Law Offices--Richard Ashare, P.C. - Page 11

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          1993 and for prior years' efforts yet uncompensated".  One day              
          before, Mr. Ashare had received and deposited petitioner's check            
          in the amount of $1,061,971.  The board also resolved on December           
          31, 1993, that petitioner's officers are "authorized, empowered             
          and directed, for and on behalf of the Corporation, to execute a            
          Promissory Note in favor of the sole Shareholder in the principal           
          amount of Eight Hundred Sixteen Thousand Seven Hundred Fifty-Six            
          and no/100 ($816,756.00) Dollars".  Petitioner issued the                   
          referenced note to Mr. Ashare on the same day.  The board also              
          resolved on December 31, 1993, that $100,000 of the $916,756 that           
          Mr. Ashare lent petitioner during the year "shall be duly                   
          reflected" on petitioner's books as a contribution to capital.              
          Petitioner's December 31, 1993, balance sheet does not reflect              
          any of the lent amount as a capital contribution, and Mr. Bess              
          does not understand Mr. Ashare to have transferred the $100,000             
          to petitioner as a capital contribution.                                    
               Respondent began auditing petitioner's 1993 taxable year in            
          or about December 1994, and the case was assigned to a revenue              
          agent who had not been involved in the audit of petitioner's 1990           
          through 1992 taxable years.  The agent examined petitioner's 1993           
          tax return and requested and received correspondence from                   
          petitioner's representative, David Lieberman.  The agent had no             
          direct contact with either Mr. Ashare or any of petitioner's                
          other officers or employees.                                                

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