Leema Enterprises, Inc. - Page 25




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                    (4)  1984 Merit Transactions                                      
               In January 1984, Mr. Keeler ended his participation in the             
          Merit programs.10  In that month, he incurred short-term capital            
          losses of $9,591,801 and had long-term capital gains of                     
          $19,180,297--including the $9,851,790 he had retained as unrealized         
          capital gains from his trading in 1982.  He withdrew his cash               
          balance of $1,197,891.  On his 1984 Federal income tax return, Mr.          
          Keeler netted his capital gains against his capital losses and              
          applied the 60-percent reduction for taxable long-term capital              
          gains permitted by section 1202(a).  He reported taxable income of          
          $5,079,712 and taxes of $2,505,189.  To this amount, he credited            
          prepayments and credits of $1,740,800 and paid the resulting tax            
          liability of $764,399.11                                                    
               B.  Leon E. Richartz                                                   
               Dr. Richartz taught economics and finance courses at the               
          University of Illinois and the University of California at Berkeley         
          and coauthored a book entitled "Vertical Market Structures".                
          During his academic career, Dr. Richartz began using computers to           
          develop trading models in making markets more efficient.  Beginning         
          in 1971, Dr. Richartz worked as a professional trader for his own           
          account and for others. He also tried to earn additional                    

               10   Sec. 101(a) of the Deficit Reduction Act of 1984                  
          (DEFRA), Pub. L. 98-369, 98 Stat. 494, repealed the exception of            
          stock from the loss disallowance rules of sec. 1092, effective              
          for positions established after Dec. 31, 1983, in taxable years             
          beginning after Dec. 31, 1983.                                              
               11   Sometime later Mr. Keeler filed an amended return                 
          seeking to apply carrybacks from 1985.                                      

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