Timothy Dean Strong - Page 4

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          15, 1990.                                                                   
               In March 1995, Strong filed his individual Federal income              
          tax returns for the years 1990, 1991, 1992, and 1993 with the               
          Internal Revenue Service.  He filed his individual Federal income           
          tax return for 1994 on April 15, 1995.  For each of those years,            
          Strong’s income tax returns reported taxable income of zero, or a           
          loss.  SCC did not file income tax returns for any of the years             
          at issue.                                                                   
               Respondent determined that Strong understated his income               
          from the construction business during the years in issue, and,              
          further, that he had overstated deductible expenses.                        
          Additionally, during the examination of Strong’s income tax                 
          returns, respondent examined a bank account, No. 893315300, at              
          First Bank of Coon Rapids, later named Marquette Bank Coon                  
          Rapids.  Both Strong and SCC are identified as account holders on           
          that account.  Respondent identified numerous deposits to that              
          account made in cash from unidentified sources.  Respondent                 
          determined that home sales reported on Strong’s returns were the            
          source of certain of these cash deposits.  Respondent determined            
          that the remaining deposits to the account came from an                     
          unidentified source and constituted unreported income of Strong             
          and SCC.                                                                    
               Respondent issued a notice of deficiency to Strong dated               
          October 18, 2000.  On November 14, 2000, respondent issued a                

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