Leema Enterprises, Inc. - Page 4




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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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Last modified: May 25, 2011