   Petitioner husband, at the time

of trial, owned a subchapter S corporation, Energy Design

Engineering Corp. (Energy Design), which provided consulting

services to the electric utility industry.    Energy Design was

intermittently profitable.   Petitioner husband also was part

owner of Cogeneration Acquisition & Development Corp.

(Cogeneration), which furnished consulting services to the

development of cogeneration projects as well as electric power

projects in the United States.    Cogeneration was regularly

profitable but eventually ceased business.

     The Pescadero property was in a severely neglected condition

when petitioners purchased it.    Over a period of several years,

petitioner husband made substantial improvements to at least one

of the residences, such as installing a heating system and
           a proposed aquaculture project, petitioner

husband seeded the reservoir with fish, such as catfish.

Petitioner husband intended to raise and sell fish from the

reservoir.   However, the project was never fully implemented

because a neighbor siphoned off water, causing an insufficient

oxygen supply to support aquatic life.    Petitioner husband

intended to raise fish at a later time.

     In 1984, there were floods which affected the Pescadero

property, requiring repairs to the damage and cleanup of silt in

the reservoir.   Subsequently, from 1987 through 1989, there was a

drought in the area .

     Sometime in 1989, petitioner husband commenced installing an

irrigation system on the Pescadero property, utilizing the
               