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and incorporated. In 1984, CWS made an S election, see sec.
1361, that remained in effect for the years in issue.
Petitioner married Madris Gutierrez (Ms. Gutierrez) in 1975.
They remained married to each other throughout the years in
issue, they separated during 1996, and they were divorced in
1997.
At one time, petitioner and Ms. Gutierrez owned all of the
stock of CWS. Some time after the corporation was organized,
however, petitioner and Ms. Gutierrez were advised that the
corporation would enjoy certain competitive business advantages
if all of its stock were held in her name. Consequently, prior
to 1994, petitioner transferred his stock in CWS to Ms.
Gutierrez. In the divorce proceeding, CWS was described as
petitioner’s business and, in 1997, in connection with that
proceeding, all of the stock in CWS was transferred to
petitioner.
Prior to and during his marriage to Ms. Gutierrez, and
before CWS was formed, petitioner was involved in various other
welding businesses. In connection with each business, he
provided services as a certified welder. Ms. Gutierrez is not
a welder and except for CWS has no experience in welding
businesses; prior to CWS she was employed as a computer operator
for various companies. Sometime before 1987, Ms. Gutierrez also
began writing romance novels. In 1996, she founded New Concepts
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