Santa Monica Pictures, LLC, Perry Lerner, Tax Matters Partner - Page 12

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               On Schedule D of its 1998 partnership tax return, SMP                  
          reported its sale of $81,590,418 (face value) notes receivable.             
          As described in more detail supra, SMP reported a long-term                 
          capital loss of $80,190,418 on this sale.                                   
              B.  Corona                                                             
               Following an extension to October 15, 1998, Corona filed its           
          1997 partnership tax return (for the period December 16, 1997, to           
          December 31, 1997), which it dated October 14, 1998.  Corona                
          reported Mr. Lerner, Peridon, SMP, and Imperial as having varying           
          interests in Corona’s profits, losses, and ownership of capital.            
          Corona reported Mr. Lerner as its tax matters partner.                      
               Corona reported a $79,912,955 basis in the $79 million                 
          receivable.  As described in more detail supra, on Schedule D of            
          its 1997 partnership tax return Corona reported selling this                
          receivable for a long-term capital loss of $78,768,955.                     
               C.  Mr. and Mrs. Ackerman                                              
               Peter and Joanne Ackerman filed joint Federal income tax               
          returns for 1997 and 1998.  On their 1997 return, the Ackermans             
          reported a net long-term capital loss from SMP of $213,715,813              
          and a net short term capital loss from SMP of $11,545,023.                  
               Among other gains and losses, the $213,715,813 net long-term           
          capital loss included these items:  a $147,486,000 loss that                
          flowed through from SMP to Somerville S Trust to the Ackermans              
          when SMP sold the $150 million receivable in 1997; a $62,237,061            






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