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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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