Dharma Enterprises - Page 5

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          transmit Buddhist teachings in the West, and to provide a work              
          setting in which to practice Buddhist teachings.  DM was a                  
          section 501(c)(3) organization for Federal tax purposes from                
          December 1, 1987 to November 30, 1992.  From its inception in               
          1975 to 1985, DM was also engaged in the commercial printing                
          business.  In 1985, employees of DM who were members of the                 
          Nyingma community formed Skillful Means Enterprises, also known             
          as Skillful Means Press (SMP), to take over DM's commercial                 
          printing business, and DM ceased its commercial printing                    
          operations.  Most of SMP's employees were members of the Nyingma            
          community.  DM provided a startup loan and rented printing                  
          equipment and building facilities to SMP.  DM intended that SMP             
          would not own any assets.  DM also licensed the right to use                
          certain intangible assets, including the name "skillful means",             
          to SMP in exchange for royalties.                                           
               A member of the Nyingma community, Arnaud Maitland                     
          (Maitland), formed petitioner in June 1987 to provide binding               
          services to SMP.  Maitland earned a master’s degree from the                
          Nyingma Institute and served as its dean from 1980 to spring                
          1987, first at its Boulder campus and then in Berkeley.  Maitland           
          has taught classes at the Nyingma Institute, including classes in           
          skillful means.  He lived at the Nyingma Institute for rent of              
          $200 per month.  Maitland was petitioner's chief executive                  
          officer.                                                                    
               One month after petitioner's incorporation, in July 1987, DM           
          notified SMP that its license and rental agreements would                   


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