Rudolph H. Beaver - Page 3

          $2,816,540 theft loss.  Respondent disallowed that loss in a                
          notice of deficiency sent to petitioner on May 17, 2001.                    
          B.  Petitioner’s Investment in HPI Stock                                    
               Petitioner began investing in stock in or about 1990.  At or           
          about that time, he started receiving unsolicited phone calls               
          from Jeffrey Weissman (Weissman), Andrew Bressman (Bressman), and           
          other brokers with the brokerage firm of D.H. Blair & Co., Inc.             
          (Blair).  Weissman suggested to petitioner that he invest in the            
          initial public offering of a company managed by Weissman’s                  
          father, Martin (Martin).  Weissman guaranteed to petitioner that            
          he would double his money.  Petitioner invested $25,000 in the              
          company and later realized from his investment a profit of                  
          approximately $20,000.  Afterwards, Weissman and Bressman                   
          persuaded petitioner to invest in the publicly traded stock of              
          Health Professionals, Inc. (HPI), a corporation for which Martin            
          served as the chairman from its (and its predecessor’s) founding            
          in the 1970s until May 1992.                                                
               In August 1992, Weissman and Bressman left Blair and founded           
          A.R. Baron & Co., Inc. (Baron), a brokerage firm of which                   
          Bressman was the president.  Weissman and Bressman continued to             
          persuade petitioner to invest in HPI without disclosing the fact            
          that HPI’s predecessor had previously been convicted of fraud.              
          From February 12 through June 8, 1993, petitioner purchased                 
          307,900 shares of HPI stock at a total cost of $3,527,002.  On              

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