Investment Engineers, LTD., Robert S. McGlamery, A Partner Other than the Tax Matters Partner - Page 15

                                                 - 15 -                                                   
            acccordingly, to deny tax revenues to the Federal Government.                                 
            Petitioner’s trial memorandum states, in part:                                                
                  the product sought to be developed by the partnership                                   
                  here dealt simultaneously with politically driven                                       
                  investment economics, and the computer software and                                     
                  hardware industries which both underwent watershed                                      
                  revolutions in the years since the product development                                  
                  began.  In spite of delays, the product has been                                        
                  managed to professional engineering specifications,                                     
                  and, a working prototype thereof attempts to solve at a                                 
                  personal level what at this moment is the biggest                                       
                  political issue of all, how to deal with government’s                                   
                  relationship with the economy without depending on the                                  
                  politicians, who may not be able to perform.                                            
            Knox testified:                                                                               
                        Q.  Could you explain to us how * * * [the                                        
                  computer software] was supposed to work?                                                
                        A.  I had a background in political science and                                   
                  financial planning, as well as law, and I had worked as                                 
                  a financial planning rather--planner rather than as a                                   
                  lawyer.  And I was interested in the nexus between                                      
                  government action and economics and investments, and I                                  
                  had studied the--I’d done some reading and studying in                                  
                  the--I’d become converted to some economic philosophies                                 
                  that are founded in what’s called the Austrian School                                   
                  of Economics, and became convinced that the government                                  
                  deficit and spending problem was out of control at that                                 
                  time and would eventually wreak serious consequences on                                 
                  the economy, and that there existed investment                                          
                  strategies that individuals could use to counter coming                                 
                  distortions or upheavals that would affect their                                        
                  investment portfolios.                                                                  
                        Q.  So what was the purpose of this product?                                      
                        A.  The purpose of the product was to give                                        
                  people--the purpose of the product was to discover and                                  
                  apply proprietary ways of measuring governmental and                                    
                  political influence on the economy and use these                                        
                  measurements to develop investment strategies that                                      
                  would be used through the--through computer software,                                   
                  so that people could use the computer software to                                       
                  design investment strategies to counter political and                                   
                  governmental influences in the economy.                                                 

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