Frank and Virginia Muhich - Page 12

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          and they began inquiring.  Soon thereafter and at the request of            
          the Muhichs, Mr. Martin attended one of Heritage's seminars.                
          Mr. Martin left the seminar with concerns about the legitimacy of           
          the trust scheme, and he conveyed his concerns to petitioner.               
          Petitioner dismissed Mr. Martin's concerns and indicated he would           
          rely on the advice given by the trust promoters.  Notwithstanding           
          their concerns, the Martins prepared the trusts' 1995 returns.              
          After 1995, the Martins prepared the 1996 Charitable Trust return           
          but refused to prepare any other trust returns.                             
          Petitioners' Tax Reporting and Respondent's Determination                   
               Midwest filed Federal income tax returns (Forms 1120) for              
          its fiscal years ended June 30, 1994, 1995, and 1996.  In its               
          1994 return, Midwest deducted the $12,000 it paid to Bartoli in             
          connection with setting up the multitrust system.  During the               
          1996 fiscal year, Midwest paid to Aegis and deducted $5,500 in              
          fees related to administration of the trusts.                               
               During fiscal years 1994, 1995, and 1996, Midwest paid the             
          Asset Trust $60,000, $103,238, and $132,766, respectively,                  
          pursuant to the consulting contract.   Midwest labeled the                  
          payments "consulting fees" and deducted these amounts in its                
          income tax returns.                                                         
               By notice of deficiency dated August 6, 1997, respondent               
          determined the above-described payments were not ordinary and               

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