Lauro G. and Gayle W. Guaderrama - Page 4




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          in question, regarding construction of a new restaurant and bar                
          to be named Severo’s.  Guaderrama had never constructed                        
          commercial property before, but he studied the proposed                        
          transaction and concluded that it would be a good investment.                  
          Guaderrama and Benavidez subsequently entered into several                     
          agreements.  On July 26, 1991, Benavidez deeded the tract of land              
          in Dona Ana County to the Guaderramas.  Guaderrama then lent                   
          Benavidez $25,000 to pay off the outstanding amount under the                  
          real estate contract between Benavidez and Saenz.  On October 9,               
          1991, Guaderrama entered into a construction agreement with JVG                
          Construction Co. providing for the construction of Severo’s.  JVG              
          Construction Co. is operated by Guaderrama’s nephew, and                       
          Guaderrama financed the construction of Severo’s with his                      
          savings.  Benavidez designed the floor plan for Severo’s, while a              
          contractor designed the rest of the restaurant.                                
               On December 4, 1991, the Guaderramas leased the land in Dona              
          Ana County to L&G Investments Ltd. (L&G).  L&G, a New Mexico                   
          corporation wholly owned by the Guaderramas, was incorporated on               
          December 13, 1991, and is structured as an S corporation for                   
          Federal income tax purposes.  L&G does not have bank accounts and              
          did not file a Form 1120-S, U.S. Income Tax Return for an S                    
          Corporation, for the 1993 tax year.                                            
               On December 10, 1991, Benavidez sold his liquor license to                
          L&G for $10 and assigned the trade name “Severo’s” and its                     






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