Michael W. and Charlotte S. Phillips - Page 3

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          amount of $1,145,508.  On Form 3468, Computation of Investment              
          Credit, which they submitted with their joint Federal income tax            
          return for 1985, petitioners calculated the amount of their                 
          available credit with respect to regular investment credit                  
          property as $114,551 and the amount of their available credit               
          with respect to business energy investment credit property as               
          $114,000, for a total of $228,551, based on the Schedules K-1.              
          Of this total amount, they claimed $45,824 as a credit against              
          their tax liability for 1985, leaving a total unused investment             
          credit of $211,492.2  In 1986 petitioners filed an amended                  
          Federal income tax return for 1984, on which they claimed a                 
          refund resulting from the carryback of $25,471 of the unused                
          investment credit for 1985.  On their joint Federal income tax              
          return for 1986 petitioners used $118,179 of the balance of the             
          unused investment credit to offset recapture tax incurred                   
          pursuant to section 47(a) on certain Ethanol equipment disposed             
          of in that year.                                                            
               A notice of final partnership administrative adjustment                
          (FPAA) was mailed to the tax matters partner of Ethanol on                  
          December 5, 1991, and a timely petition for readjustment was                
          filed with this Court on April 30, 1992.  At some time in early             
          1992, prior to the filing of the petition on behalf of Ethanol,             
          petitioners filed amended Federal income tax returns on Form                
          1040X for both the 1985 and 1986 taxable years.  On their amended           
          return for 1985 they recalculated their tax liability, deleting             

          2 In the calculation of the carryback/carryforward                          
          alternative minimum tax for 1985 the amount of $28,765 is added.            



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