Ray E. Mason - Page 3

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          did business as a smoke shop in Oklahoma.  They also owned El               
          Dorado Investments, Inc. (El Dorado), and Cornerstone Capital               
          Resources, Inc. (Cornerstone), two S corporations that held                 
          interests in four Sonic Drive-In restaurants (Sonic restaurants)            
          located in Tennessee, Kentucky, and Kansas.  The Masons also                
          owned two commercial properties that they leased to Sonic                   
          restaurants located in Tennessee.                                           
               Sometime before 1995 the Masons met Dan Meador (Meador), the           
          chairman of a tax-protester group that questions the legality of            
          the Federal income tax system.  Meador was convicted of felony              
          obstruction of justice charges relating to a 1995 Federal                   
          investigation of two other Oklahoma-based tax protesters.  When             
          respondent initiated a collection action during 1995 against Mrs.           
          Mason regarding her 1991 tax liability, petitioner and his wife             
          each sent a letter to respondent on May 24, 1995, attempting to             
          revoke their status as United States citizens.  Mrs. Mason then             
          sent an additional letter on July 14, 1995, advancing other                 
          frivolous, tax-protester type arguments.                                    
               The Masons, also during 1995, transferred their residence              
          and business interests to various trusts they controlled.                   
          Petitioner did not maintain a bank account in his name, but,                
          rather, used accounts in his wife’s name and in the name of El              
          Dorado.  In addition, petitioner did not make estimated tax                 
          payments in 1995.                                                           






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