Shorthorn Genetic Engineering 1982-2, Ltd., Shorthorn Genetic Engineering 1982-4, Ltd., Shorthorn Genetic Engineering 1982-5, Ltd., Walter J. Hoyt III, Tax Matters Partner, et al. - Page 6

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               The amount of liabilities assumed personally by the partners           
               during the first year of the partnership will be based on              
               original subscription agreements, and will be provided by              
               Walter J. Hoyt within one week after the partnership                   
               spreadsheet is submitted to him for review and/or                      
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               All partners who originally assumed personal liability for a           
               portion of the partnership debt during the first year of the           
               partnership -- whether they are now determined to be active            
               or inactive partners -- will be assigned a share of the                
               lower amount of recognized partnership debt described above.           
               Each partner's share will be the exact same percentage as              
               his/her share of the partnership debt originally assumed.              
               The agreement defines active partners as those who continue            
          to honor their obligations to Ranches and continue to participate           
          in the partnership and inactive partners as those who have walked           
          away from their note obligations and/or no longer participate in            
          the partnership.                                                            
               As an alternative, respondent made a settlement offer to the           
          partners on an individual basis.  The terms of the offer provided           
          generally that a partner who accepted would be allowed a                    
          deduction for any cash paid to the "Hoyt Organization" in the               
          year of payment.  The partner would not be allowed any other                
          deductions or credits nor be required to recognize any income               
          related to the partnerships.  The record does not indicate how              
          many partners accepted this settlement offer (referred to as the            
          out-of-pocket settlement).                                                  
               Respondent's spreadsheets calculating the partners'                    

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