Deja Vu, Inc. - Page 4

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          domestic operating companies including Adult Fun Center, Inc.               
          (Adult Fun), a domestic corporation.  Prior to the years in                 
          issue, Adult Fun was an adult novelty store with its principal              
          place of business in Phoenix, Arizona.                                      
               Petitioner operated a live entertainment night club in                 
          Toledo, Ohio.  Petitioner also provided operational, management,            
          and consulting services to adult entertainment clubs doing                  
          business as "Deja Vu".  Donald Krontz (Mr. Krontz), who served as           
          petitioner's president during the subject years, made all of                
          petitioner's executive decisions in consultation with Mr. Mohney.           
               In 1990, Adult Fun relocated to a store adjoining petitioner           
          in Toledo, Ohio, to sell adult lingerie.  Adult Fun solicited               
          funds from petitioner to remodel its new location and to start-up           
          its business there.  Beginning on February 9, 1990, petitioner              
          made unsecured cash advances to Adult Fun that were evidenced by            
          the following promissory notes (Notes):                                     
               Date         Amount   Interest Rate  Repayment Schedule                
          Apr. 13, 1990    $6,117       10%          $150/month                       
               May 5, 1990    2,000       10%               500/month                 
               June 6, 1990   17,468       10%              250/month                 
               Aug. 8, 1990   3,000       10%               200/month                 
               Oct. 18, 1990      1,000      10%        previously agreed             
                    Total        29,585                                               
          The advances were not, in all instances, contemporaneous with the           
          execution of a note.  For example, petitioner paid $5,000 to a              
          construction firm on February 9, 1990, and it paid an additional            
          amount to the same firm on April 13, 1990.  These funds, which              
          were paid to remodel Adult Fun’s new location, were reflected in            



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