Charles B. and Teresa A. Thompson, et al. - Page 13

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               The Commissioner, in his FSAA Notice for the taxable year              
          1989, disallowed in full the deductions claimed for amortization            
          of the noncompete agreements.                                               
               During the taxable year 1990, all individual petitioners               
          herein owned shares of the outstanding common stock of State                
               The Commissioner mailed his notices of deficiency to the               
          individual petitioners for the taxable year 1990, which                     
          disallowed in full the amortization deductions claimed for the              
          noncompete agreements.                                                      
          Subsequent Events                                                           
               Prior to the acquisition, Beaurline and Holliday were the              
          president and chairman of the board, respectively, of State                 
          Supply.  They continued in their respective offices for 1 year              
          after the acquisition of shares.                                            
               Approximately 2 months after the closing, Beaurline                    
          approached Von Allmen to request a change in the noncompete                 
          agreement so that Beaurline could work for a close friend who               
          owned one of State Supply's major suppliers, Lamaur.  On                    
          December 14, 1987, by letter from Terry Doverspike, the                     
          noncompete agreement with Beaurline was amended in order to allow           
          him to work for Lamaur.                                                     
               On February 26, 1991, Holliday died of a heart attack.                 

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