Mark N. Wright and Erica Y. Wright - Page 5

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               Mr. Wright is the sole stockholder of Wright & Associates              
          and during 1999, 2000, and 2001 owned and operated the S                    
          corporation.  A Form 1120S, U.S. Income Tax Return for an S                 
          Corporation, was filed for Wright & Associates for the years in             
          issue.  Petitioners are, and were during the years in issue,                
          officers of Wright & Associates.  Mr. Wright also owns, and owned           
          and operated during 1999, 2000, and 2001, Consultation &                    
          Mediation Services, L.L.C. (Consultation & Mediation), a single             
          member limited liability company.  Consultation & Mediation did             
          not file Federal tax returns for the years in issue as it was a             
          disregarded entity4 and its relevant tax matters were reported on           
          Schedule C, Profit or Loss From Business, of petitioners’ joint             
          Form 1040, U.S. Individual Income Tax Return.                               
               Mr. Wright performed accounting services for, and provided             
          tax advice to, clients of Wright & Associates, and Mrs. Wright              
          performed secretarial duties for Wright & Associates, for which             
          they were compensated during the years in issue.  Mr. Wright also           
          provided investment advice to individuals, including, inter alia,           
          Jo Ann Mohr (Ms. Mohr).5  During 1999 and 2000, Mr. Wright taught           

               4“A business entity with only one owner is classified as a             
          corporation or is disregarded; if the entity is disregarded, its            
          activities are treated in the same manner as a sole                         
          proprietorship, branch, or division of the owner.”  Sec.                    
          301.7701-2(a), Proced. & Admin. Regs.                                       
               5Jo Ann Mohr (Ms. Mohr) was not a client of Wright &                   
          Associates.  The record does not indicate whether Ms. Mohr was a            

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