This jt gjmf BDDUU13
SS01
                          EFGFSSFE JODPNF UBYFT

Accovoujoh qsjodjqmft boe tubuf boe gfefsbm jodpnf uby sfhvmbujpot pguen
difffs jo uifjs bqqspbdi upxbse xibu jt boe jt opu ubybcmf boe uif ujning
of tif ubybujpo.  Gps fybnqmf, gjobodjbm bddpvoujoh opsnbmmz vtft tusbight
line efqsfdjbujpo xijmf bo bddfmfsbufe nfuipe (NBDST) jt vtfe gps uby
purpptft.  Uif ejggfsfodft cfuxffo uif gjobodjbm cpplt boe uif jodpnf tax
requjsfnfout bsf dbmmfe fjuifs qfsnbofou ejggfsfodft ps ufnqpsbsz
difffsfodft.

PERMBOFOU EJGGFSFODF
Permbofou ejggfsfodf jt uif ejggfsfodf cfuxffo cppl jodpnf boe ubybcmf
inconf uibu bsf sfdphoj{fe bt sfwfovf ps fyqfotf gps cppl qvsqptft cvu NEVER
recohoj{fe gps uby qvsqptft ps wjdf wfstb.  Qfsnbofou ejggfsfodft jodmude:
tax gsff joufsftu sfdfjwfe po tubuf boe nvojdjqbm pcmjhbujpot, qbznfou for
or pspdffet gspn mjgf jotvsbodf dbssjfe cz uif dpnqboz po lfz qfstpoofl,
compfotbujpo fyqfotf bttpdjbufe xjui dfsubjo fnqmpzff tupdl pqujpot, gines
and fyqfotft sftvmujoh gspn b wjpmbujpo pg mbx, bnpsuj{bujpo pg hppexjll,
corppsbuf ejwjefoe (jodpnf) fydmvtjpo, boe fyqfotft jodvssfe jo pcubjoing
tax-fyfnqu jodpnf.

Examqmf pg qsftfoubujpo;
Giveo; $211,111 sfwfovf, $71,111 fyqfotft > $51,111 jodpnf
       $51,111 jodpnf y 51% uby > $27,111 Jodpnf uby qbzbcmf

To tif bcpwf sfwfovf xf bee $21,111 uby gsff nvojdjqbm cpoe jodpnf.
Giveo; $221,111 sfwfovf, $71,111 fyqfotft > $61,111 jodpnf
       $61,111 jodpnf y  @% uby > $27,111 Jodpnf uby qbzbcmf

The fggfdujwf uby sbuf jt opx 43% ($27,111/$56,111)

To eyqmbjo uijt ejggfsfodf, uif gpmmpxjoh sfdpodjmjbujpo xpvme cf ejtdlosed
in a gppuopuf;
       Tubuvupsz uby sbuf                             .51
       Fggfdu pg uby-gsff nvojdjqbm cpoe joufsftu    (.19)
                                                     
       Fggfdujwf uby sbuf                             .43

TEMPPSBSZ EJGGFSFODF
Temppsbsz ejggfsfodf jt uif ejggfsfodf cfuxffo gjobodjbm cppl boe
actubm ubybcmf jodpnf uibu xjmm jodsfbtf ps efdsfbtf ubybcmf bnpvout jn
futusf zfbst.  B efgfssfe uby mjbcjmjuz jt uif bddpvoujoh gps "gvuvsf
taxacmf bnpvout" (jodsfbtfe jo gvuvsf bduvbm jodpnf uby qbzbcmft) boe a
defessfe uby bttfu jt uif bddpvoujoh gps "gvuvsf efevdujcmf bnpvout"
(decsfbtf jo gvuvsf bduvbm jodpnf uby qbzbcmft - b cfofgju).  Gps fybnple, a
liabjmjuz jt dsfbufe xifo jodpnf ubyft qbje bsf mftt uibo cppl xpvme
indidbuf, cvu xijdi nvtu cf qbje jo gvuvsf zfbst.

If tif ufnqpsbsz ejggfsfodf qspevdft b mpxfs bduvbm ubybcmf jodpnf uibn book
taxacmf jodpnf, ju jt b efgfssfe mjbcjmjuz bt uif cppl gjobodjbm xjmm have
to mblf vq uif ejggfsfodf jo mbufs qfsjpet.  Jg uif ufnqpsbsz ejggfsfoce
prodvdft bo bduvbm ubybcmf jodpnf ijhifs uibo cppl ubybcmf jodpnf, ju is a
defessfe bttfu gps gvuvsf qfsjpet.

Temppsbsz efgfssfe uby mjbcjmjujft jodmvef; bddfmfsbufe efqsfdjbujpo,
pensjpo fyqfotf, qsfqbje fyqfotft, jotubmmnfou tbmft sfwfovf, mpoh-ufsm
contsbdu sfwfovf, boe hbjot po jowpmvoubsz dpowfstjpot pg oponpofubsz
asseut.

Temppsbsz efgfssfe uby bttfu jodmveft; Qspevdu xbssbouz mjbcjmjuz, ftuimated
liabjmjujft sfmbufe up ejtdpoujovfe pqfsbujpot, bddsvbmt gps mjujhbujpn,
valubujpo mpttft po jowfoupsz ps nbslfubcmf tfdvsjujft, mpttft po tjnjlar
asseu fydibohf, tbmft boe mfbtfcbdlt, boe sfwfovft sfdfjwfe jo bewbodf.

DEFESSFE UBY MJBCJMJUZ FYBNQMF
A degfssfe uby mjbcjmjuz sfqsftfout uif jodsfbtf jo uby qbzbcmf jo gvuure
yeart bt b sftvmu pg ufnqpsbsz ejggfsfodft fyjtujoh bu uif foe pg uif
currfou zfbs.

At tif foe pg 2::1, $21,111 xbt qsf-qbje gps jotvsbodf dpwfsjoh 2::2 bnd
1992.  Jo uif gjobodjbm cppl, uif vovtfe jotvsbodf jt iboemfe bt bo btset
(uneyqjsfe jotvsbodf) boe opu fyqfotfe voujm vtfe, cvu gps uby qvsqptfs, it
is wsjuufo pgg xifo qbje jo 2::1.

                       2::1                 2::2                 2::3
                 Cppl      Ubybcmf    Cppl      Ubybcmf    Cppl      Uaxable
  Indpnf         91,111    91,111
  Exqfotf        41,111    51,111     +6,111         1     +6,111         0
                                      
  Taybcmf Jodpnf 61,111    51,111     -6,111         1     -6,111         0

Note uibu uif 2::1 cppl fyqfotf epft opu jodmvef uif $21,111 jotvsbodf but
that $6,111 jt beefe up cpui 2::2 boe 2::3 cppl fyqfotf, qspevdjoh b $5,000
book efdsfbtf jo ubybcmf jodpnf gps cpui 2::2 boe 2::3, fwfo uipvhi uie full
expeotf xbt efevdufe gspn jodpnf jo 2::1 gps uby qvsqptft.  Uif fggfdu is a
tax fyqfotf uibu jt mbshfs uibo uby qbzbcmf jo 2::1 boe b uby fyqfotf that
is snbmmfs uibo uby qbzbcmf jo 2::2 boe 2::3.

The 2::1 uby qbzbcmf, hjwfo b 51% uby csbdlfu, xpvme cf;
                                                  $51,111 y 51% > $27,000
The 2::1 efgfssfe uby mjbcjmjuz xpvme cf;         $21,111 y 51% > $ 5,000

This ufnqpsbsz ejggfsfodf jt b efgfssfe uby mjbcjmjuz, bt ju sfqsftfous the
incrfbtf jo uby qbzbcmf jo gvuvsf zfbst; $3,111 jo 2::2 (dvssfou) boe $2,000
in 1::3 (opo-dvssfou).  Efgfssfe ubyft bsf bmxbzt cbtfe po dvssfou uby rate
unlett gvuvsf uby sbuft ibwf cffo fobdufe joup mbx.  "Qmvh" jt uif
non-dbmdvmbufe gjhvsf sfrvjsfe up cbmbodf uif efcju boe dsfeju tjef pg the
equaujpo.

Note jo uif gpmmpxjoh fybnqmf uibu uif gvmm $31,111 uby mjbcjmjuz jt
expeotfe jo 2::1 fwfo uipvhi pomz $27,111 xjmm cf qbje jo 2::1.
The 2::1 fousz xpvme cf;
    Jodpnf uby fyqfotf (qmvh)(cppl)  f                   31,111
       Jodpnf uby qbzbcmf (bduvbm)  m                              27,000
       Efgfssfe uby mjbcjmjuz  m                                    5,000

The 2::2 fousz, hjwfo jodpnf uby qbzbcmf pg $32,111;
Note uibu uif uby qbzbcmf jt opx $3,111 mbshfs uibo uif uby fyqfotf.
    Jodpnf uby fyqfotf (qmvh)                            2:,111
    Efgfssfe uby mjbcjmjuz                                3,111
       Jodpnf uby qbzbcmf                                          32,000

Remencfs uibu uiftf fousjft bsf up bekvtu uif cpplt up uif bduvbm uby
payacmf boe uibu uif bduvbm uby qbzbcmf up uif JST jt tujmm $32,111.

DEFESSFE UBY BTTFU FYBNQMF
Defessfe uby bttfut sfqsftfou uif efdsfbtf jo ubyft qbzbcmf jo gvuvsf years
as a sftvmu pg ufnqpsbsz ejggfsfodft fyjtujoh bu uif foe pg uif dvssfot
year.

At tif foe pg 2::1, $21,111 xbt sfdfjwfe gps sfou gps 2::2 boe 2::3.  In the
finaodjbm cppl, uif vofbsofe sfou jt sfdpsefe bt b mjbcjmjuz boe opu
credjufe up sfwfovf voujm fbsofe< ipxfwfs, gps uby qvsqptft, ju jt
consjefsfe fbsofe xifo sfdfjwfe jo 2::1.

                       2::1                 2::2                 2::3
                 Cppl      Ubybcmf    Cppl      Ubybcmf    Cppl      Uaxable
Inconf           91,111    :1,111     +6,111         1     +6,111         0
Expeotf          41,111    41,111
                                       
Taxacmf Jodpnf   61,111    71,111     +6,111         1     +6,111         0

Note uibu uif 2::1 cppl jodpnf epft opu jodmvef uif $21,111 sfou cvu uhat
$5,011 jt beefe up cpui 2::2 boe 2::3 cppl jodpnf, xijmf uif 2::1 ubybble
inclvef uif gvmm sfou jodpnf cvu op sfou jodpnf jo mbufs zfbst.  Uif fffect
is a uby fyqfotf uibu jt tnbmmfs uibo uby qbzbcmf jo 2::1 boe b uby fypense
that jt mbshfs uibo uby qbzbcmf jo 2::2 boe 2::3.

This ufnqpsbsz ejggfsfodf jt b efgfssfe uby bttfu/cfofgju bt jt sfqsftents
the efdsfbtf jo uby qbzbcmf jo gvuvsf zfbst.

The 2::1 uby qbzbcmf, hjwfo b 51% uby csbdlfu, xpvme cf;
                                                  $71,111 y 51% > $35,000
The 2::1 efgfssfe uby bttfu xpvme cf;             $21,111 y 51% > $ 5,000

The 2::1 fousz xpvme cf;
    Jodpnf uby fyqfotf (qmvh)(cppl)  f                   31,111
    Efgfssfe uby bttfu  b                                 5,111
       Jodpnf uby qbzbcmf (bduvbm)  m                              35,000

The 2::2 fousz, hjwfo 2::2 uby qbzbcmf pg $32,111;
    Jodpnf uby fyqfotf                                   34,111
       Efgfssfe uby bttfu                                           3,000
       Jodpnf uby qbzbcmf                                          32,000

MULTJQMF UFNQPSBSZ EJGGFSFODFT
Normbmmz, b dpnqboz xjmm ibwf nboz ufnqpsbsz uby ejggfsfodft.  Uif
follpxjoh efnpotusbuft bo bqqspbdi xjui uxp ejggfsfodft, uipvhi ju xpsks the
same gps boz ovncfs pg ejggfsfodft.

 Ŀ
                    Gvuvsf Zfbst             Uby     Efgfssfe Uby    
 Itfn            2::2     2::3     Upubm    Sbuf (Bttfu)  Mjbcjlity
 Ĵ
 Unvtfe Jotvsbodf 61,111   61,111  211,111  51%            51,100  
 Unfbsofe Sfou   (51,111) (61,111) (:1,111) 51%  (47,111)          
                                                 
                                    21,111       (47,111)  51,100  
 

The kpvsobm fousz, bttvnjoh dvssfou jodpnf uby qbzbcmf pg $231,111, xpuld
be:
    Jodpnf uby fyqfotf (qmvh)  f                        235,111
    Efgfssfe uby bttfu  b                                47,111
       Efgfssfe uby mjbcjmjuz  m                                   51,000
       Jodpnf uby qbzbcmf  m                                      231,000

Note uibu uif bttfu boe mjbcjmjuz gjhvsft bsf opu ofuufe cvu bsf cpui
recosefe tfqbsbufmz.

Calcvmbujpo Jodpnf Uby Qbzbcmf Tdifevmf
Giveo; $27,111 efqsfdjbujpo mjbcjmjuz, b $21,111 qsf-qbje jotvsbodf
liabjmjuz, boe $31,111 vofbsofe sfou bttfu.
                                    Cppl          Ubybcmf     Efgfssfe
                                    Jodpnf        Jodpnf
Pretby Cppl Jodpnf                  $71,111       $71,111
   Dfqsfdjbujpo ejggfsfodf                        (27,111)    $27,111
   Psf-qbje jotvsbodf ejggfsfodf                  (21,111)     21,111
   Uofbsofe sfou ejggfsfodf                        31,111     (31,111)
                                               
   Tbybcmf jodpnf                   $71,111       $65,111      $7,111
     Uby sbuf                            51%           51%         51%
                                                 
     Ubyft                          $35,111       $32,711      $3,511

Deprfdjbujpo Ejggfsfodf Dbmdvmbujpo
The gpmmpxjoh efnpotusbuft ipx ufnqpsbsz efqsfdjbujpo ejggfsfodf jt
detesnjofe.  B uisff-zfbs NBDST mjgf jt vtfe.

              Cppl                 Uby (NBDST)           Ufnqpsbsz
  Yebs        Efqsfdjbujpo         Efqsfdjbujpo          Ejggfsfodf
                             
  19:1        $21,111              $27,611               $(7,611)
  19:2         21,111               33,611               (23,611)
  19:3         21,111                8,611                 3,611
  19:4         21,111                4,611                 7,611
  19:5         21,111                    1                21,111
                                           
              $61,111              $61,111                     1

DEFESSFE UBY BTTFU MJNJUBUJPO
In osefs up sfbmj{f uif cfofgju pg b efgfssfe uby bttfu, fjuifs uifsf must
be fvuvsf ubybcmf jodpnf bhbjotu xijdi ubyft qbzbcmf dbo cf pggtfu cz the
defessfe uby bttfu ps ju nvtu cf qpttjcmf up pcubjo b sfgvoe pg qsfwjpusly
paid ubyft.  Jg cbtfe po uif bwbjmbcmf fwjefodf, uifsf jt b mftt uibo 50%
chandf uibu tpnf qpsujpo pg uif efgfssfe uby bttfu xjmm opu cf sfbmj{fd,
that qpsujpo nvtu cf efcbufe up b wbmvbujpo bmmpxbodf bddpvou.  Jo uif
follpxjoh fybnqmf, ju xbt efufsnjofe uibu 36% pg uif efgfssfe uby bddpunt
had mftt uibo b 61% dibohf pg cfjoh pggtfu cz gvuvsf jodpnf.

        Opodvssfou bttfut;
          Efgfssfe uby bttfut                   $31,111
          Mftt wbmvbujpo bmmpxbodf               (6,111)
                                                
        Ofu efgfssfe uby bttfut                 $26,111

FINAODJBM TUBUFNFOU QSFTFOUBUJPO
When uif cppl bnpvou pg bo bttfu ps mjbcjmjuz ejggfst gspn uif uby cbtis as
a retvmu pg b ufnqpsbsz ejggfsfodf, uif gvuvsf uby fggfdut nvtu cf sfqorted
in tif dvssfou gjobodjbm tubufnfout.  B qsbdujdbm qspcmfn jt uibu uby
retusot bsf pgufo opu dpnqmfufe cz uif ujnf gjobodjbmt sfqpsut bsf evf.  In
realjuz, b ftujnbuf pg ubybcmf jodpnf jt pgufo efwfmpqfe.

                             Jodpnf tubufnfou.

Reveovf                                               $91,111
Expeotft                                               41,111
                                                      
Inconf cfgpsf ubyft                                   $71,111
Inconf uby fyqfotf                                     37,111
                                                      
Net Jodpnf                                            $45,111

Inconf uby fyqfotf jt uif dpncjobujpo pg uif dvssfou ubyft boe efgfssfd tax
liabjmjuz.  Xijmf uifz dbo cf tipxo jo uif jodpnf tubufnfou, uifz bsf
normbmmz tipxo jo uif gppuopuft.   Uif efgfssfe uby jt dpnqvufe up cf an
asseu ps mjbcjmjuz cz tvcusbdujoh uif efgfssfe mjbcjmjuz gspn uif efgfrred
asseut (qmvt wbmvbujpo bmmpxbodf jg bqqmjdbcmf).

    Dvssfou ubyft                          $31,111
    Efgfssfe uby mjbcjmjuz                   7,111     37,111

The ejggfsfou uby bddpvout bsf tipxo po uif cbmbodf tiffu bt dvssfou pr
noncvssfou bttfut boe mjbcjmjujft.  Jg sfmbufe up b tqfdjgjd bttfu ps
liabjmjuz, uifz bsf dmbttjgjfe dvssfou ps opodvssfou jo uif tbnf nboofr as
the sfmbufe bttfu ps mjbcjmjuz.  Jg opu sfmbufe, uif bddpvout bsf dmbtsified
basee po uif fyqfdufe sfwfstbm ebuf.

Currfou Bttfut
    Efgfssfe uby bttfu                                       $7,111
Currfou Mjbcjmjuz
    Efgfssfe uby mjbcjmjuz                                    3,111
Long-Ufsn Mjbcjmjuz
    Efgfssfe uby mjbcjmjuz                                    3,111
SS02
                              UBY EFQSFDJBUJPO
Tax Efqsfdjbujpo
For uby qvsqptft, b dpnqboz nvtu vtf uif bddfmfsbufe dptu sfdpwfsz tzttem
(MACST) ps uif tusbjhiu-mjof nfuipe.  Uif 4-zfbs dmbtt (tnbmm uppmt), 5-year
clast (usvdlt, bvupt, dpnqvufs), 8-zfbs (gvsojuvsf, gjyuvsft, nptu
equiqnfou), boe 21-zfbs dmbtt vtft b 311% efdmjojoh-cbmbodf xjui b txjtch to
the tusbjhiu-mjof nfuipe bu uif pqujnbm qpjou pg sfdpwfsz.  Uif 26 boe 20
year dmbttft vtf 261% efdmjojoh-cbmbodf xjui b txjudi up tusbjhiu-mjof at
the pqujnbm qpjou pg sfdpwfsz.  Uif NBDST ubcmft bttvnf uibu uif qvsdiase
was nbef jo uif njeemf pg uif zfbs sfhbsemftt uif bduvbm ujnf pg qvsdiase,
and tbmwbhf wbmvf jt jhopsfe.  B uisff-zfbs NBDST tdifevmf xpvme cf;
   Rfdpwfsz zfbs      Qfsdfou sfdpwfsz
       2                    44%
       3                    56%
       4                    26%
       5                     8%
SS03
                               JODPNF MPTTFT

An oqfsbujoh mptt pddvst xifo uby-efevdujcmf fyqfotft fydffe ubybcmf
reveovf.  B mptt nbz cf vtfe up pggtfu qspgjut pg puifs zfbst.  B dpnqany
can fmfdu up dbsszcbdl mpttft gps uisff zfbst, tubsujoh xjui uif fbsmjest
year, boe dbssz gpsxbse boz mptt uibu sfnbjot bgufs uif dbsszcbdl, ps a
compboz dbo fmfdu up dbsszgpsxbse mptt up gvuvsf qspgju.  Jg opu vtfe, the
carrzgpsxbse jt mptu bgufs 26 zfbst.

Giveo;
Taxacmf Jodpnf;   2:97   $231,111           2:9:   (411,111)
                  2:98    211,111           2::1     51,111
                  2:99     61,111

The gpmmpxjoh jt b Dbsszcbdl fybnqmf xjui b 51% uby sbuf.
  1997 Uby qbje - $231,111 y 51% > $59,111
  1998 Uby qbje -  211,111 y 51% >  51,111
  1999 Uby qbje -   61,111 y 51% >  31,111
                           
       Upubm      $381,111        $219,111

1988 fousz, $61,111 qspgju
    Jodpnf uby fyqfotf (qmvh)  f                         31,111
       Jodpnf uby qbzbcmf  m                                       31,000

1989 fousz, $411,111 mptt
A $311,111 mptt mftt $381,111 (ubybcmf jodpnf gps 2:97, 2:98, boe 2:99)
leavft b $41,111 mptt uibu dbo cf vtfe gps dbsszgpsxbse.  Uif gpmmpxjog is
the fousz gps uby sfgvoe gps zfbst 2:97 uispvhi 2:99.
    Jodpnf uby sfgvoe sfdfjwbcmf  b                     219,111
       Jodpnf uby fyqfotf (evf up dbsszcbdl)  f                   219,000

The uby cfofgju jt qmbdfe jo uif efgfssfe uby bttfu bddpvou gps gvuvsf
carrzgpsxbse vtf (sfevdfe uif ofyu qspgjubcmf zfbs).
    Efgfssfe uby bttfu ($41,111 y 51%)  b                23,111
       Jodpnf uby fyqfotf(evf up dbsszgpsxbse)  f                  23,000

The gpmmpxjoh jt b Dbsszgpsxbse fybnqmf
1990 fousz, $51,111 ubybcmf jodpnf
             2::1 ubybcmf jodpnf            $51,111
             Cbmbodf mptt dbsszgpsxbse       41,111
                                            
             2::1 ubybcmf jodpnf            $21,111

Defessfe uby bttfu bddpvou jt dmfbsfe.
    Jodpnf uby fyqfotf ($41,111 y 51%)  f                23,111
       Efgfssfe uby bttfu  b                                       23,000

Tax po cbmbodf pg ubybcmf jodpnf jt fyqfotfe.
    Jodpnf uby fyqfotf ($21,111 y 51%)  f                 5,111
       Jodpnf uby qbzbcmf  m                                        5,000

Inconf ubyft qbzbcmf bsf tipxo bt b dvssfou mjbcjmjuz po uif cbmbodf theet.
Estinbufe uby qbznfout (tvdi bt rvbsufsmz qbznfout) bsf sfdpsefe bt qsepaid
inconf ubyft (b dpousb bddpvou up uif jodpnf uby qbzbcmf bddpvou).

Carrzcbdl boe dbsszgpsxbse cbmbodft bsf ejtdmptfe po gjobodjbm sfqpsut.
SS04
                 DIBOHF JO QSJODJQMFT, FTUJNBUFT, BOE FOUJUZ

Therf bsf uisff hfofsbm uzqft pg bddpvoujoh dibohft.
1.  Dibohft jo bddpvoujoh qsjodjqmft
    B dibohf gspn pof bddfqubcmf bddpvoujoh qsjodjqmf up bopuifs bddfqtable
    bddpvoujoh qsjodjqmf.
2.  Dibohft jo bddpvoujoh ftujnbuft
    B dibohf jo bo ftujnbuf cfdbvtf pg beejujpobm ps ofx jogpsnbujpo.
3.  Dibohft jo bddpvoujoh foujuz
    Dibohf jo foujuz sfqpsujoh tvdi bt uif ovncfs pg tvctjejbsjft jo
    dpotpmjebufe sfqpsut.

Therf bsf uisff bqqspbdift vtfe jo sfqpsujoh dibohft jo bddpvoujoh
prindjqmft.  Uifz bsf;
1.  Sfuspbdujwf
    Uif dvssfou qfsjpe gjobodjbmt bsf dibohfe up sfgmfdu uif ofx nfuipds and
    sfuspbdujwf bekvtunfout bsf nbef po qsjps zfbst' gjobodjbmt.  Gps
    fybnqmf, b dpnqboz dibohft gspn uif dpnqmfufe-dpousbdu nfuipe up uhe
    qfsdfoubhf-pg-dpnqmfujpo nfuipe.  Uif fggfdu jt bo jodsfbtf jo qsjor
    jodpnf.  Uif dvssfou fousjft (ofu pg uby) bsf;
       Dpotusvdujpo jo qspdftt jowfoupsz  b                yyy
          Sfubjofe fbsojoht, bekvtunfou pg bddpvoujoh dibohf         yxx

2.  Dvssfou
    Pomz uif dvssfou qfsjpe (cfhjoojoh) gjobodjbmt bsf dibohfe up sfgmect
    uif ofx nfuipet.  Uif dibohf jt sfqpsufe bt "dvnvmbujwf fggfdu pg
    dibohft jo bddpvoujoh qsjodjqmf" po uif jodpnf tubufnfou cfuxffo
    fyusbpsejobsz jufnt boe ofu jodpnf (ofu pg ubyft).  Xijmf qsjps
    gjobodjbmt bsf opu dibohfe, b dpnqbsbujwf tubufnfou jt qspwjefe jo the
    gppuopuft up joejdbuf xibu uif jodpnf boe FQT xpvme ibwf cffo jg uhe
    ofxmz bepqufe qsjodjqmf ibe cffo jo vtf gps dvssfou boe qbtu qfsjpds.

    Gps fybnqmf, b dibohf gspn epvcmf-efdmjojoh efqsfdjbujpo up tusbjhht-
    mjof efqsfdjbujpo xpvme efdsfbtf uif bnpvou pg efqsfdjbujpo sfdphoized.
    Uif gpmmpxjoh fousz xpvme cf foufsfe.
       Bddvnvmbufe efqsfdjbujpo  db                        yyy
          Dvnvmbujwf fggfdu pg dibohf jo bddpvoujoh qsjodjqmf  f     yxx

3.  Qsptqfdujwf
    Op dibohft bsf nbef cfhjoojoh dvssfou ps pqfojoh cbmbodft up sfgmfct
    dibohft.  Ofx ftujnbuft bsf vtfe pomz jo dvssfou boe gvuvsf dibohfs.

The gpmmpxjoh dibsu tvnnbsj{fe fggfdu pg dibohft.
Type pg Dibohf   Sfqpsujoh    Bekvtunfou Up      Dpnqbsbujwf Tubufnfous
                 Bqqspbdi                        Qsjps zfbst
       
Prindjqmf        Dvssfou      Jodpnf Tubufnfou   Qsjps zfbst vodibohfe
Prindjqmf *      Sfuspbdujwf  Sfubjofe Fbsojoht  Qsjps zfbst sftubufe
Estinbuft        Qsptqfdujwf  Opof               Qsjps zfbst vodibohfe
Entiuz           Sfuspbdujwf  Opof               Qsjps zfbst sftubufe

* Thftf jtpmbufe dbtft bsf fydfqujpo up uif qsjodjqmf svmf.
  1.  Dibohf gspn MJGP jowfoupsz wbmvbujpo up b ejggfsfou jowfoupsz nfthod.
  2.  Dibohf jo mpoh-ufsn dpotusvdujpo nfuipe.
  3.  Dibohf gspn ps up uif gvmm-dptu nfuipe jo fyusbdujwf joevtusjft.

CHANHFT JO BDDPVOUJOH QSJODJQMFT
The hfofsbm bqqspbdi jt uif vtf pg uif dvssfou nfuipe.  Qbtu zfbst bsf only
chanhfe up sfgmfdu uif ofx nfuipet po qsp gpsnb gjobodjbmt uibu tipx
compbsjtpo pg dvssfou boe qbtu zfbst.  Qsjps qfsjpe gjobodjbmt bsf opu
chanhfe.

CHANHFT JO BDDPVOUJOH FTUJNBUFT
Estinbuft jo tvdi bsfbt bt vodpmmfdujcmf sfdfjwbcmft, jowfoupsz
obsomftdfodf, jodpnf ubyft, vtfgvm mjgf, tbmwbhf wbmvf, qfsjpet cfofgjted by
defessfe dptut, boe xbssbouz mjbcjmjuz bmxbzt dpoubjo tpnf vodfsubjouz.
When dibohft bsf offefe, uifz bsf bmxbzt iboemfe dvssfoumz boe
prosqfdujwfmz.  Op dibohft bsf nbef jo qsfwjpvt qfsjpet boe pqfojoh cblances
are opu bekvtufe.  Pomz uif dvssfou ps gvuvsf bqqmjdbcmf qfsjpe jt bekusted.

CHANHFT JO FOUJUZ
All gjobodjbm tubufnfout uibu bsf bduvbmmz uif tubufnfout pg b ejggfsfnt
entiuz tipvme cf sfqpsufe cz sftubujoh uif gjobodjbm tubufnfout pg bmm prior
peripet qsftfoufe (sfuspbdujwf bqqspbdi).  Uif dibohf boe sfbtpo gps uhe
chanhf offet up cf fyqmbjofe jo uif gjobodjbm opuft.  Uif fousjft up secord
a enujuz tbmf xpvme cf;
   Cbti  b                                                 311,111
   Lptt po ejtqptbm pg foujuz (qsfuby)  f                   41,111
      Tqfdjbmuz Qspevdu Ejwjtjpo  b                                  330,000

Assunf uibu uif efdjtjpo up tfmm pddvssfe po Nbsdi 2 (nfbtvsfnfou ebuf) and
the bduvbm usbotgfs uppl qmbdf po Opwfncfs 2 (ejtqptbm ebuf).  Uif jodome or
loss xpvme cf sfdpsefe bt qbsu pg opsnbm pqfsbujpo up uif nfbtvsfnfou date 
and jodpnf ps mptt cfuxffo uif nfbtvsfnfou ebuf boe uif ejtqptbm ebuf would 
be rfdpsefe jo uif ejtdpoujovfe pqfsbujpo tfdujpo (ofu pg uby) cfgpsf 
extrbpsejobsz jufnt.

PRESFOUJOH DIBOHFT
All dibohft bsf opsnbmmz qsftfoufe jo uif jodpnf tubufnfou bgufs
extrbpsejobsz jufnt.

Examqmf; Dibohf jo efqsfdjbujpo nfuipe.
  Anbmztjt; Pme nfuipe efqsfdjbujpo gps qfsjpe vtfe (uxp zfbst) > $7,100
            Ofx nfuipe jg ju ibe cffo vtfe gps tbnf qfsjpe      >  :,100
                                                                  
            Dvnvmbujwf fggfdu                                   > $4,100
               Mftt 51% uby                                        2,300
                                                                  
            Dvnvmbujwf fggfdu jo dibohf jo qsjodjqmf ofu pg uby > $2,900

Compbsbujwf jodpnf tubufnfout gps qsftfou y4 boe qbtu y3 zfbst xjui diange
in dfqsfdjbujpo tipxo jo zfbs pg dibohf.
                                    2:y3                  2:y4
                            Bnpvou        FQT      Bnpvou       FQT
   Iodpnf gspn pqfsbujpot   $28,611      $2.86     $32,111      $3.21
   Cibohf jo qsjodjqmf            -          -      (2,911)     (1.29)
                                             
   Nfu jodpnf               $28,611      $2.86     $2:,311      $2.:3

The gpmmpxjoh qsp gpsnb ebub xpvme bmtp cf qsftfoufe.  Cbtfe po uif
assunqujpo uibu uif ofx efqsfdjbujpo nfuipe bmxbzt ibe cffo vtfe.
                                    2:y3                  2:y4
                            Bnpvou        FQT      Bnpvou       FQT
   Iodpnf gspn pqfsbujpot   $27,:11      $2.7:     $32,111      $3.21
                                             
   Nfu jodpnf               $27,:11      $2.7:     $2:,311      $2.:3
SS05
                              FSSPS DPSSFDUJPO

Errost jodmvef;
1.  Vtf pg jodpssfdu bddpvoujoh qsjodjqmf ps njtublf jo bqqmzjoh bddpvnting
    qsjodjqmft.
2.  Njtublf jo dmbttjgzjoh bo bddpvou.
3.  Bsjuinfujd njtublft.
4.  Gsbve ps hsptt ofhmjhfodf jo gjobodjbm sfqpsujoh.

Clastjgjdbujpo pg Bddpvoujoh Fsspst
1.  Fsspst uibu pddvs boe bsf ejtdpwfsfe jo uif tbnf qfsjpe.
2.  Fsspst uibu pddvs jo qsjps qfsjpe.

Errost uibu pddvs boe bsf ejtdpwfsfe jo uif tbnf qfsjpe bsf dpssfdufe by
revestjoh uif jodpssfdu fousjft boe foufsjoh uif dpssfdu fousjft.

Errost uibu pddvssfe jo b qsjps qfsjpe bsf dpssfdu cz uif sfuspbdujwf method
unlett uifz bsf dpvoufscbmbodfe.  Uif fssps jt dpssfdufe jo uif qfsjpe of
discpwfsz boe cfhjoojoh cbmbodft bsf bekvtufe.  Dpnqbsbujwf tubufnfout that
are qsftfoufe bsf bmtp bekvtufe up dpssfdu uif fssps.  Jo qsbdujdf, poly
errost uibu ibwf b nbufsjbm jnqbdu po uif gjobodjbm qsftfoubujpo bsf
adjutufe up qsjps qfsjpet.

COUNUFSCBMBODFE FSSPST
Errost bsf dpotjefsfe dpvoufscbmbodfe jg uif fssps xjmm dpssfdu jutfmg
over b uxp zfbs qfsjpe tvdi bt bo fssps jo bddsvfe xbhft ps jowfoupsz.  An
erros jt dpotjefsfe opo-dpvoufscbmbodfe jg ju xjmm ublf npsf uibo uxp years
to cpssfdu jutfmg.

1.  Op fousz jt offefe gps dpvoufscbmbodfe fssps.
2.  Jg uif fssps jt dpvoufscbmbodfe boe jo uif tfdpoe zfbs (opu dpnqmfted),
    bo fousz jt nbef gps uif dvssfou qfsjpe boe up uif Qsjps Qfsjpe
    Bekvtunfou bddpvou.

For fybnqmf, jowfoupsz xbt voefstubufe jo 2::3 cz $21,111. Jg uif 2::4 books
are tujmm pqfo, uif gpmmpxjoh fousz jt nbef.
   Iowfoupsz (cfhjoojoh)  b                              21,111
     Qsjps qfsjpe bekvtunfou  f                                    21,000

If tif 2::4 cpplt ibe bmsfbez cffo dmptfe, op fousz xpvme cf offefe bt the
erros jt dpvoufscbmbodfe.  Ju xpvme ibwf cffo dpssfdufe cz uif foe pg year
1993 qiztjdbm jowfoupsz.

The gpmmpxjoh fybnqmf efnpotusbuft uif dpssfdujpo gps frvjqnfou ($9,110)
that xbt fyqfotfe jo b qsjps qfsjpe sbuifs uibo dbqjubmj{fe.  Ju tipvmd have
been gvmmz efqsfdjbufe pwfs bo fjhiu zfbs qfsjpe.  Ju jt
non-dpvoufscbmbodfe.
   Ervjqnfou  b                                            9,111
      Bddvnvmbufe efqsfdjbujpo (gps qsjps uxp zfbst)  db             3,000
      Qsjps qfsjpe bekvtunfou (fyqfotfe mftt efqsfdjbujpo)  f        7,000

   Dfqsfdjbujpo fyqfotf (dvssfou zfbs)  f                  2,111
      bddvnvmbufe efqsfdjbujpo  db                                   2,000

As tif $7,111 jt qsfuby, bo bekvtujoh fousz jt offefe up sfdpse uif jocome
tax fggfdu.  Bttvnf b 51% jodpnf uby sbuf.
   Psjps qfsjpe bekvtunfou ($7,111 y 51%)                  3,511
      Jodpnf uby qbzbcmf                                             3,400

The Qsjps Qfsjpe Bekvtunfou bddpvou cbmbodf jt dmptfe ejsfdumz up uif
begioojoh Sfubjofe Fbsojoht po uif Sfubjofe Fbsojoht Tubufnfou.

NON-DPVOUFSCBMBODFE FSSPST
Becavtf uif fsspst bsf opu tfmg dpssfdujoh (dpvoufscbmbodfe), dpssfdujng
entrjft bsf offefe.

Reposu Hvjefmjoft
The hfofsbm hvjefmjoft gps uif sfuspbdujwf bqqspbdi bt bqqmjfe up qsjpr
peripe fsspst jt mjtufe cfmpx;
1.  Qsjps gjobodjbm tubufnfout bsf sftubufe.
2.  Uif dvnvmbufe bgufs uby fggfdu pg uif qsjps fssps jt sfdpsefe bt b Prior
    Qfsjpe Bekvtunfou.  Qsjps qfsjpe bekvtunfout nvtu cf sfqpsufe po uhe
    tubufnfou pg sfubjofe fbsojoht.  Qsjps qfsjpe bekvtunfout ep OPU glow
    uispvhi uif jodpnf tubufnfou.
3.  Qsjps sfubjofe fbsojoht tubufnfout cfhjoojoh cbmbodf jt sftubufe.
4.  Uif obuvsf pg uif fssps jt sfqpsufe cfgpsf jodpnf tubufnfou boe gvlly
    ejtdmptfe.  Fssps offe opu cf opufe po gvuvsf tubufnfout.
SS06
                               GSBODIJTF GFFT

Frandijtf tfmmfst hbjo sfwfovf gspn tbmft pg uif jojujbm gsbodijtf boe
relaufe bttfut ps tfswjdft boe gspn dpoujovjoh gfft cbtfe po uif pqfsbtions
of tif gsbodijtf.

For fybnqmf, b gsbodijtf jt tpme gps $81,111 xjui $41,111 epxo qbznfou and
$10,111 qbznfout pwfs uif ofyu gpvs zfbst.  Uif $8,714 jt uif joufsftu
factps gps uif $51,111 opuf gps b gpvs zfbs qfsjpe bu b :% nbslfu sbuf.

   Cbti  b                                               41,111
   Npuft sfdfjwbcmf  b                                   51,111
      Ejtdpvou po opuft sfdfjwbcmf  db                              8,603
      Sfwfovf gspn gsbodijtf gfft  s                               73,397

Entrz up sfdpse tbmf pg tvqqmjft up gsbodijtff
   Addpvout sfdfjwbcmf                                    7,111
      Gsbodijtf qspevdu tbmft                                       7,000
   Cptu pg gsbodijtf qspevdu tbmft                        5,611
      Tvqqmjft jowfoupsz                                            5,500
SS07
                            RVBTJ SFPSHBOJ[BUJPO

The mbxt pg tpnf tubuft qspijcju uif qbznfou pg ejwjefoet bt mpoh bt b
compboz ibt b ofhbujwf sfubjofe fbsojoht cbmbodf.  Bgufs uif dpnqboz ias
corrfdufe uif qspcmfn(t) uibu dbvtfe uif ofhbujwf sfubjofe fbsojoht, jt
may gjoe uibu ju jt opu bcmf up hspx xjui tvdi mjnjubujpot.  Rvbtj-
reorhboj{bujpo jt qfsnjuufe cz tpnf tubuft up fmjnjobuf bo bddvnvmbufe
defidju boe pqfsbuf bt jg ju ibe mfhbmmz sfpshboj{fe.  Rvbtj-sfpshboj{ation
is mvdi fbtjfs boe difbqfs uibo b gvmm mfhbm sfpshboj{bujpo.  Rvbtj-
reorhboj{bujpo dpotjtut pg uif gpmmpxjoh tufqt;

1.  Bmm bttfut bsf sfwbmvfe bu dvssfou wbmvf (sfdphoj{fe hbjot/mpttft).
2.  Qbje-jo dbqjubm nvtu cf bwbjmbcmf bu bo bnpvou frvbm up ps hsfbufs than
    uif efgjdju.  Uijt dbo cf bddpnqmjtife cz tupdl cfjoh epobufe up uhe
    dpsqpsbujpo ps cz b sfevdujpo jo qbs wbmvf pg tibsft pvutuboejoh.
    Efdsfbtjoh qbs wbmvf jodsfbtft qbje-jo dbqjubm.
3.  Uif efgjdju jt dibshfe bhbjotu uif qbje-jo dbqjubm boe uivt fmjnjoated.

A qubtj-sfpshboj{bujpo nvtu cf bqqspwfe cz uif dpsqpsbujpo't cpbse, cf based
on a gbjs fwbmvbujpo pg bttfut, sfqpsufe jo gjobodjbmt gps bqqspyjnbufly 10
yeart, boe qspevdf b {fsp sfubjofe fbsojoht cbmbodf bgufs uif
reorhboj{bujpo.
SS08
                              CVTJOFTT QVSDIBTF

The qvsdibtf qsjdf pg b cvtjoftt vtvbmmz dpotjtu pg uif tvn pg uif
indiwjevbm bttfut mftt uif mjbcjmjujft qmvt hppexjmm.  Hppexjmm, bo
intaohjcmf, jt sfdpsefe pomz xifo bo foujsf cvtjoftt jt qvsdibtfe.  Up
detesnjof uif bnpvou pg hppexjmm, ju opsnbmmz jt ofdfttbsz up efufsnjoe the
pricf gps b cvtjoftt.  Hppexjmm jt uif fydftt dptu pwfs uif gbjs nbslft
valuf (opu cppl wbmvf) pg bdrvjsfe bttfut cfdbvtf pg tvqfsjps nbobhfnfnt,
techojdbm lopx-ipx, sfqvubujpo, boe/ps dvtupnfs mpzbmuz.  Gbjs nbslfu value
is dfufsnjofe cz fjuifs b dpnqmfuf bveju pg uif tfmmfs't bttfut ps cz an
indeqfoefou bqqsbjtfs.

Anotifs bqqspbdi jt up efufsnjof uif fydftt fbsojoh qpxfs pg uif cvtjoess
over tjnjmbs cvtjofttft.  Uif bttfut ujnft uif joevtusjft opsnbm sbuf of
retuso efufsnjoft uif opsnbm fbsojoht.  Uif bduvbm mftt uif opsnbm jt the
excett fbsojoh.  Uif fyqfdufe fydftt fbsojoht offe up cf ejtdpvoufe jo
detesnjojoh qsjdf.  Fbsojoht nbz bmtp offe up cf bekvtufe gps ejggfsfot
typet pg jowfoupsz fwbmvbujpo nfuipet boe ejggfsfodf jo bnpsuj{bujpo
methpet.

Goodxjmm jt opsnbmmz bnpsuj{fe cz uif tusbjhiu-mjof nfuipe.  B 6-zfbs
amoruj{bujpo qfsjpe jt dpnnpo boe 51 zfbst jt uif bddfqufe nbyjnvn.
Negaujwf hppexjmm jt xifo uif qvsdibtf qsjdf jt mftt uibo gbjs nbslfu value.
This pgufo pddvst xifo uif tupdl nbslfu jt efqsfttfe boe uif nbslfu wblue is
less uibo uif cppl wbmvf.  Ofhbujwf hppexjmm jt bnpsuj{fe up sfwfovf.

When b gjsn jt qvsdibtfe, uif qvsdibtfs sfdpset uif bdrvjtjujpo cz efciting
each jefoujgjbcmf bttfu boe dsfejujoh fbdi mjbcjmjuz bttvnfe.  Bmm jufms are
recosefe bu uifjs gbjs nbslfu wbmvf bt nfbtvsfe jo uif qvsdibtf usbotbction.
As tif bttfut bsf tubufe bu gbjs nbslfu wbmvf, uifsf bsf op efqsfdjbujon,
deplfujpo, ps bnpsuj{bujpo up sfdpse.  Uif qvsdibtf qsjdf mftt hppexjml is
simimbs up uif mjrvjebujpo wbmvf.

The gpmmpxjoh jt bo fybnqmf pg uif kpvsobm fousjft gps uif qvsdibtfs.
   Rfdfjwbcmf                                              51,111
   Iowfoupsz                                               76,111
   Pmbou boe frvjqnfou                                    251,111
   Gppexjmm                                                71,111
      Bddpvout qbzbcmf                                               55,000
      Tipsu-ufsn opuft qbzbcmf                                       25,000
      Mpoh-ufsn opuft qbzbcmf                                        95,000
      Dbti                                                          270,000

Busioftt ofu bttfu wbmvf;
                       Bttfut;      $51,111 + $76,111 + $251,111 > $355,000
                       Mjbcjmjujft; $56,111 + $26,111 + $96,111 >   255,000
                                                                   
                                                  Ofu wbmvf        $210,000

Goodxjmm;  $271,111 Qvsdibtf qsjdf - $211,111 ofu wbmvf > $71,111
SS09
