Johannes M. Schalekamp - Page 5

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          Ampel notes, with $201,158.56 to be paid immediately, in cash,              
          and the balance ($19.3 million) due on March 2, 1999.                       
          Floridama’s obligation to pay $19.3 million on March 2, 1999, was           
          evidenced by its interest-bearing note (the Floridama note).                
          Interest was to be paid on the Floridama note at an annual rate             
          of 10.88 percent.  Pursuant to a stock pledge agreement,                    
          petitioner held Floridama stock as security for the Floridama               
          note.  On March 2, 1989, the accrued interest on the 1987 Ampel             
          notes was $2,449,974.  Petitioner’s adjusted basis in the 1987              
          Ampel notes at their sale to Floridama was $6,940,865                       
               Sometime in 1991, petitioner exchanged the Floridama note              
          for two notes from Ampel in the total amount of $25.5 million               
          (the 1991 Ampel notes).  Petitioner exchanged the Floridama note            
          for the 1991 Ampel notes in order to facilitate Ampel’s                     
          redemption of the 1987 Ampel notes.  He did so because Ampel had            
          failed to pay interest to Floridama on the 1987 Ampel notes, and            
          Floridama had threatened to foreclose on the related mortgages,             
          which, petitioner believed, would have limited the amount that,             
          eventually, he would have been able to obtain from Floridama with           
          respect to the Floridama note.  As of the time of trial,                    
          petitioner still held the 1991 Ampel notes, on which he had, as             
          of then, received no payment.                                               
          Holland Spring Notes                                                        
               Holland Spring, Inc. (Holland Spring) is a Florida                     
          corporation.  In December 1987, Holland Spring purchased from               



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