Indmar Products Co., Inc. - Page 2

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          66621 penalties.                                                            
                                  FINDINGS OF FACT                                    
               Indmar Products Company Inc. (petitioner), incorporated in             
          1971, is a marine engine manufacturer.  In 1973, petitioner was             
          owned equally by Richard Rowe, Sr. (Mr. Rowe), and Marty Hoffman.           
          In 1978, Mr. Rowe became the majority stockholder owning 51                 
          percent of petitioner’s stock.  After Mr. Hoffman died in 1985,             
          Mr. Rowe and Donna Rowe (the Rowes) became the major stockholders           
          each owning 37.22 percent of petitioner’s stock.  Other                     
          stockholders included Richard Rowe, Jr., and Diane Rowe (i.e.,              
          the Rowes’ son and daughter-in-law) and Kathy and Joseph Tidwell            
          (i.e., the Rowes’ daughter and son-in-law).                                 
               From 1986 to 2000, petitioner’s business grew significantly.           
          Sales and costs-of-goods sold increased from $5 million and $3.9            
          million to $45 million and $37.7 million, respectively.  In                 
          addition, petitioner’s working capital (i.e., current assets                
          minus current liabilities) increased from $471,386 to $3.8                  
          million.  Petitioner did not declare or pay formal dividends.               
               In 1987, the Rowes began transferring cash (transfers) to              
          petitioner with the intent to take the money out as they needed             
          it.  After receiving advice from numerous estate planners, the              

               1 Unless otherwise indicated, all section references are to            
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              

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