Conrad Janis and Maria G. Janis - Page 9

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          a partnership.  The partnership continued to operate the gallery            
          throughout the years in issue.  Fiduciary income tax returns were           
          filed for the trust for 1989 through 1995.  Forms 1065, U.S.                
          Partnership Return of Income, were filed for the partnership for            
          1996 and 1997.                                                              
               David J. Silverman (Silverman) prepared the fiduciary income           
          tax returns for the trust and the Forms 1065 for the partnership            
          during those years.  Silverman is an accountant and has been an             
          enrolled agent since approximately 1974.  Silverman assisted in             
          the preparation of the Form 706 for Sidney’s estate and had been            
          a longtime tax adviser to the gallery and to Carroll and Donna              
          prior to preparing the tax returns for the trust and the                    
          partnership.  Silverman has also written extensively on the                 
          subject of taxes and has represented other art galleries in their           
          tax matters.                                                                
               On or about August 6, 1991, Silverman prepared the fiduciary           
          income tax return filed for the trust for 1990.  Attached to this           
          fiduciary income tax return was a Schedule C, Profit or Loss from           
          Business.  The Schedule C reflected the trust’s operation of the            
          gallery during 1990.  In order to determine the cost of goods               
          sold (COGS) for 1990, the gallery used the discounted value of              
          the collection as originally reported on Sidney’s estate tax                
          return, $12,403,207, as the value of the gallery’s inventory at             
          the beginning of that year.  The value reported for the gallery’s           






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