William C. and Josephine Houchin - Page 3

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          Josephine Houchin resided in Lynn Haven, Florida, at the time               
          they filed their petition.  Petitioner W.C. Houchin Corp.’s                 
          principal place of business was in Colorado at the time the                 
          petition was filed.                                                         
               W.C. Houchin Corp. was incorporated in Texas in 1987 as a C            
          Corporation.  William Houchin conveyed personal and real property           
          located in Huerfano County, Colorado (Huerfano property),                   
          including “all oil, gas and other minerals”, to W.C. Houchin                
          Corp. on August 28, 1987.  W.C. Houchin Corp. converted to an S             
          Corporation effective January 1, 1999.  William Houchin is the              
          president and sole shareholder of W.C. Houchin Corp.  From 1987             
          to 2000, W.C. Houchin Corp. used the accrual method of                      
          accounting.                                                                 
               The Huerfano property conveyed to W.C. Houchin Corp. was               
          subject to a carbon dioxide gas lease to Atlantic Richfield Co.             
          (ARCO).  The gas lease permitted ARCO to enter onto the Huerfano            
          property and explore for oil and gas.  The gas lease also                   
          permitted ARCO to produce any discovered carbon dioxide gas and             
          lay pipelines to transport the gas.  The terms of the lease                 
          required ARCO to pay a royalty when any discovered carbon dioxide           
          gas was sold.  The 1987 transfer by William Houchin to W.C.                 
          Houchin Corp. included the rights to receive the royalties paid             
          by ARCO under the lease.                                                    







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