Geoffrey K. Calderone, Sr. - Page 5

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          authority to make decisions with respect to the sale proceeds,              
          potentially millions of dollars.                                            
                Jacob prepared tax returns for petitioners for the relevant           
          years.  Those returns did not recognize any gain from the sale of           
          the MPG stock to First Management but included a statement,                 
          entitled “Election to Defer Gain on Sale of Qualified Securities            
          under Internal Revenue Code Section 1042(a)”, which disclosed the           
          date and nature of the sale to First Management.  In 1995,                  
          Geoffrey, Peter, and Jacob were notified by the law firm of                 
          Weinberg & Green, LLC, who had previously represented MPG and               
          were, at that time, representing Morgan and Onorato, that there             
          were “problems” with the ESOP.                                              
                On July 25, 1995, Geoffrey and Peter entered into an                  
          Amended and Restated Stock Purchase Agreement drafted by Weinberg           
          & Green, LLC (amended ESOP).  Jacob was not involved in the                 
          drafting of the amended ESOP, but he signed it with Geoffrey and            
          Peter.  Under the amended ESOP, petitioners agreed that First               
          Management failed the definition of an ESOP as set forth in                 
          section 4975(e)(7).  Petitioners also agreed that they would, if            
          necessary, file amended returns to correct the treatment of                 
          payments in prior years insofar as that treatment was                       
          inconsistent with the characterization of the purchase and sale             
          transactions under the amended ESOP.  As part of the amended                
          ESOP, the previous promissory note was canceled and was replaced            






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