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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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