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Unless otherwise stated, all section references herein are
to the Internal Revenue Code in effect for 1990, and all rule
references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts, supplemental stipulation of facts, and
attached exhibits are incorporated herein by this reference.
At the time they filed their petitions in these cases,
Zahirudeen Premji (Mr. Premji), and Carol M. Premji, and Carl
John Norby (Mr. Norby), resided in Boulder, Colorado.
Mr. Premji and Mr. Norby invested funds in M&L Business
Machine Company, Inc. (M&L).
M&L Business Machine Company, Inc.
M&L was a closely held Colorado corporation formed in the
1970's to repair office machines and business equipment. During
the 1980's, Robert Joseph, Daniel Hatch, and David Parrish
acquired all of M&L's stock. Thereafter, M&L was used to operate
a ponzi scheme.1 M&L also continued to repair office machines
and business equipment, but that activity generated little
income.
The M&L ponzi scheme collected funds from investors. In
return, M&L promised investors exceptionally high interest rates.
1 The first ponzi scheme surfaced in 1920, instigated by
Charles Ponzi. It is the subject of Cunningham v. Brown, 265
U.S. 1 (1924).
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