Robert L. and Brenda J. Tarter - Page 3

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          Limited (BBT), a limited partnership.  The partners of BBT were             
          petitioner and B & B Complex Trust, with petitioner having a                
          1-percent interest and B & B Complex Trust having a 99-percent              
          interest.  By at least June 2001, B&B began to operate as BBT.              
          No Form 1065, U.S. Return of Partnership Income, was filed for              
          BBT for 2001.  No Form 1041, U.S. Income Tax Return for Estates             
          and Trusts, was filed for the B & B Complex Trust for 2001.                 
          Petitioner reported all claimed income and deductions of the                
          concrete business for 2001 as those of a sole proprietorship on             
          their Schedule C, Profit or Loss From Business.                             
               A checking account for BBT, d.b.a. B&B, was opened on                  
          May 17, 2001 (BBT account).  At that time, a checking account               
          existed in the name of B&B and petitioners (B&B account).                   
          Sometime after August or September 2001, operating expenses for             
          the concrete construction business were paid out of the BBT                 
          account.  After September 2001, funds represented by checks from            
          the BBT account were not funds that came from the B&B account.              
          B.   Additional Entities                                                    
               On September 15, 2000, petitioner set up the entity V & E              
          Leasing, Ltd., a California limited partnership (V&E Leasing).              
          The partners of V&E Leasing were petitioner and Granite Bay                 
          Complex Trust.  Upon formation of V&E Leasing, petitioner held a            
          1-percent interest, and Granite Bay Complex Estate Trust held a             
          99-percent interest.  The depreciable vehicles and smaller                  

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