Joseph P. and Marilyn Schneller - Page 4

          for Delivery through 1989.  All such returns for periods bearing on                
          this case were executed by one or the other of petitioners in their                
          capacities as corporate officers.                                                  
                Delivery was a union company.  After a bout of trouble with                  
          the Teamsters, Delivery was phased out in favor of a new nonunion                  
          company named Land Air Express, Inc. (all the stock of which is                    
          owned by petitioners), which today operates the business formerly                  
          conducted by Delivery.                                                             
                Delivery underwent a reorganization in 1990 and filed its                    
          corporate income tax return for that year under its new name, KTM,                 
          Shareholder Loan Accounts                                                          
                From time to time, commencing at dates prior to 1976,                        
          petitioner made withdrawals from Delivery.  Some of the withdrawals                
          were recorded as shareholder loans, advances, or investments.  None                
          was included in petitioners' income.  In 1979, Delivery's                          
          stockholders adopted a resolution ratifying all existing loans,                    
          advances, and investments and authorized the corporation to                        
          continue such transactions.  As part of the resolution, petitioner                 
          agreed to repay the amounts on demand.                                             
                In 1982, petitioner sold his interest in a waste management                  
          company for $800,000.  He did not use any of the proceeds to repay                 
          his withdrawals from Delivery.                                                     
                In September 1984, petitioner was advised by his accountant,                 

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