Mohan Roy, M.D., Inc. - Page 6

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               Roy, Inc. purportedly  acquired  the  Rolls  Royce4 as a               
          promotional tool to obtain referral business from cardiologists and         
          hospitals.  However, because of the downturn in the economy during          
          the early 1990's, it was determined that it would be inappropriate          
          to "showcase the Rolls Royce" while seeking referrals from doctors          
          who had declining income.  Consequently, the Roys decided that Roy,         
          Inc. should dispose of the Rolls Royce, although the corporate              
          petitioner did not do so during the years in issue.                         
               The Rolls Royce was driven sparingly by Mohan Roy during the           
          years in issue.  The odometer readings on the Rolls Royce on                
          various dates were as follows:                                              
                             Date           Odometer Reading                         
                         July 21, 1990            150                                 
                         Oct. 1, 1991             2,023                               
                         July 13, 1993            4,581                               
                         July 22, 1994            5,152                               
                         Nov. 17, 1994            5,226                               
          Occasionally Mohan Roy used the Rolls Royce for commuting to work           
          from home, attending hospitals to visit patients or perform                 
          surgeries, or having the car serviced (twice per year) or generally         
          maintained.  When not in use, the Rolls Royce was garaged at the            
          Roys' residence.                                                            
               Mohan Roy generally drove the Lexus 400 to commute to work and         
          to perform medical services.  The tax returns for the individual            

               4    The Rolls Royce was purchased for $159,837.19, which              
          was paid in part by trading in a 1979 Rolls Royce and receiving a           
          $38,000 credit.                                                             




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