A. Lee Petersen and INI Builders, Inc. - Page 9

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          defendant to recoup some or all of the legal fees incurred, a               
          judgment was entered against petitioner in the approximate amount           
          of $70,000.                                                                 
               By October 1, 1984, the Shaktoolik projects were                       
          substantially complete and operational, and INI had received                
          payments totaling $1,875,000.  The gross receipts reported on               
          INI’s TYE 9/84 U.S. corporation income tax return amounted to               
          $1,665,000.  INI's TYE 9/84 return reflects taxable income of               
          $87,177 after deductions.  INI reported officer's compensation              
          and wages on line 12 of the TYE 9/84 return in the amount of                
          $165,000 and bonuses on line 26 in the amount of $63,800.  The              
          $165,000 shown on line 12 of INI’s TYE 9/84 return includes the             
          deduction for $100,000 attributable to the accrual of the bonus             
          payable to Burke’s estate.                                                  
               Shortly after Mutual Life denied the insurance claim,                  
          petitioner and Thorpe discussed the buy-sell agreement.  During             
          this discussion, petitioner told Thorpe he would pay $150,000 for           
          the stock.  Petitioner did not try to rescind the buy-sell                  
          agreement or reduce the purchase price of the stock; he simply              
          tried to extend the time over which he had to pay.                          
               Later, during fall 1984, petitioner suggested to Thorpe that           
          the estate could be paid faster, on the rationale that a layer of           
          taxation could be eliminated, if the buy-sell agreement were                
          reformed, nunc pro tunc, to reduce the purchase price by $100,000           





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