John B. Mathers, Sr. - Page 4

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               The following amounts were paid by FBI solely for the                  
          personal benefit of Mathers, Jr.:                                           

                    Year                     Amount                                   
                    1982                     $28,947.29                               
                    1983                     25,811.92                                
                    1984                     18,363.25                                
                    1985                     25,667.61                                
                    1986                     9,269.58                                 

          The parties have stipulated that, if any of the amounts paid by             
          FBI for the personal benefit of petitioner or Mathers, Jr. are              
          taxable to petitioner, they constitute constructive dividends               
          from FBI.                                                                   
               Petitioner was audited in the 1960's.  In 1972, this Court             
          decided that he had unreported taxable income in 1964; an opinion           
          was rendered as Mathers v. Commissioner, 57 T.C. 666 (1972).                
          Petitioner did not file individual Federal income tax returns for           
          any year from 1974 through 1986.  In late 1983, the Internal                
          Revenue Service began an audit of petitioner.  After the initial            
          interview, it became apparent that FBI was the source of                    
          petitioner's funds.  The audit expanded to include FBI as well as           
          petitioner.  Because of petitioner's failure to keep personal               
          income records, it was necessary to use the FBI records to                  
          reconstruct petitioner's income.  Petitioner was given time to              
          organize the records of FBI and to file amended returns for FBI             
          for the years in issue.  The audit took 4 years to complete                 
          because of the lack of financial records for petitioner and FBI.            

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