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The issues presented for decision are: (1) Whether the
Treasury note/bond (T-bond) option activities, Treasury bill (T-
bill) option activities, and stock forwards activities (a market
for the future sale of corporate stock) of Merit Securities, Inc.
(Merit), a subsidiary of petitioner Leema Enterprises, Inc.
(Leema), lacked economic substance; (2) whether participants in
Merit's T-bond option, T-bill option, and stock forwards programs
had a profit motive; (3) whether participants in Merit's T-bond
option, T-bill option, and stock forwards programs are liable for
additions to tax pursuant to section 6653; (4) whether participants
in Merit's T-bond option, T-bill option, and stock forwards
programs are liable for the 120-percent interest rate for tax-
motivated transactions pursuant to section 6621(c); and (5) whether
petitioners Maria Rivera and Leon E. Richartz are liable for
additions to tax pursuant to section 6661.
In docket Nos. 41343-85, 41987-85, 22921-86, and 25313-86,
additional issues remain to be resolved. An appropriate order in
these dockets, permitting the parties an opportunity to resolve the
remaining issues, will be issued.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulations
of facts are incorporated in our findings by this reference.
At the time the respective petitions in these cases were
filed, the principal place of business of petitioner Leema
Enterprises, Inc., was located in Tiburon, California; petitioners
Leon E. Richartz and Maria Rivera were residents of Tiburon,
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