Frank and Virginia Muhich - Page 4

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               Petitioner3 attended 3 years of college but did not obtain a           
          degree. From 1978 through the years in issue, petitioner owned,             
          operated, and was the president of Midwest.  Midwest was a                  
          photography business, and it earned income by participating in              
          fund-raising programs of local community service organizations.             
               From 1985 forward, Midwest worked exclusively with fire,               
          rescue, and ambulance departments in the four-State region of               
          Illinois, Iowa, Wisconsin, and Indiana.  In addition to taking              
          the photographs, Midwest supplied the various departments with              
          professionals to assist in soliciting donations and handing out             
          complimentary certificates.  Under this arrangement, Midwest                
          received approximately 50 percent of the donations plus the                 
          income from the sales of additional photographs.  Midwest                   
          conducted its business in the four-State region by employing                
          "road people" to solicit donations, take the complimentary                  
          photographs, and sell additional photographs.  Midwest employed             
          two people in its home office.                                              
               Before the subject years, petitioner drew a salary from                
          Midwest for the work he performed.  Midwest deducted his salary             
          as officer compensation.  Petitioner essentially compensated                
          himself on a commission basis, setting his salary upon Midwest's            

               3References to petitioner are to Frank Muhich.                         

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