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Sometime around 1988, Mr. Smith transferred the stock of WFIC to
petitioner or petitioner’s sister and brother-in-law2 and moved
WFIC to Taxman’s office space. Petitioner ran the day-to-day
operations of WFIC from 1988 until 1994. While petitioner ran
WFIC, WFIC’s primary business was the sale of commercial real
estate. WFIC maintained a checking account, a savings account,
and an Interest on Real Estate Trust Account (trust account)
throughout the years in issue. On September 14, 1990, the North
Dakota Real Estate Commission (NDREC) granted petitioner’s
application to be a real estate broker for WFIC. WFIC did not
hold regular shareholders or directors meetings. During the
years at issue, WFIC employed two real estate agents in addition
to petitioner. WFIC paid each agent commissions the agent earned
brokering transactions for WFIC. Certain of Taxman’s employees,
including petitioner, performed work for WFIC and were paid for
these services by Taxman. The Taxman employees who also worked
for WFIC did not keep track of the time they spent working for
WFIC. During 1990, 1991, 1992, and 1993, WFIC transferred at
2Petitioner testified that Mr. Smith transferred the WFIC
stock to petitioner’s sister and brother-in-law because
petitioner’s attorney advised him not to own stock in light of
the lawsuit against him and a potential lawsuit from his former
wife. Respondent alleges that the WFIC stock was transferred to
petitioner’s sister and brother-in-law as nominees for
petitioner. Because the identity of the true owner of WFIC’s
stock does not affect our determinations herein, we do not
address this discrepancy.
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