Martin and Barbara Schachter - Page 3

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               By May of 1955, petitioner and a relative by the name of               
          David Karp were working as partners in the business, and Cal Ben            
          was conducted as a partnership.                                             
               On September 7, 1959, Ben Schacter, David Karp, and                    
          petitioner entered into a written partnership agreement that                
          provided that they would share equally as partners in the profits           
          and losses of Cal Ben.                                                      
               On May 1, 1967, Ben Schachter retired and relinquished his             
          interest in Cal Ben.  Thereafter, petitioner and David Karp                 
          operated Cal Ben as equal partners, and each was entitled to 50             
          percent of the profits and losses of Cal Ben.                               
               A checking account and a money market account for Cal Ben              
          were maintained in Cal Ben's name at Bay Bank of Commerce.  The             
          address for the accounts at Bay Bank of Commerce apparently                 
          reflected Cal Ben's mailing address, and all bank statements for            
          these accounts apparently were mailed to Cal Ben's business                 
          mailing address.                                                            
               Also, after August 8, 1977, and during the years in issue, a           
          bank account was maintained at Lloyds Bank California (which in             
          1986 was acquired by Sanwa Bank California) in the name of "C B             
          Co., MFG." (the Lloyds/Sanwa account).  Petitioner and David Karp           
          were authorized signatories on the Lloyds/Sanwa account.  The               
          address for the Lloyds/Sanwa account reflected petitioners'                 
          residence address, and all bank statements for the Lloyds/Sanwa             
          account were mailed to petitioners' residence.                              




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