Chong-Kak and Sang-Ok Lee - Page 3

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               4.  Whether Hamalee had a net operating loss (NOL) in 1989,            
          that the Lees may carry back to the subject years.  We hold it              
          did not.1                                                                   
               5.  Whether petitioners are liable for the additions to tax            
          for fraud determined by respondent.  We hold they are to the                
          extent stated herein.                                                       
              6.  Whether petitioners are liable for the additions to tax            
          for substantial understatements determined by respondent.  We               
          hold they are.                                                              
               Unless otherwise stated, section references are to the                 
          Internal Revenue Code in effect for the years in issue.  Rule               
          references are to the Tax Court Rules of Practice and Procedure.            
          We separately refer to Chong-Kak and Sang-Ok Lee as Mr. Lee and             
          Mrs. Lee, respectively.  We collectively refer to Mr. Lee and               
          Mrs. Lee as the Lees.  We refer to the Lees' daughter, Inae Lee,            
          as Ms. Lee.  We refer to the Lees' son-in-law, Ick Soo Won, as              
          Mr. Won.  We refer to Hamalee Distributors, Inc., as Hamalee.               
          We refer to Myun Suk Chong as Ms. Chong.                                    
                                  FINDINGS OF FACT                                    


          1 Our resolution of this issue moots another issue raised by                
          the parties as to Mr. Lee's basis in his Hamalee stock on                   
          Dec. 31, 1989.                                                              








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