Richard C. and Hattie M. Martin - Page 8




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               Raul also was deposed on May 17, 1994, and he corroborated the         
          statements Richard made in his deposition.                                  
               On July 1, 1994, the defendants filed a memorandum of                  
          contentions of facts and law, asserting that Cola, Inc. had                 
          substantial capital assets, stockholders, a lease for a                     
          manufacturing plant, and had engaged in a continuous course of              
          business activity since 1988.                                               
               In November 1994, the Beta Maskin lawsuit was settled. The             
          parties agreed that only Cola, Inc. was liable for the asserted             
          obligation to Beta Maskin.  Richard and Raul signed the settlement          
          agreement as officers of Cola, Inc.  A note payable was created on          
          Cola, Inc.'s general ledger reflecting Cola, Inc.'s obligation              
          under the settlement agreement.                                             
               Cola, Inc. was sued by other businesses with which it had              
          contracted; i.e., Axis Engineering in 1992, and Sterling Air Cargo,         
          Inc. in 1994.  In satisfaction of the default judgment in the Axis          
          Engineering lawsuit, Cola, Inc. issued a check drawn on the                 
          corporate bank account with the imprint "Cola Performance Products,         
          Inc."                                                                       
          Income Tax Returns                                                          
               Petitioners timely filed Federal income tax returns for 1992,          
          1993, and 1994.  They individually claimed losses on Schedules C of         
          their respective tax returns for those years with respect to the            
          automotive crankshaft business, as follows:  Richard and his wife,          





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