William Whelpley, Jr. - Page 11

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             Transaction Date1      Amount            Reference                        
             May 5, 1988           $43,092.89   Write off Loss in CPI                  
             July 31, 1988         10,000.00    Loss in CPI/Re: Mgt. Fee               
             Aug. 31, 1988         10,000.00    Loss in CPI/Re: Mgt. Fee               
             Sept. 30, 1988        10,000.00    Loss in CPI/Re: Mgt. Fee               
             Oct. 31, 1988         10,000.00    Record loss from CPI Rec               
             Nov. 30, 1988         10,000.00    Loss from Uncollect Rec                
             Dec. 31, 1988         10,000.00    Loss Uncollect Rec-CPI                 

                  1The "transaction date" indicates the dates on which these items     
             were written off in Weeden's books rather than the dates on which the     
             cash was transferred.                                                     

             In this manner, Weeden wrote off the balance in the account               
             labeled RECEIVABLE FROM CPI.  On its Form 1120, U.S.                      
             Corporation Income Tax Return for 1988, Weeden claimed a                  
             bad debt deduction in the amount of $103,093, the amount it               
             had advanced for the CPI project.                                         
                  Beginning in September 1989, respondent examined WAI's               
             returns for 1987, 1988, and 1989.  During the examination,                
             WAI's representatives raised the issue whether WAI had                    
             erred by including in WAI's gross income for 1987 the                     
             advances that had been made by Weeden during the year.                    
             WAI's representatives took the position that the advances                 
             constituted either equity investments in WAI or loans to                  
             WAI which, in either event, should not have been included                 
             in petitioners' gross income in 1987.                                     
                  A letter dated September 18, 1991, from Mr. Flaherty                 
             and addressed to Mr. Whelpley at WAI, states that Weeden                  
             considered the subject advances as loans to WAI, and                      






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