Deja Vu, Inc. - Page 6

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          petitioner's management determined that Adult Fun was not doing             
          well, and petitioner made further advances to Adult Fun.  By                
          November 1990, Adult Fun ceased its payroll, and released its               
          employees.  In early 1991, Adult Fun closed its store and                   
          discontinued its business activities.  On April 10, 1992,                   
          petitioner and Adult Fun agreed that petitioner would be assigned           
          Adult Fun's leasehold improvements on account of the $30,035 in             
          advances ($29,585 + $450) made by petitioner to Adult Fun.  The             
          parties agreed that the value of the assigned property was                  
               For Federal income tax purposes, Adult Fun reported net                
          operating losses (NOL’s) of $71,032 and $40,083 for its 1985 and            
          1986 taxable years, respectively.  For its 1987 taxable year,               
          Adult Fun reported taxable income (before application of any net            
          operating loss deduction) of $105,115.  All of this income was              
          attributable to cancellation of debt.  For its 1988 and 1989                
          taxable years, Adult Fun reported no gross receipts and no                  
          taxable income.  For its 1990 taxable year, Adult Fun reported              
          total income of $3,662 and a taxable loss (before application of            
          any net operating loss deduction) of $4,266.                                
               Petitioner engaged Modern Bookkeeping Services, Inc. (MBS),            
          another Mohney related entity, to provide it with bookkeeping and           
          tax preparation services.  MBS retained David Shindel                       
          (Mr. Shindel), a certified public accountant, to prepare                    
          petitioner’s Federal income tax returns.  Mr. Shindel prepared              

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