Estate of Robert G. Kluener, Deceased, Donald E. Hathaway, Co-executor and Charlotte J. Kluener - Page 12

            dismissed all of the directors, except himself.  As sole                                      
            director, Mr. Kluener declared, effective June 25, 1990, a                                    
            distribution to himself of $2,176,000, to be paid by July 31,                                 
            1990, representing the remaining amount of the proceeds of the                                
            horse sales and the earnings thereon held in the Legg Mason                                   
            account in the name of APECO Equine.  The balance of the Legg                                 
            Mason account was distributed to Mr. Kluener during July 1990.                                
            APECO's president was unaware of the distribution when it                                     
            occurred.  The timing of the distribution was set with the                                    
            assistance of Mr. Kluener's tax advisers.  For its year ending                                
            June 30, 1990, APECO had no current or accumulated earnings and                               
            profits, and the distribution was treated as a nontaxable return                              
            of capital.                                                                                   
                  The transaction involving the horses was reflected in                                   
            APECO's financial records for the first time when its audited                                 
            financial statement for the year ending June 30, 1990, was                                    
            prepared.  APECO's audited financial statement for its year                                   
            ending June 30, 1990, describes the transaction involving the                                 
            horses as follows:                                                                            
                  In August 1989, the Company's shareholder contributed                                   
                  equine property to the Company with the intent of                                       
                  selling the property and utilizing the Company's tax                                    
                  loss carryforwards to shelter the gain on the sale.                                     
                  The contribution to capital of this nonmonetary asset                                   
                  was valued at the net proceeds from the sale of the                                     
                  property which took place within two months of the                                      
                  contribution.  Such value was $2,152,288.                                               
                  In June 1990, the Company declared a distribution of                                    
                  $2,176,000 which was paid in July 1990.  This                                           
                  distribution was recorded as a reduction of additional                                  

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