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In 1972, petitioner founded Pre-Paid Legal, Inc. (Pre-Paid
Legal), as a corporation to provide prepaid legal services to the
public. During 1976, Pre-Paid Legal went public with a listing
on the NASDAQ Exchange. In 1986, Pre-Paid Legal stock was traded
on the American Stock Exchange, and as of the time of trial,
Pre-Paid Legal stock was traded on the New York Stock Exchange.
Since 1986, Pre-Paid Legal has been profitable. As of the time
of trial, Pre-Paid Legal had accumulated $50 million in cash and
investment assets.
During most of the years since 1976 and specifically during
the years in issue, petitioner has worked as a full-time officer
and employee of Pre-Paid Legal with such positions as chairman of
the board of directors, president, and chief executive officer.
In 1975, petitioners paid $40,000 for 40 acres of property
in Coal County, Oklahoma (the 40 acres). Over the years since
1975, petitioners’ immediate family has occupied the residence on
the 40 acres. Petitioners have improved the residence by adding
three rooms, a bath, a sunroom, a three-car garage, and a carport
at a total cost of $233,000. Petitioners have also improved the
property immediately surrounding the residence by constructing
hound kennels at a cost of $90,000 and a well house, two storage
buildings, and a hay shed at a cost of $36,000. The cumulative
cost of the 40 acres, the residence, and improvements described
above was $399,000.
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