Max Burton Enterprises, Inc. - Page 8

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          Beginning in 1982, Mr. Burton designed, installed, and maintained           
          the computer system of petitioner.  Part of that system included            
          a program that tracked customer responses to advertisements and a           
          program used for the company’s accounting.  At all relevant                 
          times, Mr. Burton also worked for a company known as Fiserv,                
          installing computer systems for banks.                                      
               As vice president of petitioner, Denovan developed and                 
          executed sales and marketing strategies and was responsible for             
          organizing and managing petitioner’s national sales                         
          representatives.  He was responsible for hiring employees and was           
          in charge of the shipping of petitioner’s products from suppliers           
          to vendors.  During the calendar year 1990, petitioner employed a           
          total of 30 employees.  At all relevant times, Denovan was                  
          employed full time by the Port of Seattle Police Department,                
          where he was responsible for training and scheduling special                
          teams of police.                                                            
               Petitioner had gross receipts and retained earnings for its            
          tax years as follows:                                                       
                              1987       1988        1989         1990                
          Gross receipts      $990,388   $975,254   $1,222,973   $4,675,219           
          Retained earnings   215,154   231,401      241,839      341,239             
               On June 29, 1990, bonus checks were issued by petitioner.              
          Bonuses were paid to Ms. Burton, Mr. Burton, and Denovan in the             
          amounts of $700,000, $200,000, and $100,000, respectively.                  
          Twenty percent of these amounts was withheld and paid to the                

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