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All section references are to the Internal Revenue Code and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulation of
facts is incorporated in our findings by this reference.
Petitioners Richard C. (Richard) and Hattie M. Martin, husband
and wife, and petitioners William L. (William) and Sylvia L.
Martin, husband and wife, resided in Rolling Hills Estates,
California, at the time they filed their respective petitions in
this Court contesting respondent's determinations. Richard and
William are brothers.
Richard is a principal shareholder of a corporation that is
one of the largest commercial drywall, framing, and plastering
contractors in the Los Angeles area. For many years, he had an
interest in car racing.
Formation of Cola, Inc.
In 1988, Richard and Raul Negrete (Raul) (formerly, the
general manager of L.A. Billet, a manufacturer of race car
crankshafts) decided to form a corporation that would engage in the
business of manufacturing automotive crankshafts for race cars (the
business). Both agreed to contribute $100,000 to the corporation.
On June 22, 1988, Richard's attorney, Mark A. Treadwell, of
Mantalica & Treadwell, filed the necessary corporate documentation
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