Jerry S. Payne - Page 7

                                          - 7 -                                       
          $55,753 and $275,000 Loans From TexAmBkSW and TexGuarantyBk                 
               In 1986, a $55,753 loan was obtained from Texas American Bank          
          South West (TexAmBkSW) on behalf of 2618 Inc but nominally in the           
          name of petitioner.                                                         
               In 1987, a $275,000 loan was obtained from Texas Guaranty              
          National Bank (TexGuarantyBk) on behalf of 2618 Inc but nominally in        
          the name of petitioner.                                                     
               The $55,753 in loan proceeds received from TexAmBkSW was used in       
          1986 to pay a portion of Helmle’s legal fees owed to petitioner.  On        
          his 1986 Federal income tax return, petitioner reported his receipt         
          of the $55,753 as taxable income.                                           
               In 1987 and 1988, petitioner received additional funds from 2618       
          Inc that he used to make payments of principal and interest to              
          TexAmBkSW on the $55,753 loan.  The following schedule reflects for         
          1987 and 1988 the funds that petitioner received from 2618 Inc to           
          make payments on the $55,753 loan and the principal and interest that       
          petitioner paid to TexAmBkSW on the loan.                                   

                                            Funds Paid to                            
                         Funds Received      TexAmBkSW on $55,753 Loan                
               Year      from 2618 Inc       As Principal  As Interest                
               1987      $27,500             $23,272       $4,228                     
               1988      10,000            9,598          402                         

               The $275,000 in loan proceeds received from TexGuarantyBk was          
          used on behalf of 2618 Inc to redeem a 50-percent stock interest in         
          2618 Inc that was held by Spiro Kalantzakis.                                






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