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engage in sexual activities with individuals who paid her for
such services. The parties have referred to such arrangements as
the provision of “escort” services, and we shall do so in this
opinion. Petitioner also sold electronic equipment, lighting
equipment, theater tickets, and music tapes. She earned money
for designing apartment interiors and installing entertainment
systems; she also engaged in obtaining loans; and she dabbled in
her family’s real estate activities in Hawaii and Ohio.
Petitioner formed Real Services, Inc. (Real Services), in
New York State on September 29, 1988. Petitioner was its
president and sole shareholder. She signed a preprinted
document, filling in the blanks, which indicated that she was an
employee of Real Services. Her associate and companion, Laura
C., agreed to serve as vice president of Real Services but
performed no meaningful activities in that role. Ms. C. was
elected vice president of Real Services several months after
using that title to attest to petitioner’s employment contract.
Two individuals named Ted P. and Michael S. were business
associates of petitioner but were not actively involved in the
operation of the corporation. Real Services did not file Federal
corporation income tax returns, Federal payroll tax returns, or
New York State tax returns covering any of the years at issue.
Petitioner maintained sketchy and incomplete records for
Real Services. She did, however, have signature authority over a
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