John Andrew Dorris and Donna L. Dorris - Page 4

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               After Ms. Spiegel deposited the money, she issued a check to           
          Reverend McWilliams in the same amount.  Ms. Spiegel and Reverend           
          McWilliams were the only two people who had signatory authority             
          over the TFC account.  Reverend McWilliams deposited the checks             
          into his personal account.  Reverend McWilliams never provided              
          Agape with an accounting of how the funds were used.                        
               Reverend McWilliams worked as Agape's minister.  There was             
          no employment contract.  Reverend McWilliams was hired as a                 
          "private contractor".  In addition to performing social work in             
          Mexico and working with deprived and disadvantaged people,                  
          Reverend McWilliams performed baptisms and marriages.  Reverend             
          McWilliams was neither a member of Agape, nor was he on Agape's             
          Board of Elders.                                                            
               Reverend McWilliams was the president of TFC at the time TFC           
          temporarily closed its business in December 1988.  Reverend                 
          McWilliams also was in the business of providing food, shelter,             
          and medical care to various persons in a religious communal group           
          setting in exchange for payments.  He reported profits from this            
          business.                                                                   
               During the taxable years at issue, petitioners and their               
          three children lived on the approximately 2-1/2 acre property               
          owned by Reverend McWilliams.  Situated on the property is an               
          approximately 5,500 square foot building that served as living              
          quarters.  The building consists of two wings and has a common              





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