Estate of Melvin W. Ballantyne, Deceased, Jean S. Ballantyne, Independent Executrix, and Jean S. Ballantyne - Page 10

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               The loss calculation for 1994 is calculated as follows:                
                    Net farm revenues                  $1,132,681                     
                         add:  depreciation            135,317                        
                         less: distribution (10/94)    (147,174)                      
                    Interest income                    13,057                         
                    Interest expense                   (12,082)                       
                    Total cash embezzled               $1,121,799                     
                    50% Share                          $  560,900                     
               On both its original and amended Forms 1041 for the taxable            
          year 1995, the estate claimed that as a result of Melvin’s death            
          it acquired a 50-percent interest in BBP.  In a document attached           
          to both the original and amended Forms 1041, the estate made the            
          following statement:                                                        
               [The estate] acquired a 50% interest in Ballantyne                     
               Brothers on March 4, 1994 as a result of the death of                  
               Melvin Ballantyne.  The interest in the partnership was                
               valued at $731,509 on the 706.                                         
               On March 4, 1994, the assets of Ballantyne Brothers                    
               consisted of cash, marketable securities, notes                        
               receivable, oil and gas properties, office furniture                   
               and fixtures, farm inventory, seed, buildings and                      
               equipment having a fair market value of $1,463,019.                    
               Taxpayer has been unable to obtain the basis amounts                   
               for these assets.  Currently there is legal action                     
               against the partnership to obtain such information.                    
               On August 24, 1998, a settlement agreement was executed                
          which resolved the dispute concerning BBP.  In negotiating the              
          settlement, representatives of the estate relied on the advice of           
          a certified public accountant as to the value of BBP’s assets.              
          The goal of the estate’s representatives was to obtain 50 percent           
          in value of the partnership’s assets.  Under the settlement                 

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