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Petitioner’s father, Kenneth Alvin Tamms (Mr. Tamms), was
president and a nonmajority shareholder of PSI.1 Because of ill
health, Mr. Tamms stopped working at PSI in October 1992.
Thereafter, petitioner operated PSI until its complete
liquidation in 1995.
Beginning in 1982 and continuing until PSI’s liquidation in
1995, PSI retained JJT to: (1) Provide back office support
(e.g., computerizing and processing accounts receivable and
payable), and (2) photograph and provide graphic representations
of PSI’s equipment for sales and to ensure PSI’s compliance with
OSHA regulations in operating the equipment. From January 1993
through April 1995, JJT billed PSI $505 per month for its
services. In May 1995, JJT reduced its monthly fee to $205
because PSI was in the process of closing the business and no
longer required the full range of JJT’s services. Petitioner
never realized a net profit from the service arrangement with
PSI.
In 1988, realizing that his father was aging and that PSI’s
business was in decline, petitioner sought to purchase a wedding
photography business, but, after a period of negotiations, the
would-be seller decided not to sell. Subsequently, petitioner
began exploring the possibility of transitioning JJT into
1 The record indicates that other members of petitioner’s
family were also shareholders of Professional Services, Inc., but
does not otherwise reveal the ownership composition.
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