Milward Corporation - Page 4

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               After the case was restored to the general docket,                     
          respondent served petitioner with (1) a request for admissions              
          (with attached exhibits) pursuant to Rule 90(a), (2)                        
          interrogatories, and (3) a request for production of documents.             
          At the same time, respondent filed her request for admissions               
          with the Court pursuant to Rule 90(b).                                      
          Petitioner failed to respond to respondent's discovery                      
          requests.  Further, as a consequence of petitioner's failure to             
          respond to respondent's request for admissions, each matter set             
          forth therein was deemed admitted pursuant to Rule 90(c).                   
          Marshall v. Commissioner, 85 T.C. 267, 272 (1985); Morrison v.              
          Commissioner, 81 T.C. 644, 647 (1983).                                      
               The following is a summary of the matters that petitioner is           
          deemed to have admitted pursuant to Rule 90(c).                             
               For the fiscal year ending January 31, 1988, petitioner used           
          the accrual method of accounting for financial statement purposes           
          and income tax purposes.  For the fiscal years ending January 31,           
          1989 and 1990, petitioner utilized the accrual method of                    
          accounting and percentage of completion method for financial                
          statement purposes and used the cash method of accounting for               
          income tax purposes.  Petitioner did not file a Form 3115                   
          (Application for Change in Accounting Method) or otherwise seek             
          respondent's approval to change its method of accounting for                







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