David M. and Teri L. Saykally - Page 15

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            1997, CPSG, Inc. informed petitioner that it was unable to make the minimum                      
            royalty payments under the development agreement.  The $3,150 is presumably                      
            accrued interest for the period of nonpayment of minimum royalties.                              
            The $52,500 paid on January 28, 1997, included the January 31,                                   
            1997, minimum royalty payment as contemplated under the                                          
            development agreement as well as an advance payment for the April                                
            30, 1997, minimum royalty payment.                                                               
                   Petitioner paid CPSG, Inc. the following amounts as interest                              
            on his $1.4 million indebtedness to CPSG, Inc.:                                                  
                    Date                Amount               For Period                                      
                   12/29/96           $30,947.27         110/1995 - 09/1996                                  
                   03/31/98           138,541.27         10/1/96 - 12/31/97                                  
                   12/30/98           117,092.59                1998                                         
                   12/21/99           111,595.20                1999                                         
                   TOTAL        398,176.33                                                                   
                   1 For the period Oct. 1995 to Sept. 1996, the record fails to state the                   
            actual days upon which interest accrued.                                                         
            Other Schedule C Expenses                                                                        
                   On their Schedules C, petitioners reported the following                                  
            amounts as receipts and expenses for a consulting business named                                 
            “CPSG Ventures”12 for the years at issue:                                                        
                                      1994                 1995                1996                          
                   Receipts           $194,317           $67,565            $72,118                          
                   Expenses           79,881             30,912             79,349                           
                   Net profit/loss    114,436            36,653             (7,231)                          
            The receipts reported for CPSG Ventures for 1994 on petitioners’                                 
            Schedule C consisted of the following items:                                                     
                   CPSG, Inc. reimbursements1                   $61,640                                      

                   12“CPSG Ventures” is the name of both a partnership in which                              
            petitioner was a general partner and petitioner’s Schedule C                                     
            business.  See supra note 10.                                                                    




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