Sunoco, Inc. and Subsidiaries - Page 9

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             portion of those costs attributable to exposed but unmined               
             coal, as it did for financial accounting purposes.  The                  
             aggregate of the deductions claimed on each of Cordero’s                 
             separate returns for the removal of overburden at the                    
             Gillette mine was equal to the amount added for the year to              
             the general ledger account described above, Preproduction                
             Overburden Removal-–Year to Date Change, except for the                  
             amount allocated to ending inventory.                                    
                  Each of Cordero’s separate returns for 1983 through                 
             1986 includes an adjustment that has the effect of                       
             capitalizing a portion of the subject overburden removal                 
             costs as would be required under section 291(b)(1),                      
             assuming that the total overburden removal costs incurred                
             during the year at the Gillette mine were mine development               
             expenditures that are otherwise deductible under section                 
             616(a).  The adjustment reported on Cordero’s separate                   
             return for the first part of 1983 consists of a                          
             “miscellaneous” reduction of the “other deductions” claimed              
             on line 26 of the return.  The adjustments reported on                   
             Cordero’s returns for the second part of 1983 and for 1984,              
             1985, and 1986 consist of reductions to Cordero’s cost of                
             goods sold and are labeled “mine development costs”.                     

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