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During the years at issue, petitioner and his wife owned
approximately 98 percent of the stock in EIC. Further, during
this period, petitioner was the chief executive officer, chair-
man, and, except for a brief period, the president of EIC. Since
its inception, Mrs. Wang has been the secretary, treasurer, and
chief financial officer of EIC. Petitioner typically worked 10
hours a day, 6 days a week. Petitioner is very driven, and he is
involved with nearly every sale transaction that occurs at EIC.
The success enjoyed by EIC and petitioner is a reflection of
petitioner's industry and dedication. Revenues reported in EIC's
financial statements grew from $4,118,262 in 1985 to $29,411,411
in 1989, while assets grew from $23,343,200 to $46,231,210.
Recent promotional materials for EIC indicate that the company
owns investment property worth in excess of $60,000,000, and that
investors have enjoyed an average annual appreciation of 25.9
percent on their investments, based on a sampling of prices over
a 15-year period. At the peak of operations, approximately 12
people were employed at EIC's headquarters full time. In addi-
tion, there were 11 branch offices located throughout California,
and as many as 50 sales agents worked at these branches. Most of
the agents were independent contractors, although a few were
classified as employees of EIC.
The market for raw land suffered a downturn in 1990. How-
ever, EIC was able to continue selling land despite this down-
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