Carl J.D. Bauman and Margaret A. Bauman - Page 13

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               The tax opinion contained in the offering materials was                
          exhaustive.  It discussed essentially all relevant Code sections,           
          Treasury regulations, and revenue rulings pertaining to the                 
          structure of ERL and its transactions.  Much case law was also              
          presented, explaining how the courts had interpreted the various            
          Code sections, regulations, and rulings discussed therein.                  
               The accounting projections accompanying the offering                   
          materials included an estimate of ERL’s taxable income for 1980,            
          1981, and 1982.  Also included in the accounting projections was            
          an analysis of ERL’s estimated mining operations for the 29-year            
          period ending with 2009.  The accounting projections estimated              
          that ERL would realize a net loss of $10,105,000 in 1980.                   
          Similarly, for 1981 and 1982, net losses were estimated to be               
          $9,200,000 and $7,712,500, respectively.  As previously stated,             
          all but 1 percent of these losses were allocable to the limited             
          partners pursuant to the partnership agreement.  The accounting             
          projections further explained that, in light of this loss                   
          forecast, and based on the limited partners’ cash capital                   
          contributions, the ratios of the tax deductions to the cash                 
          capital contributions would be 333 percent, 304 percent, and 255            
          percent, respectively, for 1980, 1981, and 1982.                            
               The accounting projections also contained a tabular analysis           
          of projected mining operations.  It was projected that ERL would            
          sell 200,000 tons of coal in 1981.  The projections increased               
          annually, and during the period from 1989 through 2009 it was               

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