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CONTENTS
I. STATEMENT OF ISSUES .................... 8
A. Issues With Respect to LTD ............. 8
B. Issues With Respect to INC ............ 10
C. Issues With Respect to Holdings .......... 11
II. FINDINGS OF FACT .................... 11
A. Petitioners .................... 11
B. Petitioners' Returns ............... 12
C. Creation of LTD .................. 13
D. Creation of INC .................. 15
E. Structure and Operation of LTD's
Promotion, Service, and Sales . . ......... 17
F. INC's Consulting Agreement With LTD ........ 22
G. Research ..................... 26
H. Financial Accounting and Client Statements for LTD 27
I. IRS Audit During Spring 1987 ........... 29
J. The Transition to MultiValores .......... 30
K. Accounting Firm Audit ............... 31
L. LTD's Receipts .................. 31
1. Management Fees ............... 31
2. Interest Income ............... 33
a. U.S. Certificates of Deposit
and Bank Deposits ............ 33
b. Loans .................. 38
c. Non-U.S. Certificates of Deposit
and Term Deposits . . . . . . . . .... 38
d. Pace Investments ............ 40
e. MMA II ................. 40
3. Currency Exchange Transactions Income .... 43
a. Currency Swaps ............. 43
b. Currency Transactions .......... 43
4. Sales Commissions and Fees .......... 46
a. Currency Fund .............. 46
b. FEIM Fund ................ 47
c. Matric Fund ............... 48
d. Inversat Fund .............. 49
e. TVA ................... 50
f. Client Incorporation and Trust Creation . 52
g. Legal Advice Income ........... 53
h. Letters of Credit ............ 53
i. Foreign Exchange Investments ...... 54
j. Treasury Bills ............. 54
k. Wires and Checks ............ 55
l. Gold and Silver Futures ......... 55
m. Project Income ............. 56
n. Income From Investments ......... 56
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Last modified: May 25, 2011