Michael W. Keller - Page 8

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          indicate that any part of the total purchase price was paid for             
          those embryos.                                                              
               The “Certificate of Warranty” guaranteed that all heifers              
          listed on the bill of sale would be able to reproduce for 10                
          consecutive years.                                                          
               The “Sales Order” indicated that petitioner purchased 73               
          Durham Shorthorn heifers for $478,490 and 73 confirmed embryos              
          for $478,490.                                                               
               To fund his purchase of cattle, petitioner signed a                    
          “Fifteen Year Promissory Note” (promissory note), agreeing to pay           
          Hoyt Ranches $956,980.  The promissory note provided that                   
          petitioner was required to pay interest in 50 monthly                       
          installments of $1,075, beginning on September 1, 1995.                     
          Beginning in August 2000, petitioner was required to pay 10                 
          percent of the unpaid principal each year until the entire debt             
          was satisfied.  Petitioner did not keep a copy of the promissory            
          note for his records.                                                       
               To secure repayment of the promissory note, petitioner                 
          signed a “Security Agreement”, granting Hoyt Ranches a security             
          interest in all cattle purchased or bred by petitioner.                     
          Petitioner did not keep a copy of the security agreement for his            
          records.                                                                    
               On July 31, 1995, petitioner signed a “Share-Crop Board                
          Agreement” (board agreement).  The board agreement provided that            






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