Fountain Valley Transit Mix, Inc. - Page 4

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               During petitioner's fiscal year 1990, Gillette Tire was in             
          the business of selling and recapping tires.  For its fiscal year           
          ending March 31, 1991, Gillette Tire filed a consolidated tax               
          return with A&A.  Gillette Tire derived a substantial portion of            
          its income from the sale of truck tires and tire-related services           
          to unrelated third parties.                                                 
               In June 1987, petitioner signed a lease agreement with                 
          Nikki's Leasing Corp. (Nikki's) to lease ready-mixed concrete               
          trucks (the Nikki lease).  Kurt Caillier established Nikki's and            
          other leasing companies in 1987 to lease trucks to the Caillier             
          family's related companies.  These companies were owned by                  
          children of Kurt and Randy Caillier but controlled by Kurt and              
          Randy Caillier.  During petitioner's fiscal year 1990, Kurt                 
          Caillier was the president of both petitioner and Nikki's.                  
               During its fiscal year ending June 30, 1990, petitioner                
          leased trucks from Nikki's pursuant to the Nikki lease.  In 1990,           
          petitioner had on lease from Nikki's 48 trucks.  The number of              
          trucks used by petitioner fluctuated from day to day.  If                   
          petitioner needed additional trucks, it would use available                 
          trucks of related companies and sometimes would rent trucks from            
          unrelated sources.  In 1990, petitioner did not own any concrete            
          trucks.                                                                     
               In 1990, Mr. Chris Pisano (Mr. Pisano) was petitioner's                
          general manager.  As general manager, Mr. Pisano ran the daily              






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