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FINDINGS OF FACT
Some facts were stipulated. The stipulated facts and the
accompanying exhibits are incorporated herein by this reference.
We find the stipulated facts accordingly. Petitioner was married
throughout the subject year and resided in Memphis, Tennessee,
when his petition was filed. He has not filed a Federal income
tax return for 1995 through 2000.
Petitioner is the president, chief executive officer, and
sole shareholder of Only Kids. Only Kids was incorporated on
November 4, 1988, and it filed a 1998 Form 1120S, U.S. Income Tax
Return for an S Corporation, reporting a loss of $86,889. That
return also reported that Only Kids had been an S corporation
since the year of its incorporation and that as of the end of its
1998 taxable year, December 31, 1998, its balance sheet included
capital stock, additional paid-in-capital, and a retained deficit
in the amounts of $425,000, $2,049,649, and $2,053,361,
respectively. That balance sheet did not list any loans to Only
Kids from petitioner.
Only Kids paid wages of $99,692 to petitioner during 1998.
Petitioner also received during 1998 other items of gross income.
First, he received interest and dividends of $99 and $463,
respectively. Second, he received $39,056 from Donaldson Lufkin
& Arnold (DLA) and $16,349 from U.S. Clearing (USC) for sales of
stock. The proceeds from DLA were for sales in the respective
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