In the Matter of Roger Roy Larson and Joan Rosemary Larson, Debtors-Appellants

BAUER, Chief Judge.

Debtors-appellants Roger and Joan Larson appeal from the district court’s judgment affirming a decision of the bankruptcy court, which determined that the Internal Revenue Service (IRS) had correctly made deficiency assessments against the Larsons for tax years 1974 and 1975, and that the tax liability was not dischargeable in bankruptcy. We affirm.

I. Background

In 1973, the Larsons founded Pharmaco, Inc., an Illinois corporation, to exploit certain inventions of Roger Larson. Pharma-co issued 800 of its initial 1,000 shares of stock to the Larsons in exchange for patent…