Bill L. and Patricia M. Spencer - Page 18

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          1Lewis Smith was unrelated to any of the other SPC-FL                       
          shareholders.  Mr. Smith resigned and sold his 5-percent interest           
          in SPC-FL to Mrs. Schroeder during 1933.                                    
               During the years in issue, SPC-FL was a calendar year S                
          corporation within the meaning of section 1361.  Mr. Spencer was            
          the chief executive officer and treasurer of SPC-FL,  Mr.                   
          Schroeder served as its chief operating officer, and Mrs.                   
          Spencer, also a corporate officer, worked at SPC-FL as an office            
          Nominal Resale of Florida Assets to SPC-FL                                  
               During August 1990, the SPC-FL shareholders nominally                  
          conveyed the same assets acquired in the Florida transaction to             
          SPC-FL in consideration for $1,150,000.  Neither that conveyance            
          nor the consideration for the transaction (hereinafter referred             
          to as the SPC-FL nominal debt) was documented.16                            
          Payment Flow                                                                
               All payments on the $1,150,000 S/S/S note have been made               
          from SPC-FL's current corporate revenues.  No payments have been            
          directly made by the SPC-FL shareholders.                                   
               SPC-FL began making payments to SSI during September 1990              
          and continued to do so until October 1991.  SPC-FL began                    
          experiencing cash-flow problems during 1991, and no payments were           

          16   The parties stipulated that the "note" from SPC-FL to the              
          SPC-FL shareholders was never documented.  We take this                     
          stipulation to mean that the consideration given by SPC-FL to its           
          shareholders took the form of a debt that was never documented by           
          a note.                                                                     

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