Frank W. George - Page 6




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          because she was concerned about its tax implications, she did not            
          trust Chisum, and she believed that Chisum would have control                
          over their assets if she and petitioner transferred their assets             
          to Arivada.                                                                  
               On August 5, 1994, petitioner assigned his interest in                  
          Stepping Stone to Arivada.  Petitioner’s use of the Scottsdale               
          residence did not change after he transferred his interest in                
          Stepping Stone to Arivada.                                                   
               2.   Operation of Arivada                                               
               Before Arivada was formed, petitioner operated a medical                
          practice at his Scottsdale residence.  After Arivada was formed,             
          petitioner continued to operate his medical practice there just              
          as he had done before Arivada was formed.  There was no written              
          employment contract between petitioner and Arivada.                          
               Chisum did not make operational decisions for Arivada in                
          1993 and 1994.  He did not schedule patients and made no                     
          decisions about petitioner's medical treatment of patients.                  
               Arivada paid petitioner $4,000 in 1993 and $14,400 in 1994.             
               Chisum opened a checking account for Arivada at First                   
          Interstate Bank of Arizona (now known as Wells Fargo Bank) on                
          July 14, 1993 (the “Arivada checking account” or “Arivada                    
          account”).  Arivada used the Pinnacle Peak address on its checks.            
          Petitioner kept the checkbook for the Arivada account in his                 
          briefcase.  Petitioner and Chisum each had a stamp bearing                   






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