Paul A. Tanner, Sr. and Beverly N. Tanner - Page 3




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          proved a substantial omission of income under section 6501(e)1 to           
          extend the period of limitations to 6 years.2                               
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the attached exhibits are                      
          incorporated herein by this reference.  At the time they filed              
          their petition, Paul Tanner (hereinafter, petitioner) and Beverly           
          Tanner resided in Dallas, Texas.3                                           
               At the time of trial, petitioner was 70 years old and                  
          retired.  Before his retirement, petitioner bought, sold, and               
          invested in private and public companies.  In 1992, petitioner              
          planned to acquire control of Polyphase Corp. (Polyphase).                  
               Before Polyphase entered into negotiations with petitioner,            
          it required petitioner to sign a “lockup agreement”.  This lockup           
          agreement was a contractual obligation that restricted for 2                
          years petitioner’s ability to dispose of any Polyphase stock that           
          he might acquire while he had more than 5 percent beneficial                
          ownership in the corporation.                                               



               1  Unless otherwise indicated, all section references are to           
          the Internal Revenue Code in effect for the year in issue.                  
               2  Petitioners also argue that they are entitled to a                  
          deduction for personal exemptions of $4,900.  As the deduction              
          for personal exemptions is computational, we leave it for the               
          parties to compute in accordance with this decision.                        
               3  Petitioners filed a joint return for the 1994 taxable               
          year.                                                                       




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