J. Michael Shedd and Marita Shedd - Page 3




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                              FINDINGS OF FACT                                        
               The parties’ stipulation of facts and the exhibits are                 
          incorporated herein by this reference.                                      
               Petitioners J. Michael and Marita Shedd (the Shedds) are               
          husband and wife and resided in Livonia, Michigan, at the time              
          their petition was filed.  The Shedds each owned 50 percent of              
          J&J, whose principal place of business was Romulus, Michigan, at            
          the time its petition was filed.  J&J was engaged in the freight            
          forwarding business in the Detroit, Michigan, metropolitan area.            
          Mr. Shedd owned 100 percent of TLC, which was engaged in a                  
          freight forwarding business in Cleveland, Ohio.  J&J and TLC are            
          related due to Mr. Shedd’s stock ownership.  J&J began operating            
          in June 1988, and Mrs. Shedd maintained its books without                   
          receiving compensation.  Mr. Shedd was president of J&J.  J&J did           
          not declare or pay any dividends.                                           
               J&J was the first of the Shedds’ companies to become                   
          involved in a network of independent freight forwarding                     
          contractors named SEKO.  Payments were made by freight customers            
          to SEKO, which retained 40 percent of adjusted revenues and                 
          remitted the balance to the contractors.  SEKO also retained the            
          right to apply customer receipts to outstanding indebtedness and            
          was entitled to maintain contractor security deposits.  Under its           
          agreement with SEKO, J&J’s shareholders were required to                    






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