Shedco, Inc. - Page 7

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          account was fully liquidated.  Petitioner did not receive                   
          Schedules K-1, Partner's Share of Income, Credits, Deductions,              
          Etc., from Estes Co. from 1981 through 1989 or 1990.                        
               Petitioner employed Mr. Estes under the management contract            
          from September 1980 through September 1985.  He did not serve as            
          an officer or director of petitioner during those years.                    
               On September 30, 1986, petitioner's board of directors voted           
          to terminate the management contract effective December 31, 1986.           
          Formal notice of termination provided to Estes Co. was dated                
          November 1, 1986.  At the time the management contract was                  
          terminated, all of the employees originally listed in the                   
          contract had retired from or otherwise terminated their                     
          employment with petitioner except for Mr. Shedd, and he was                 
          preparing to retire from petitioner.                                        
          The Pension Plan                                                            
               On September 18, 1980, petitioner adopted a defined benefit            
          pension plan (the plan), effective September 20, 1979.                      
          Petitioner amended and restated the plan on December 5, 1985,               
          effective for plan year ending September 19, 1985, and respondent           
          issued a favorable determination letter as to the qualification             
          of the plan and its related trust as restated (hereinafter                  
          collectively referred to as plan) on July 8, 1987.  The                     
          determination letter cautioned:  "Continued qualification of the            
          plan will depend on its effect in operation under its present               
          form."                                                                      



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