National Industrial Investors, Inc. - Page 16

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            a property, inspecting it, and negotiating with the owner.  Byrne                          
            scoured California, searching for a suitable exchange property.                            
            His mileage logs for 1989 and 1990 detail his trips to at least                            
            19 different properties.                                                                   
                  In his search, Byrne drove two cars: A 1978 Chevrolet Malibu                         
            (Malibu) owned by Frances and a 1977 Mercury Cougar (Cougar)                               
            owned by NII.  Byrne kept detailed mileage logs when he drove the                          
            Malibu.  Petitioner claims that Byrne drove the Malibu 10,305                              
            miles in 1989, and 12,636 miles in 1990.  Petitioner reimbursed                            
            Byrne for his mileage by issuing him notes, payable on or before                           
            December 31, 1997.  The note for 1989 was for $2,318.63 (10,305                            
            miles at 22.5 cents per mile).  The note for 1990 was for                                  
            $3,285.36 (12,636 miles at 26 cents per mile).                                             
                  The Malibu's 1990 mileage logs, however, are inaccurate.                             
            Imbedded in the Malibu's logs were the Cougar's mileage logs for                           
            June, July, and August of 1990.  Moreover, some of the 1990                                
            Malibu mileage logs that petitioner refers to in its summary                               
            mileage calculation are not in evidence.  After deducting these                            
            miles, the Malibu's mileage logs indicate that Byrne drove the                             
            Malibu 7,523 miles in 1990.                                                                
                  Except for the "imbedded" mileage logs, Byrne kept no Cougar                         
            mileage logs.  Petitioner claimed deductions only for the                                  
            Cougar's repairs and insurance.                                                            







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