A.J. Concrete Pumping, Inc. - Page 11




                                       - 11 -                                         
          Understatement of Equipment Rental Income                                   
               Findings of Fact                                                       
               On March 15, 1990, Bone and Guerrero formed a new S                    
          corporation, Olympic, to operate a business project in Washington           
          State.  In 1992, Guerrero owned 51 percent of Olympic’s common              
          stock and Bone owned the remaining 49 percent.  Bone and Guerrero           
          each contributed $500 to Olympic, arranged for Olympic to lease             
          concrete pumping trucks, and permitted Olympic to borrow capital            
          from petitioner.  During the period under consideration, Olympic            
          made repayments to petitioner.  During its existence, Olympic               
          leased trucks and concrete pumping equipment from petitioner for            
          use in Olympic’s business.  Olympic discontinued business in                
          1992.                                                                       
               Olympic, pursuant to the lease with petitioner, was                    
          obligated to pay an $11,681.41 monthly rental for use of the                
          equipment.  Olympic paid petitioner $190,415.89 during the fiscal           
          year ending March 31, 1992.  Of the $190,415.89, petitioner                 
          reported $64,839 as rental proceeds on its 1992 tax return.  Of             
          the remaining $125,576 in payments, petitioner contends that they           
          should be treated as nontaxable payments on a loan.  Respondent,            
          however, has allowed only one-half of the $125,576, or $62,788,             
          to be treated as a loan repayment from Olympic to petitioner, and           
          respondent treated the other one-half as additional lease                   








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