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During the years in issue, Dennis and Curtis were
petitioner's sole stockholders. Dennis and Curtis are the sons
of Clifford Wagner (Clifford) and Evelyn Wagner (Evelyn).
Dennis was born in 1952, and graduated from high school in 1971.
Curtis was born in 1954, and graduated from high school in 1973.
Neither Dennis nor Curtis attended college. Both began working
with their father when they were young boys.
Petitioner is the successor to a partnership called Clifford
Wagner & Dennis Wagner Construction (Wagner & Wagner). Clifford
and Dennis formed Wagner & Wagner in 1974 to conduct a logging
business. In 1976, Wagner & Wagner acquired a construction
business that previously had been owned by Clifford and a third
individual. Clifford and Dennis each owned a 50-percent interest
in Wagner & Wagner.
On November 1, 1985, Clifford and Dennis incorporated
petitioner. At that time, the construction business of Wagner &
Wagner was well established; the partnership had approximately 30
employees1 and normally operated four construction crews during
the construction season.
Wagner & Wagner transferred assets of $638,916 and
liabilities of $127,543 to petitioner. The transfer was treated
as a contribution to capital on petitioner's books. The amount
1Wagner & Wagner had seven or eight full-time employees; the
other employees were seasonal.
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