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25011 of 10 shares of stock in a certain company, Hess
Industries, Inc., that Mr. Hess gave to an irrevocable trust for
the benefit of his daughter.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time of filing the
petition, petitioners resided in Granger, Indiana. Petitioners
are husband and wife.
Petitioners owned stock in Hess Industries, Inc. (HII). HII
is a closely held C corporation, which was formed in July 1977.
HII, through its subsidiaries, primarily manufactures metal
processing machines and automation systems for the automotive
industry. The industry in which HII and its subsidiaries
operates is cyclical. HII’s principal customer markets
(automotive and steel processing) are also cyclical. HII relies
heavily on long-term contracts for special machines that take
more than a year to complete. It builds special machines, often
one-of-a-kind. HII acquires its business on the basis of bids.
HII’s sales and earnings are erratic and not readily predictable.
HII operates on a fiscal and taxable year ending on July 31
of each year. Through 1995, HII accounted for its sales on a
1All section references are to the Internal Revenue Code in
effect for the taxable year in issue, and all Rule references are
to the Tax Court Rules of Practice and Procedure.
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