John T. and Linda L. Hewitt - Page 3

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          Virginia (the company), in 1982.  In fiscal year 1987, the                  
          company generated over $1 million in revenues and by 1988, was              
          operating out of 50 office locations in three States.  In 1988,             
          the company name was changed to Jackson Hewitt Tax Service, Inc.            
          (Jackson Hewitt).                                                           
               During the taxable year 1990, petitioners made gifts of                
          Jackson Hewitt stock to the Hewitt Foundation (the foundation)              
          and the Foundry United Methodist Church (the church).  During               
          1991, petitioners made gifts of Jackson Hewitt stock to the                 
          foundation and the church.                                                  
               At the time of the gifts, the market for Jackson Hewitt                
          stock operated primarily through individuals or organizations               
          contacting the company and offering to buy or sell at a given               
          price.  In arriving at the price, the potential purchaser had               
          access to information with respect to the most recent trades and            
          offers to sell by other shareholders.  At the time of the gifts,            
          approximately 700,000 shares of Jackson Hewitt stock were                   
          outstanding in the hands of approximately 400 individuals and               
          organizations (among whom were employees, franchisees, and others           
          unrelated to the company).  Between May 1, 1990, and December 31,           
          1991, 317 stock transfers were recorded in the company's stock              
          book, involving approximately 100,000 shares.                               
               In addition to the company market, another market operated             
          through Wheat, First Securities, Inc., in which hundreds to                 

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