Dale H. Sundby and Edith Littlefield Sundby - Page 4

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          1996 with respect to its taxable year beginning November 9, 1994,           
          and ending December 31, 1994.  This return reflected zero income            
          and zero expenses.                                                          
               Navis conducted business throughout 1994.  A conference                
          table, computer supplies and software, business cards, legal                
          services, fax repair services, and access to an information                 
          service were all purchased by Navis during that year.  In                   
          addition, Navis maintained a Federal Express shipping account and           
          a Sprint telephone service account.                                         
               Throughout 1994, petitioner sent and received various                  
          correspondence in his capacity as CEO of Navis.  The                        
          correspondence appearing in the record can be summarized as                 
          follows.  On January 4, 1994, petitioner sent a letter as CEO of            
          Navis to Integrated Systems Solutions Corp. of Bethesda,                    
          Maryland, concerning products under development by Navis.  On               
          January 19, 1994, EDS Commercial Services (EDS) sent petitioner a           
          letter concerning the development of a product known as WorkUSA.            
          This letter stated in part:                                                 
               My proposal is that EDS and NAVIS begin a four-month design            
               effort.  During this stage, EDS will establish a core                  
               organization staffed with the expertise necessary to further           
               define the business processes and requirements, and design             
               the data base, application systems and technology platform.            
               * * * we understand the purpose of obtaining these estimates           
               is to assess EDS’ ability to deliver a full solution, we               
               also understand that the figures may be used [by] NAVIS in             
               obtaining financial backing from outside investors.  EDS               
               asks that the source of these estimates be held in                     
               confidence between EDS and NAVIS until such time as NAVIS              
               and EDS reach an agreement to proceed.                                 

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