Rudolph H. Beaver - Page 4

          June 24 and 25, 1993, petitioner sold all of those shares at a              
          loss of $2,816,540.  Petitioner claimed this loss as a capital              
          loss for 1993.  Four years later, petitioner reported on his 1997           
          Federal income tax return that he had at the beginning of 1997 a            
          capital loss carryover of $460,486.  The record does not specify            
          the source of that carryover.                                               
          C.  Administrative Proceedings by the SEC                                   
               During 1996, the Securities and Exchange Commission (SEC)              
          instituted administrative proceedings against Weissman, Martin,             
          Baron, and Bressman (collectively, the brokers) in connection               
          with their sale of HPI stock.  The SEC found that the brokers               
          manipulated the market for HPI stock from October 1991 through              
          June 1993 and effectively controlled the market for HPI stock.              
          See SEC Release No. 42103 (Nov. 4, 1999); SEC Release No. 37831             
          (Oct. 17, 1996); SEC Release No. 37661 (Sept. 9, 1996); SEC                 
          Litigation Release No. 14987 (July 23, 1996).                               
          D.  Indictment                                                              
               On May 13, 1997, the District Attorney for the County of New           
          York, New York, announced the criminal indictment of Baron,                 
          Bressman, and 12 other members of Baron.  Among other things, the           
          174-count indictment charged the defendants with violating the              
          New York Enterprise Corruption Statute, NY Penal Law, sec. 460.20           
          (Consol. 1993).  In the fall of 1997, Baron pleaded guilty to the           
          charges filed against it.  On December 15, 1997, Bressman pleaded           

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