Edward E. and Constance M. Thorpe - Page 8

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          amount of $22,000.  ETCO presented the replacement check in the             
          amount of $22,000 to Mr. Sloan, who again forwarded the second              
          check to TransAmerica.  The replacement check also did not clear            
          ETCO's bank account and was not credited to ETCO's account with             
          TransAmerica.  On July 3, 1992, ETCO requested that Mr. Sloan               
          return all documents related to the ETCO pension plan.  As a                
          result, the plan documents, the second $22,000 check, and the               
          original $64,000 were returned to ETCO.                                     
               Upon notice that the second check had not been credited to             
          ETCO's account with TransAmerica, ETCO sought out a new insurance           
          carrier through another insurance agent.  On August 31, 1992,               
          upon finding a replacement insurance carrier, ETCO made a third             
          check in the amount of $22,000.  This check was made payable to             
          Aetna, a separate insurance company.3                                       
               During the fiscal years in issue, ETCO paid life insurance             
          premiums for Edward Thorpe, Constance Thorpe, and Mr. Echols.               
          ETCO was also the owner and beneficiary of the life insurance               

               3The parties stipulate that an ETCO check made payable to              
          Aetna, dated Aug. 31, 1992, in the amount of $22,000, represents            
          an amount claimed as a deduction on ETCO's tax return for the               
          fiscal year ended June 30, 1990.  Respondent disallowed a                   
          deduction in the amount of $22,000 in ETCO's tax year ending June           
          30, 1990.  It is unclear how many checks in the amount of $22,000           
          were issued by ETCO and how many of those checks were returned.             
          Because we hold that the amount was not deductible under the                
          facts presented, we need not decide whether the check dated Mar.            
          8, 1991, was the first check or when the first $22,000 check was            
          remitted to TransAmerica or how such a check could relate to the            
          check dated Aug. 31, 1992, and be deductible in the year ending             
          June 30, 1990.                                                              

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