Thomas and Linda O'Connell - Page 3




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          operations.  Mayflower owned 100 percent of Sabinas Claims                  
          Service, Inc., and 100 percent of Texas Premium Finance.                    
               During the years in issue, petitioner owned 100 percent of             
          Jordan General Insurance Agency, Inc. (Jordan), an S corporation,           
          and was involved in a number of other insurance-related                     
          enterprises in which he held ownership interests.  During the               
          years in issue, each of petitioners received wages from one or              
          more of the insurance-related enterprises.                                  
          Advances to Petitioner                                                      
               During 1986 and 1987, petitioner received advances of                  
          $1,175,044 and $1,469,974.40 from Mayflower.  During 1988,                  
          petitioner received advances of $329,266.66 from Jordan.                    
          Petitioner executed promissory notes in the amount of the                   
          advances.  None of the amounts advanced were ever repaid.  The              
          advances were shown on Mayflower’s 1987 U.S. Corporation Income             
          Tax Return, Form 1120, as “loans to stockholders”.  The amounts             
          were not reflected as outstanding at the end of 1988 on                     
          Mayflower’s corporate tax return for that year, and no loans to             
          stockholders were shown on Jordan’s corporate tax return for                
          1988.                                                                       
               In December 1989, Mayflower and Jordan each filed petitions            
          in bankruptcy.  The amounts that were advanced to petitioner were           
          not shown as property of Mayflower or Jordan in the schedules               
          filed in the bankruptcy proceeding.                                         






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