Duane D. & Ina R. Gay - Page 3




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               In Schedule E, Supplemental Income and Loss (Schedule E),              
          included as part of petitioners’ 2000 return (2000 Schedule E),             
          petitioners showed total rents received of $16,490 and claimed              
          total expenses of $61,654 and total losses of $45,164.  An                  
          attachment to that schedule showed, inter alia, the following               
          items which, when totaled and rounded to the nearest dollar,                
          equal the total expenses of $61,654 claimed in the 2000 Schedule            
          E:                                                                          

                            $39,545.86 expenses                                       
                            $ 4,427.94 Taxes                                          
                            $17,680.50 Credit card Visa                               
                            $61,654.30                                                
               Schedule E included as part of petitioners’ 2001 return                
          (2001 Schedule E) contained no entries.  However, an attachment             
          to that schedule (attachment to the 2001 Schedule E) showed,                
          inter alia, total rental income of $14,000 and total expenses of            
          $89,542.                                                                    
               Another attachment to the 2001 Schedule E (second attachment           
          to 2001 Schedule E) showed the following items which, when                  
          totaled and rounded to the nearest dollar, equal the total                  
          expenses of $89,542 shown in the attachment to the 2001 Schedule            
          E:                                                                          










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