Diamond Claims & Investigation Services, Inc. - Page 2

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          District of Oregon (District Court) to the plaintiffs in a law-             
          suit in which petitioner and two individuals, Peter J. Diamond              
          (Mr. Diamond) and Shirley Diamond (Ms. Diamond), were identified            
          as the plaintiffs.  We hold that petitioner must include in its             
          income only the portion stated herein.                                      
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
               Petitioner, Diamond Claims & Investigation Services, Inc.              
          (DCI), is an Oregon corporation that was incorporated on August             
          21, 1979, and that had its principal place of business in Coos              
          Bay, Oregon, at the time the petition was filed.                            
               During the years 1980 through 1988, Mr. Diamond and Ms.                
          Diamond, who were married, each owned 50 percent of the outstand-           
          ing stock of DCI.  They also were its only officers, serving as             
          president and secretary, respectively.  (Mr. Diamond and Ms.                
          Diamond are sometimes referred to as the Diamonds.)  As of the              
          time of the trial herein, DCI was not actively engaged in a trade           
          or business, was in existence in name only, and was wholly owned            
          by Mr. Diamond, who inherited Ms. Diamond's stock in DCI after              
          she died on May 6, 1990.                                                    
               Throughout the years 1980 through 1988, DCI's principal                
          business activity was the investigation of insurance claims and             
          other insurance-related matters.  During the years 1980 through             
          1984, DCI derived approximately 90 percent of its business from a           
          group of related companies that were collectively known as                  

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