Law Offices--Richard Ashare, P.C. - Page 5




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          petitioner liquidated most of its assets so that it would have              
          the funds to pay Mr. Ashare the $1,750,000.  Petitioner reported            
          a $1,857,933 taxable loss for 1993, which, on February 14, 1994,            
          it carried back to 1990 to receive a $581,812 refund of taxes               
          paid for 1990.  Petitioner's reported loss resulted in a reported           
          deficit of $89,855 in retained earnings on December 31, 1993,               
          which translates into a deficit of $1,463,768 in retained                   
          earnings exclusive of the tax refunds of $733,006, $59,095, and             
          $581,812 described infra and supra.  Petitioner's reported                  
          balance sheet at the beginning and end of 1993 was as follows:              
          1/1/93 12/31/93                                                             
          Assets:                                                                     
          Cash                                          $146,130 $35,197              
          Mortgage receivable                             11,000  11,000              
          Loan receivable                                  5,000    -0-               
          Prepaid expense                                  3,200   3,200              
          Refundable income tax                           69,095 582,812              
          Investments--marketable securities             569,173   9,048              
          Depreciable property (net of depreciation)     197,164 187,113              
          Total assets                               1,000,762 828,370                
          Liabilities:                                                                
          Payroll taxes withheld                           2,871     469              
          Accrued pension contribution                    40,002     -0-              
          Loans from shareholders                          8,800 916,756              
          Total liabilities                             51,673 917,225                
          Shareholder's equity:                                                       
          Common stock                                     1,000   1,000              
          Retained earnings (deficit)                    948,089 (89,855)             
          Total shareholder's equity (deficit)         949,089 (88,855)               
          Total liabilities & S/H's equity (deficit) 1,000,762 828,370                








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