Estate of Donald H. Ray, Deceased, Patricia G. Ray, Independent Executrix, and Patricia G. Ray - Page 9

               before the United States Tax Court as referenced above.                
               Although the balance of the Compliance Center letter is                
               correct, I want to clarify the terms of the settlement,                
               as well as the manner and time-frame for accepting the                 
                    First, the settlement offer that you received may                 
               appear confusing at first glance because it is embodied                
               in a schedule of partnership adjustments.  The bottom                  
               line of the settlement offer, however, is that all of                  
               the items reflected on your income tax returns for the                 
               taxable years 1983 and 1984 which flow from your                       
               interest in Valley Cable, Ltd. will be removed from                    
               those returns.  You will be allowed an ordinary                        
               deduction in 1983 equal to your partnership percentage                 
               of 1/2 of the total cash invested in the partnership as                
               determined at the partnership level.                                   
                    Second, the settlement offer also contains certain                
               concessions by the government with respect to the                      
               penalties which have been recommended by the                           
               Examination Division in connection with your                           
               participation in Valley Cable, Ltd.  The penalties are                 
               not at issue in the partnership proceeding but be                      
               advised that the offer to settle them will expire at                   
               the same time as the offer for the partnership items.                  
               In due course, a statutory notice of deficiency will be                
               issued to you for the full amount of the recommended                   
               penalties if you choose not to accept the government's                 
               offer while it is available.                                           
                    Third, the settlement offer can only be accepted                  
               by you if you (and your spouse, if a joint return was                  
               filed) execute the Form 870-L(AD), previously sent to                  
               you by the Compliance Center, and forward it to Mr.                    
               Peter Palka in an envelope postmarked no later than May                
               6, 1991, which date is the Final deadline for accepting                
               the offer.  If the Form 870-L(AD) is altered in any                    
               way, or if it is accompanied by a cover letter                         
               containing any conditions to the settlement, it will be                
               considered a counter-offer and therefore a rejection of                
               the government's offer.  Mr. Palka's address is Appeals                
               Division - I.R.S., 10850 Richmond Avenue, Suite 300,                   
               Houston Texas 77042.  The settlement agreement between                 
               you and the government will be consummated only upon                   
               the execution of the Form 870-L(AD) by an authorized                   
               representative of the government.                                      

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