Midwest Stainless, Inc. and Robert A. and Mary J. Lechner - Page 7

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            $26,702.80 personally paid by Mr. Lechner for defense fees in                              
            calendar year 1993 and $107,405.74 so paid in calendar year 1994.                          
                  In the notice of deficiency issued to the Lechners for 1994,                         
            respondent added $113,495.00 to Mr. Lechner’s individual dividend                          
            income.  This amount reflects the $107,405.74 reduction during                             
            1994 of Mr. Lechner’s debt to Stainless referred to above, and                             
            $6,089.19 for other personal accounting and legal fees of Mr.                              
            Lechner actually paid by Stainless in 1994.  The parties agree                             
            that the $6,089.19 referred to above is a constructive dividend                            
            that should have been reported on the Lechners’ 1994 joint                                 
            individual tax return.                                                                     

                                    ULTIMATE FINDING OF FACT                                           
                  In 1994 Mr. Lechner received an additional $107,405.74 in                            
            gross income from Stainless as a constructive dividend that took                           
            the form of a debt reduction.                                                              
                  The apparent clarity and simplicity of the findings set                              
            forth above is belied by some missing links and skewed by one of                           
            respondent’s concessions, which might be considered overly                                 
            generous (although not the one respondent has in mind).2                                   

            2 The concession of respondent that respondent asserts on                                  
            brief might have been overly generous is respondent’s concession                           
            that Mr. Lechner is entitled to a Schedule C deduction for his                             
            payment of the defense fees in his criminal case.  The concession                          

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