Stephen D. Pahl and Louise A. Pahl - Page 6

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          Niesar Pahl.  Petitioner’s duties, among other things, included             
          supervising Niesar Pahl’s billing and payment procedures,                   
          establishing bank accounts, hiring and firing employees, and                
          attending to the line of credit with the bank.  Petitioner                  
          provided his own property as security for the line of credit with           
          the bank.                                                                   
               No other employees of Niesar Pahl who were not shareholders            
          received a compensation package equivalent to what petitioner               
          received.  Among other items of compensation, petitioner received           
          an annual salary of $180,000 and an automobile allowance of                 
          $6,500 (the automobile allowance).  Petitioner’s receipt of the             
          automobile allowance for 1990 is reflected on a Form 1099-MISC,             
          Miscellaneous Income (the Form 1099), issued to petitioner for              
          1990 by Niesar Pahl and showing nonemployee compensation of                 
          $6,500.                                                                     
          Petitioner’s Disassociation From Niesar Pahl                                
               On June 30, 1990, petitioner and Gosselin left Niesar Pahl.            
          Petitioner and Gosselin departed pursuant to an agreement (the              
          separation agreement).  Pursuant to the separation agreement,               
          Niesar Pahl transferred to petitioner and Gosselin furniture and            
          equipment with an agreed value of $34,875 and assigned accounts             
          receivable to them in the amount of $135,000.  In consideration             
          thereof, among other things, Pahl and Gosselin assumed Niesar               
          Pahl’s credit line with the bank in the amount of $242,500,                 
          agreed that the June 30, 1990, employee payroll of $105,539 would           




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