Ronald L. DeVault - Page 6

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          time, Mr. Turner offered to forgive petitioner’s $22,000 debt to            
          Union Machine and to pay petitioner an additional $10,000 for his           
          ownership interest.  Petitioner did not accept the offer.                   
               Since leaving Union Machine, and through the year in issue,            
          petitioner did not sign any document purporting to relinquish his           
          interest as a shareholder in Union Machine, nor did he take any             
          legal action to terminate such interest in Union Machine.  In               
          addition, Union Machine has not provided petitioner with any                
          consideration in exchange for redemption of his shares, and Mr.             
          Turner has not commenced a declaratory judgment action to become            
          the sole shareholder.8                                                      
               In July 1999, petitioner filed for bankruptcy protection               
          under chapter 7 of the Bankruptcy Code.  In his bankruptcy                  
          filing, petitioner disclosed his shareholder interest in Union              
          Machine but did not assign a value to it.  The bankruptcy court,            
          however, did not administer petitioner’s shareholder interest as            
          part of the bankruptcy estate.  In November 1999, the bankruptcy            
          court discharged, inter alia, petitioner’s Household Finance loan           
          and his debt to Union Machine of $22,000.9                                  
               On December 7, 1999, Union Machine held its annual meeting             

               8  Since late 1998, Union Machine has not had an occasion              
          requiring action by a two-thirds vote of the stockholders.                  
               9  Around this time, Mr. Turner again offered to buy                   
          petitioner’s ownership interest.  Petitioner did not accept this            

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