James L. and Leta A. Thurman - Page 4

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          distribution of dividends in the amount of $739,979.25.  EMFI               
          prepared a "Statement of election to treat distributions to                 
          shareholders as not made first out of the accumulated adjustments           
          account", and Mr. Thurman signed the statement on December 22,              
          1992.  EMFI also prepared a "Statement of consent of affected               
          shareholders to election by Earth Movers of Fairbanks, Inc. to              
          treat distributions to shareholders as not made first out of the            
          accumulated adjustments account."  Each of the shareholders who             
          received a distribution signed the statement on December 22,                
          1992.  EMFI did not attach to its Form 1120S for the fiscal year            
          ended October 31, 1993, or file separately with the IRS, the                
          election statement or the statement of consent.                             
               In accordance with the board of directors' resolution, the             
          first distribution was made on December 22, 1992, in the amount             
          of $739,979 and was paid partially by checks totaling $229,394              
          and partially in promissory notes totaling $510,586.                        
          Petitioners' share of the first distribution paid by EMFI on                
          December 22, 1992, totaled $665,981.                                        
               The second distribution was paid in the total amount of                
          $2,318,872.  A portion of the second distribution was paid by               
          EMFI to the shareholders on December 22, 1992.  Petitioners'                
          share of the first portion of the second distribution paid on               
          December 22, 1992, totaled $140,000.  During the calendar year              
          1992, petitioners received a total of $805,981 in cash and                  





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