Carl E. Jones and Elaine Y. Jones - Page 5

            Mrs. Jones received $150,000, which she had in a bank account in                          
            her name at the time of trial.                                                            
            B.  The Corporations                                                                      
                  During the 3 years at issue, petitioner was the sole                                
            shareholder and president of INI, a C corporation, and of                                 
            Towergate Townhomes, Inc. (Towergate), and Development, which are                         
            both S corporations.  Also during this time, petitioner and Mrs.                          
            Jones were each 50-percent owners of Carlsgate Properties, Inc.                           
            (Carlsgate), an S corporation.  During 1989 and 1990, petitioner                          
            was president and owner of Winterchase Townhomes, Inc.                                    
            (Winterchase), a C corporation.                                                           
                  INI operated as a developer of real estate and managed a                            
            60,000-square-foot building that was developed by a related C                             
            corporation, Spalding.                                                                    
                  INI was incorporated on June 25, 1984, at which time it                             
            issued 1,000 shares of stock--500 to petitioner and 500 to Ronald                         
            Cates (Cates).  When INI was incorporated, petitioner and Cates                           
            each owned 50 percent of Spalding.  Spalding operated as a holder                         
            of raw land and a developer of real estate.                                               
                  On November 1, 1984, petitioner and Cates transferred all of                        
            their shares in INI to Spalding, and INI became a wholly owned                            
            subsidiary of Spalding.  Thus, petitioner and Cates each owned 50                         
            percent of Spalding, and Spalding owned 100 percent of the INI                            
            shares outstanding.                                                                       

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