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knowledge, and by using the sources of supply that were developed
therefrom.
Unlike its competitors, petitioner derived economies by
copying the trading operations of some of the large securities
firms on Wall Street in New York, New York. Petitioner’s traders
worked out of a trading pit where purchasing and selling
transactions were brokered in a matter of seconds. Petitioner’s
traders did not have a set markup on parts sold; instead, they
worked off market prices; i.e., petitioner profited on the spread
between the purchase and selling price when it was able to match
a customer's need with the integrated circuits that petitioner
could locate. Petitioner carried minimal inventory, had a high
inventory turnover rate, and had no written agreements with
manufacturers. Petitioner generally did not order goods for
which it did not have a buyer, and in the rare cases that it did,
it always had the option of selling the goods before they were
delivered or canceling the order.
2. Petitioner's Owners
The Officers were longtime friends who met in grade school.
They organized Components in October 1979 by contributing a total
of $2,000 in cash in return for all of its stock. Mr. Laviano
received 75 percent of the stock, and Mr. Woll received the other
25 percent. The business of Components was headquartered in the
basement of the home of Mr. Laviano's parents. The Officers used
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