Leo J. Polack - Page 2




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                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulations of fact are incorporated herein by this                    
          reference.  Leo J. Polack (petitioner) was a resident of                    
          Minnesota when he filed the petition in this case.                          
          Background                                                                  
               Zip Sort, Inc. (ZSI), was incorporated on July 24, 1987, and           
          petitioner purchased ZSI in August 1987.  During 1987, ZSI                  
          employed approximately 10 people and had 30 to 40 regular                   
          customers.  ZSI engaged in the trade or business of printing and            
          preparing pieces of bulk mail for clients and, to that end,                 
          operated lettershop and presorting divisions.                               
               The lettershop division processed mailings for ZSI’s                   
          clients, providing services ranging from printing and folding               
          materials to stuffing and addressing envelopes.  In 1991,                   
          petitioner purchased Stedman Enterprises, an unprofitable                   
          printing company, to bolster ZSI’s lettershop division and as a             
          backup in the event of an imminent strike.                                  
               The presorting division sorted the pieces of bulk mail                 
          according to U.S. Postal Service (Postal Service) criteria in               
          order to take advantage of Postal Service refund programs.                  
          Initially, ZSI employees manually sorted the pieces of bulk mail,           
          and the Postal Service discounted the postage for each piece of             
          mail in each of ZSI’s presorted mailings by 4 cents (presorting             






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