Custom Chrome, Inc. and Subsidiaries - Page 15

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          primarily to the noncompetition agreements each of these                    
          individuals entered into, not to payments for services rendered             
          in prior years.  Because Panzica’s, Battistella’s, and Navarra’s            
          3-year noncompetition obligations were not triggered until they             
          left employment with petitioner and because, in 1990, Panzica,              
          Battistella, and Navarra still worked for petitioner, respondent            
          determined that no portion of the $1.25 million should be                   
          deducted in 1990 or in later years before the Court.                        
               For 1992, respondent disallowed the $1,342,347 that                    
          petitioner claimed as deductible financing charges on the grounds           
          that the expenses constitute nondeductible capital expenditures             
          relating to acquisition of the stock in petitioner.  Respondent             
          now agrees that $692,347 of the $1,342,347 was properly deducted            
          by petitioner as ordinary business expenses.  Only $650,000                 
          remains in dispute as alleged nondeductible capital expenditures.           
               Although not claimed on its 1990 through 1994 corporate                
          Federal income tax returns as filed, petitioner in its petition             
          affirmatively asserts beginning for 1990 (in order to increase or           
          to maintain the amount of the NOL claimed from 1990) and later              
          years, or beginning for 1992 and later years, that it is entitled           
          to amortize a portion of the claimed $3,068,750 as original issue           
          discount relating to the options that were issued to FNBB.                  
          Alternatively, petitioner argues that the $3,068,750 should be              

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