Stephen M. and Rebecca A. Kerns - Page 3

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          tickets for all home games of the Houston Texans football team1             
          to be played in the new football stadium (now called Reliant                
          Stadium) that was then under construction in Houston, Texas.                
          Petitioner listed his home address and Social Security number on            
          the application.  InsurMark paid $7,800 with the application but            
          did not deduct this payment on its 1999 corporate income tax                
          return.                                                                     
               On May 23, 2000, petitioner signed a Harris County Stadium             
          permanent seat license agreement, under which the permanent seat            
          license fee was payable in three installments of $7,800, totaling           
          $23,400.  Petitioner signed the agreement as “president” but did            
          not specify the entity of which he was president.  Petitioner had           
          the exclusive right to use the seat license.  He could not                  
          transfer the license before the end of May 2003 without the                 
          consent of the Harris County-Houston Sports Authority, other than           
          to an immediate family member.  Petitioner indicated in the                 
          agreement that he was not acquiring the license as an investment            
          and that he intended to use the license himself, and not to                 
          distribute it or season tickets to others.                                  
               InsurMark also paid $7,800 for the permanent seat license in           
          the year ending December 31, 2000, and $7,800 in the year ending            
          December 31, 2001, for a total of $23,400 by the end of 2001.               


               1 The Houston Texans are a member of the National Football             
          League (NFL).                                                               





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