T.C. Memo. 2016-1 83

CLC

T.C. Memo. 2016-1 83

UNITED STATES TAX COURT

ESTATE OF EDWARD G. BEYER, DECEASED, CRAIG E. PLASSMEYER,

EXECUTOR, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10231-11.

Filed September 29, 2016.

John W. Porter, Keri D. Brown, and Jeffrey D. Watters, Jr., for petitioner.

Naseem J. Khan, David A. Lee, and James Cascino, for respondent.

CONTENTS

FINDINGSOFFACT.............................................

4

GeneralBackground..............................................

4

Mr.Beyer'sEstatePlanning........................................

6

Section 529 Accounts and Certain Other Gifts.. . . . . . . . . . . . . . . . . . . . . . . . .

89

SERVED Sep 29 2016

-2 [*2] EGBLP's Partnership Returns...................................

90

Decedent's Income Tax Returns....................................

105

Mr.Beyer'sGiftTaxReturns......................................

106

Estate Tax Return. ..............................................

109

NoticeofDeficiency.............................................

111

OPINION......................................................

111

EstateTax. ....................................................

113

Section2036(a)............................................

113

Transfer of Property by Mr. Beyer........................

115

Transfer Other Than a Bona Fide Sale for an Adequate

and Full Consideration in Money or Money's Worth.. . . . . . .

Possession or Enjoyment of, or Right to Income From,

115

the Property Transferred. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

127

Value of Assets Includible in the Value of the Gross Estate of

Decedent Under Section 2036(a)(1). . . . . . . . . . . . . . . . . . . . .

138

GiftTax.......................................................

144

Section529Accounts.......................................

144

Additions to Tax and Accuracy-Related Penalty. . . . . . . . . . . . . . . . . .

148

Section6651(a)(1)and(2)..............................

149

Section6662(a).......................................

153

MEMORANDUM FINDINGS OF FACT AND OPINION

CHIECHI, Judge: Respondent determined a deficiency of $19,066,532 in

Federal estate tax (estate tax) with respect to the Estate of Edward G. Beyer

-3[*3] (decedent's estate). Respondent also determined a deficiency in, and

additions under section 6651(a)(1) and (2)¹ to, Edward G. Beyer's Federal gift tax

(gift tax) for his taxable year 2002 of $174,300, $43,575, and $39,217,

respectively. Respondent further determined a deficiency in, and an accuracyrelated penalty under section 6662(a) on, Edward G. Beyer's gift tax for his

taxable year 2005 of $3,933,948 and $786,790, respectively.

The issues remaining for decision are:

1. Is the value of assets that Edward G. Beyer transferred to a certain

limited partnership includible in the value of his gross estate under section

2036(a)? We hold that it is.

2. Is decedent's estate entitled to discount the value on the alternate

valuation date of assets of a certain limited partnership, which the parties

stipulated, that we have held is includible in the value of his gross estate under

section 2036(a) in order to determine the value of those assets on that date that is

so includible? We hold that it is not.

¹All section references relating to estate tax are to the Internal Revenue

Code (Code) in effect on the date of Edward G. Beyer's death. All section

references relating to gift tax, additions to gift tax, and an accuracy-related penalty

on gift tax are to the Code in effect for Edward G. Beyer's taxable years 2002 and

2005. All Rule references are to the Tax Court Rules of Practice and Procedure.

-4[*4] 3. Are the $55,000 that Edward G. Beyer contributed in 2002 to each of ten

so-called section 529 accounts and the $55,000 that he contributed in 2005 to each

of eight section 529 accounts taxable gifts that he made during his taxable years

2002 and 2005, respectively? We hold that all of those contributions are.

4. Is Edward G. Beyer liable for an addition to gift tax under section

6651(a)(1) for his taxable year 2002? We hold that he is.

5. Is Edward G. Beyer liable for an addition to gift tax under section

6651(a)(2) for his taxable year 2002? We hold that he is.

6. Is Edward G. Beyer liable for the accuracy-related penalty under section

6662(a) for his taxable year 2005 on the portion of the underpayment in gift tax

for that year that is attributable to the $55,000 that he contributed to each of eight

section 529 accounts in that year? We hold that he is.

FINDINGS OF FACT

Many of the facts have been stipulated and are so found.

General Background

Edward G. Beyer (Mr. Beyer or decedent) was a resident of Chicago,

Illinois, at the time of his death on May 19, 2007. After Mr. Beyer died, the

probate division of the Circuit Court of Cook County, Illinois, appointed

decedent's nephew, Craig E. Plassmeyer (Craig Plassmeyer), executor of

-5[*5] decedent's estate. Craig E. Plassmeyer resided in Thousand Oaks, California

(Thousand Oaks), at all relevant times, including at the time he filed the petition in

this case.

Mr. Beyer, who was born in 1910, never married and had no children. Mr.

Beyer had four sisters: Mildred Beyer, Ruth E. Plassmeyer (Ruth Plassmeyer),

Lucille V. Wilkinson (Lucille Wilkinson), and Eleanor Beyer and one brother,

Robert Beyer. Two of Mr. Beyer's sisters, Ruth Plassmeyer and Lucille

Wilkinson, were alive at all relevant times. For a period not established by the

record during his lifetime, Mr. Beyer permitted Ruth Plassmeyer and Lucille

Wilkinson to live in certain condominium apartments (condos) that he owned and

paid certain expenses relating to those condos.

In addition to Craig Plassmeyer, Mr. Beyer had another nephew, Bruce R.

Plassmeyer (Bruce Plassmeyer), and he also had a niece, Doris Kaminski. From

1999 to the date of Mr. Beyer's death on May 19, 2007, Craig Plassmeyer2

traveled from California to Chicago approximately once a month to visit family,

2Craig Plassmeyer received at different times from the Urbana-Champaign

campus of the University of Illinois a bachelor of science degree in chemistry and

mathematics and a master's degree in business administration, with specialties in

marketing and finance. From 1999 until at least the time of the trial in this case,

Craig Plassmeyer was the co-owner of a healthcare company in Thousand Oaks

that provided high-skilled home nursing care to persons after they had been

discharged from hospitals.

-6[*6] including Mr. Beyer. As Mr. Beyer advanced in age, Bruce Plassmeyer,3 who

lived in Chicago, assisted Mr. Beyer in certain day-to-day activities. Mr. Beyer

did not have a close relationship with Doris Kaminski.

Mr. Beyer spent most of his life working for Abbott Laboratories (Abbott)

in Chicago, Illinois. Mr. Beyer ultimately became that company's chief financial

officer. Over the course of his employment with Abbott, Mr. Beyer acquired stock

options from that company, began exercising those options around 1962, and

accumulated a substantial amount of Abbott stock. The only time that Mr. Beyer

sold any of the Abbott stock that he had acquired was to purchase a house in the

1970s.

In June 1999, Mr. Beyer held 800,000 shares of Abbott stock, certain other

stock, certain other noncash property, and a certain amount of cash.

Mr. Beyer's Estate Planning

At a time not established by the record, Mr. Beyer was introduced to an

attorney named Michael H. Erde (Mr. Erde), who specialized in estate planning.

After consulting with Mr. Erde, Mr. Beyer decided to form a trust. On June 8,

1999, Mr. Beyer executed a trust agreement (1999 Trust agreement) that Mr. Erde

3At all relevant times, Bruce Plassmeyer, who never married, had more

limited business experience than Craig Plassmeyer.

-7[*7] had prepared and thereby formed a trust that was designated in that agreement

as the "EDWARD G. BEYER TRUST dated June 8, 1999" (1999 Trust). In the

1999 Trust agreement, Mr. Beyer identified himself as both the settlor and the

initial trustee of the 1999 Trust and recited that the initial 1999 Trust property was

$10 in cash. On June 8, 1999, the date on which Mr. Beyer formed the 1999

Trust, he transferred certain assets, including 800,000 shares of Abbott stock, to a

brokerage account at Banc One Securities Corp. (Banc One)4 that he had opened

in the name of the 1999 Trust (1999 Trust Bane One account).

As pertinent here, the 1999 Trust agreement provided:

ARTICLE II

Commencing as of the date of this instrument and during my life, the

trustee shall administer the trust principal and any net income thereof

as follows:

A. The trustee shall allow me and any of my sisters the right to

occupy rent-free any house, condominium (residential property) or

garage and any furniture therein (wherein they are living), which

property or any interest therein (including any interest as owner,

lessee, shareholder, trust beneficiary or otherwise) from time to time

forms a part of the trust principal. At any time or times while we

shall have that right, the trustee may, with either of our approvals

(mine and the sister living in the residence), that approval being

required only if we (myself and the sister living in the particular

4The record is inconsistent with respect to the spelling of the first word in

the name of Banc One Securities Corp. We took judicial notice of the correct

spelling of that word.

-8[*8]

residence) are not "disabled" as determined in paragraph D of this

Article):

1. Sell the interest in residential property forming a part of the

trust principal and invest such amounts as the trustee believes

desirable in any other interest in residential property selected by the

trustee; or

2. Terminate the right given to me under this paragraph and

lease, sell, or otherwise dispose of or administer any such interest in

residential property in the same manner as any other trust asset.

B. After my death, any residential property in this trust shall be

managed as follows:

1. If any of my sisters wishes to live in a residence of mine,

said residence shall not be sold without the approval of such sister

living in the residence (as long as she is not disabled as defined

herein).

2. At such time as a sister of mine no longer lives in such

residence for three months or leaves such residence for three months,

then said residence shall be sold.

3. Any sister living in a residence shall not pay rent nor pay

any expenses regarding the residence (including taxes and insurance),

but they shall pay their own phone and electric bills.

C. In addition to the provisions of Paragraph A and B of this

Article and during my life, the trustee shall administer the trust

principal and any net income thereof as follows:

1. The trustee shall distribute to me or apply for my benefit

such amounts of net income and principal, even to the extent of

exhausting principal, as the trustee believes desirable from time to

time for my health, support in reasonable comfort, best interests, and

welfare, considering all circumstances and factors deemed pertinent

-9[*9] by the trustee. Any undistributed net income shall be accumulated

and added to principal, as from time to time determined by the trustee.

2. In addition, the trustee shall distribute to me or others such

amounts of net income and principal as I may from time to time direct

in writing, except that if the trustee believes that I am unable to

manage my business affairs properly because of advanced age,

illness, or other cause, the trustee may, in the trustee's sole discretion,

decide not to honor my written direction.

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ARTICLE III

Following my death, the trustee shall pay out of the trust

principal all (a) my legally enforceable debts, including debts owed

by me to a trustee individually, except debts which are an

encumbrance on real property, (b) the expenses of my last illness and

funeral, (c) the administration expenses payable by reason of my

death, and (d) the estate and inheritance taxes (including interest and

penalties, if any) payable in any jurisdiction by reason of my death

(including those administration expenses and taxes payable with

respect to assets which do not pass under this trust).

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ARTICLE IV

As of the date of my death, but after providing for the

payments, if any, required by Article III of this instrument, the trustee

shall manage or distribute the remaining trust principal (including

property to which the trustee may be entitled under my will or from

any other source), as follows:

A. If any of my sisters survives me (and for purposes of this

Article if the actual sequence of our deaths cannot readily be

determined, I shall have presumed to have survived my sisters), the

- 10 [*10] trustee shall allocate, as of the date of my death, from the trust

principal (including property to which the trustee may be entitled

under my will or from any other source) to (2) separate trusts, one

named for my sister, MILDRED L. BEYER, with the amount of One

Hundred Thousand Dollars ($100,000.00) and one named for my two

sisters, RUTH E. PLASSMEYER and LUCILLE V. WILKINSON,

with the amount of Two Hundred Twenty Five Thousand Dollars

($225,000.00).

B. The trust named for MILDRED L. BEYER shall be

administered as follows:

1. Commencing as of the date of my death and during the life

of MILDRED L. BEYER and as long as she is living at 5928 North

Landers, in Chicago, Illinois, the trustee shall distribute the funds

from the MILDRED L. BEYER TRUST to pay all costs and expenses

of said Landers property. When MILDRED L. BEYER then leaves

said property pursuant to Article II, the trustee shall distribute to

MILDRED L. BEYER or for her benefit as much or all of the income

or principal of the trust as the trustee from time to time believes

desirable for the health and support in reasonable comfort of

MILDRED L. BEYER, considering all circumstances and factors

deemed pertinent by the trustee.

2. Upon the death of MILDRED L. BEYER, the then

remaining principal of her trust and any accrued or undistributed net

income thereof shall be added to, and shall thereafter be administered

under Section D in this Article.

C. The second trust named for RUTH E. PLASSMEYER and

LUCILLE V. WILKINSON shall be administered as follows:

1. The income and principal of this trust shall be used to pay

for the costs and expenses (except for telephone and electric bills) of

maintaining the respective condominiums and their garages that these

two sisters reside in.

- 11 [*11]

2. At such time as the first to happen that a sister shall move

out of her respective condominium (per Article II) or die, then said

condominium and its associated garage(s) shall be sold and the

proceeds distributed to CRAIG E. PLASSMEYER, if alive, otherwise

to his descendants per stirpes.

3. At such time that neither RUTH E. PLASSMEYER nor

LUCILLE V. WILKINSON is living in her respective condominium,

then the trust set up for RUTH E. PLASSMEYER and LUCILLE V.

WILKINSON shall be terminated and the balance therein shall be

distributed outright to CRAIG E. PLASSMEYER, if living, otherwise

to his descendants per stirpes.

D. As of the date of my death, but after providing for the

payments, if any, required by Article II of this instrument, and the

allocations, if any, required by A, B, & C [of Article IV] above, the

trustee shall distribute the balance of the trust as follows:

(1) One-third (1/3) to DORIS KAMINSKI, if living,

otherwise to her descendants, per stirpes;

(2) One-third (1/3) to BRUCE PLASSMEYER, if

living, otherwise to his descendants, if any, per stirpes,

otherwise half of this one-third to DORIS KAMINSKI, if

living, otherwise to her descendants per stirpes, and half

of this one-third to CRAIG PLASSMEYER, if living,

otherwise to his descendants per stirpes; and

(3) One-third (1/3) to CRAIG PLASSMEYER, if

living, otherwise to his descendants per stirpes.

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Article VII

A. Any trustee may resign at any time by giving prior written

notice to me, if I am then living, or if I am not then living, to the

- 12 [*12] beneficiary or beneficiaries to whom the current trust income may or

must then be distributed.

B. Except as otherwise provided in paragraphs D of this

Article:

1. If I cease to act as trustee hereunder for any reason, I name

CRAIG PLASSMEYER as trustee; and

2. If CRAIG PLASSMEYER fails or ceases to act as trustee

hereunder for any reason, then BRUCE PLASSMEYER shall act as

trustee.

C. The person or persons indicated in paragraph E of this

Article may at any time, by written instrument, approve the accounts

of the trustee with the same effect as if the accounts had been

approved by a court having jurisdiction of the subject matter and of

all necessary parties.

D. As often as the trustee shall deem such action to be

advantageous to the trusts or to any beneficiary, the trustee may, by

written instrument, resign and appoint as substitute trustee with

respect to all or any part of the trust principal, including property as

to which the trustee cannot act, any person, or any bank or trust

company, within or outside the State of Illinois. The substitute

trustee shall have all of the title, powers, and discretion of the original

trustee, but shall exercise the same under the supervision of the

resigning trustee, who shall act as adviser to the substitute trustee.

The adviser may at any time remove the substitute trustee by written

instrument delivered to the substitute trustee. Upon the removal or

resignation of the substitute trustee, the adviser may resume the office

of trustee or may continue to act as adviser and appoint another

substitute trustee. Any adviser may receive reasonable compensation

for services as adviser.

E. The accounts of the trustee may be approved pursuant to

paragraph C of this Article by me, if then living, or after my death, by

- 13 [*13] a majority in number of DORIS KAMINSKI, BRUCE PLASSMEYER, and CRAIG PLASSMEYER, if alive, otherwise to their

descendants per stirpes. If any person so entitled to act is then under

legal disability, the instrument of appointment or approval may be

signed by the lawful guardian of such person on his or her behalf.

F. The incumbent trustee shall have all of the title, powers, and

discretion granted to the original trustee, without court order or act of

transfer. No successor trustee shall be personally liable for any act or

failure to act of a predecessor trustee. With the approval of the

person or persons indicated in paragraph E of this Article who may

approve the accounts of the trustee, a successor trustee may accept the

account furnished, if any, and the property delivered by or for a

predecessor trustee without liability for so doing, and such acceptance

shall be a full and complete discharge to the predecessor trustee.

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In a letter dated June 30, 1999 (June 30, 1999 letter) from Patrick J.

Edwards (Mr. Edwards) of First Chicago Insurance Services, Inc., to Craig

Plassmeyer,5 Mr. Edwards identified certain asset transfer strategies that he

recommended Mr. Beyer consider, including what Mr. Edwards described in that

letter as: (1) intentionally defective irrevocable trusts; (2) family limited

partnerships; (3) grantor retained trusts; and (4) irrevocable life insurance trusts.

Mr. Edwards indicated in his June 30, 1999 letter that "[i]n the case of the first

5Mr. Edwards sent a copy of his June 30, 1999 letter to Charles Holup (Mr.

Holup), Mr. Beyer's investment advisor who worked for JPMorgan Chase Bank

(Chase). Mr. Beyer had introduced Mr. Holup to Craig Plassmeyer in 1999

because Mr. Beyer wanted Craig Plassmeyer to play a role in Mr. Beyer's financial

planning matters.

- 14 [*14] three strategies, the primary reason for their use is to discount the value of

assets for transfer purposes. * * * [T]his tends to hinge on lack of control and

marketability of the assets which have been transferred." He further advised Craig

Plassmeyer in that letter that each potential strategy had "pros and cons" and that

"[c]oordination with tax counsel could help quickly ferret out the probability [that]

one or more of the transfer techniques could assist in minimizing income, gift and

estate tax liabilities for all involved."

As Mr. Beyer advanced in age, he desired to give Craig Plassmeyer a power

of attorney over his property. On October 29, 2001, Mr. Beyer signed a power of

attorney that was to be construed under the laws of the State of Illinois (Illinois

law), in which he named Craig Plassmeyer as his attorney-in-fact. That power of

attorney stated in pertinent part:

THE PURPOSE OF THIS POWER OF ATTORNEY IS TO GIVE

THE PERSON YOU DESIGNATE (YOUR "AGENT') BROAD

POWERS TO HANDLE YOUR PROPERTY, WHICH MAY

INCLUDE POWERS TO PLEDGE, SELL OR OTHERWISE

DISPOSE OF ANY REAL OR PERSONAL PROPERTY WITHOUT

ADVANCE NOTICE TO YOU OR APPROVAL BY YOU. * * *

UNLESS YOU EXPRESSLY LIMIT THE DURATION OF THIS

POWER IN THE MANNER PROVIDED BELOW, UNTIL YOU

REVOKE THIS POWER OR A COURT ACTING ON YOUR

BEHALF TERMINATES IT, YOUR AGENT MAY EXERCISE

THE POWERS GIVEN HERE THROUGHOUT YOUR LIFETIME,

EVEN AFTER YOU BECOME DISABLED. * * *

- 15 [*15] On December 17, 2001, Mr. Beyer signed a document titled "FIRST

AMENDMENT TO EDWARD G. BEYER DECLARATION OF TRUST" that

Mr. Erde, Mr. Beyer's estate planning attorney at that time, had prepared. In that

document, Mr. Beyer amended paragraph (C)(1) of Article II of the 1999 Trust

agreement (quoted above) by deleting the words "best interests, and welfare" from

that paragraph. After that amendment, that paragraph of the 1999 Trust agreement

provided:

1. The trustee shall distribute to me or apply for my benefit such

amounts of net income and principal, even to the extent of exhausting

principal, as the trustee believes desirable from time to time for my

health, support in reasonable comfort, considering all circumstances

and factors deemed pertinent by the trustee. Any undistributed net

income shall be accumulated and added to principal, as from time to

time determined by the trustee.

On May 2, 2002, Mr. Erde sent to Mr. Beyer and Craig Plassmeyer for

review and comment a draft copy of a proposed second amendment to the 1999

Trust agreement. Thereafter, on May 21, 2002, Mr. Beyer signed a document

titled "SECOND AMENDMENT TO EDWARD G. BEYER DECLARATION OF

TRUST". In that document, Mr. Beyer amended, inter alia, paragraph (D) of

Article IV of the 1999 Trust agreement. After that amendment, that paragraph of

the 1999 Trust agreement provided:

- 16 [*16]

D. As of the date of my death, but after providing for the

payments, if any, required by Article II of this instrument, and the

allocations, if any, required by A, B, & C [of Article IV] above, the

trustee shall distribute the balance of the trust as follows:

(1) One-fifth (1/5) to DORIS KAMINSKI, if living,

otherwise to her descendants, per stirpes;

(2) Two-fifth (2/5) to BRUCE PLASSMEYER, if

living, otherwise to his descendants, if any, per stirpes,

otherwise half of this two-fifths to DORIS KAMINSKI,

if living, and half of this two-fifths to CRAIG

PLASSMEYER, if living, otherwise to his descendants

per stirpes; and

(3) Two-fifth (2/5) to CRAIG PLASSMEYER, if

living, otherwise to his descendants per stirpes.

Mr. Holup wanted Mr. Beyer and Craig Plassmeyer to be aware of certain

estate planning options that Mr. Beyer should consider. Consequently, in 2003,

Mr. Holup introduced them to Michael J. Stuart (Mr. Stuart), an estate planning

attorney who was serving as of counsel to Anthony J. Madonia & Associates, Ltd.

(Madonia & Associates).6 In May 2003, Mr. Beyer retained Madonia &

Associates to perform services in developing and implementing an estate plan for

Mr. Beyer. That firm was still serving in that capacity when Mr. Beyer died on

May 19, 2007.

6At all relevant times, including during 2003 and at the time of the trial in

this case, Anthony J. Madonia (Mr. Madonia), who owned Madonia & Associates,

was a business and estate planning attorney.

- 17 [*17] In an engagement letter dated May 23, 2003 (May 23, 2003 engagement

letter) from Mr. Madonia to Craig Plassmeyer,7 Mr. Madonia confirmed that his

firm was to prepare a detailed analysis of Mr. Beyer's current estate plan as well as

certain alternative estate plans that were to be designed to reduce Mr. Beyer's

estate tax without requiring him to relinquish control of his assets. Craig

Plassmeyer signed the May 23, 2003 engagement letter.

In an engagement letter dated July 16, 2003 (July 16, 2003 engagement

letter)8 from Mr. Madonia to Mr. Beyer, Mr. Madonia discussed a meeting that

took place on July 9, 2003, in which Mr. Madonia presented certain alternative

estate planning strategies to Mr. Beyer. In the July 16, 2003 engagement letter,

Mr. Madonia confirmed that his firm was to take steps to implement certain estate

planning strategies that he had presented to Mr. Beyer at that meeting. Mr. Beyer

signed the July 16, 2003 engagement letter.

From around May until October 13, 2003, Mr. Stuart, Mr. Madonia, Craig

Plassmeyer, and Mr. Beyer held certain discussions regarding various strategies

that would minimize the estate tax to be paid after Mr. Beyer died. As of October

7In the May 23, 2003 engagement letter, Mr. Madonia referred to a meeting

that he had had with Craig Plassmeyer in which Mr. Madonia had discussed estate

planning options for Mr. Beyer.

"The record does not establish why there are two engagement letters.

- 18 [*18] 13, 2003, the strategies that Mr. Beyer had decided to use in order to

accomplish that objective included two revocable grantor trusts, a limited

partnership, and an irrevocable trust. One of the revocable grantor trusts was to be

the general partner of the limited partnership, and the other revocable grantor trust

was to be the limited partner of the limited partnership. The irrevocable trust,

which Mr. Beyer was not to form until some time after the creation of the limited

partnership, was to purchase the limited partnership interest of the revocable

grantor trust that was to be the initial limited partner of the limited partnership.

In order to implement the estate planning strategies that Mr. Beyer had

chosen, on October 13, 2003, he, inter alia, signed his last will and testament (Mr.

Beyer's will) that Madonia & Associates had prepared for him.9 In Mr. Beyer's

will, he named Craig Plassmeyer as the executor of his estate. Mr. Beyer gave the

following directive in Mr. Beyer's will:

I direct that the taxes imposed by reason of my death upon property

passing under and outside my will be apportioned and paid in the

manner provided in the EDWARD G. BEYER LIVING TRUST, and

I incorporate the tax apportionment provisions of that [sic] the

EDWARD G. BEYER LIVING TRUST as part of my will.

In order to implement the estate planning strategies that Mr. Beyer had

chosen, on October 13, 2003, Mr. Beyer also signed three separate powers of

°Mr. Beyer never amended Mr. Beyer's will.

- 19 [*19] attorney (October 13, 2003 powers of attorney), each of which was to be

construed under Illinois law and each of which Madonia & Associates had

prepared for him. In each of the three October 13, 2003 powers of attorney, Mr.

Beyer named Craig Plassmeyer as Mr. Beyer's attorney-in-fact and granted him:

(1) full power and authority to do everything necessary to transfer, assign, convey,

and deliver to the Living Trust [one of the revocable grantor trusts that Mr. Beyer

was to create] any interest in property owned by Mr. Beyer, (2) the power to make

health care decisions on behalf of Mr. Beyer, and (3) the power to act on Mr.

Beyer's behalf in the event of his disability.

In order to implement the estate planning strategies that Mr. Beyer had

chosen, on October 13, 2003, Mr. Beyer also signed a trust agreement (Living

Trust agreement) that Madonia & Associates had prepared for him and thereby

formed the revocable grantor trust that he named the Edward G. Beyer Living

Trust (Living Trust), which was to be the limited partner of the limited

partnership. In the Living Trust agreement, Mr. Beyer named himself, Craig

Plassmeyer, and Bruce Plassmeyer as the three co-trustees of the Living Trust.

The Living Trust agreement provided in pertinent part:

- 20 [*20]

Article One

Establishing My Trust

The date of this trust agreement is October 13, 2003. The parties to

this agreement are EDWARD G. BEYER (the "Trustmaker") and

EDWARD G. BEYER, CRAIG PLASSMEYER and BRUCE

PLASSMEYER (collectively, the "Trustee").

Section 1.01

Identifying My Trust

My trust may be referred to as "EDWARD G. BEYER, CRAIG

PLASSMEYER, and BRUCE PLASSMEYER Trustees of the

EDWARD G. BEYER LIVING TRUST dated October 13, 2003, and

any amendments thereto."

For the purpose of transferring property to my trust, or identifying my

trust in any beneficiary or pay-on-death designation, any description

referring to my trust shall be effective if it reasonably identifies my

trust. Any description that contains the date of my trust, the name of

at least one initial or successor Trustee and an indication that my

Trustee is holding the trust property in a fiduciary capacity shall be

sufficient to reasonably identify my trust.

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Section 1.03

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Transferring Property to My Trust

Any person or entity may transfer property of any kind, nature and

description to my trust in any manner authorized by law.

(a)

Initial Funding of My Trust

By execution of this agreement, I transfer, convey and

assign to my Trustee and my Trustee accepts and agrees

to hold, the property described in Schedule A, annexed

hereto, together with all my right, title and interest in and

to all of my property that may by law be held in trust and

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- 21 [*21]

that may, by this assignment, be transferred to my trust.

This assignment shall include, without limitation, all real

and personal, tangible and intangible property, located in

the United States, whether separate or community,

whether acquired before or after the execution of this

agreement except for the following assets that are

expressly not transferred to my trust by this assignment:

Life insurance policies, unless the ownership of a

policy is transferred to my trust by a separate

instrument that specifically refers to such policy;

Corporate and self-employed ("Keogh") pension,

profit sharing and stock bonus plans;

Simplified Employee Plans (SEPs);

Individual retirement accounts and tax sheltered

annuities;

Commercial annuities;

Any property the transfer of which would violate a

restriction on transfer agreement.

*

*

Section 1.04

*

*

*

*

*

Powers Reserved by Me as Trustmaker

During my lifetime, I shall retain the powers set forth in this Section

in addition to any powers that I reserve in other provisions of this

agreement.

(a)

Action on Behalf of My Trust

During any period that I am serving as a Trustee of my

trust, I may act for and conduct business on behalf of my

- 22 [*22]

trust without the consent of any other Trustee.

(b)

Amendment, Restatement or Revocation

I have the absolute right, at any time and from time to

time, to amend, restate, or revoke any term or provision

of this agreement in whole or in part. Any amendment,

restatement, or revocation must be in a written

instrument signed by me.

(c)

Addition or Removal of Trust Property

I have the absolute right, at any time and from time to

time, to add to the trust property and to remove any

property from my trust.

(d)

Control of Income and Principal Distributions

I have the absolute right to control the distribution of

income and principal from my trust. My Trustee shall

distribute to me, or to such persons or entities as I may

direct, as much of the net income and principal of the

trust property as I deem advisable. My Trustee may

distribute trust income and principal to me or for my

unrestricted use and benefit, even to the exhaustion of all

trust property. Any undistributed income shall be added

to the principal of my trust.

(e)

Approval of Investment Decisions

I have the absolute right to approve my Trustee's investment decisions. My approval of investment decisions

shall be binding on all other beneficiaries of this

agreement.

- 23 [*23] Section 1.05

Grantor Trust Status

By reserving the broad rights and powers set forth in Section 1.04 of

this Article, I intend to qualify my trust as a "Grantor Trust" under

Sections 671 to 677 of the Internal Revenue Code so that, for federal

income tax purposes, I will be treated as the owner during my lifetime

of all the assets held in my trust as though I held them in my

individual capacity.

During any period that my trust is a Grantor Trust, the taxpayer

identification number of my trust shall be my social security number,

in accordance with Treasury Regulation Section 301.6109-1(a)(2).

*

*

*

*

*

*

*

*

*

Article Three

Trustee Succession Provisions

*

*

Section 3.02

*

*

*

Trustee Succession During My Lifetime

During my lifetime, this Section shall govern the removal and

replacement of my Trustees.

(a)

Removal and Replacement by Me

I may remove any Trustee with or without cause at any

time. If a Trustee is removed, resigns or cannot continue

to serve for any reason, I may serve as sole Trustee,

appoint a Trustee to serve with me or appoint a successor

Trustee.

(b)

During My Incapacity

During any time that I am incapacitated, the following

- 24 [*24]

shall replace any then serving Trustee in the order

named:

CRAIG PLASSMEYER and BRUCE PLASSMEYER, to serve as Co-Trustees; and then

GUARANTY TRUST

If I am incapacitated, a majority of the income

beneficiaries, may remove any Trustee with or without

cause.

If I am incapacitated and there is no named successor

Trustee, a majority of the income beneficiaries shall

appoint an individual or a corporate fiduciary to serve as

my successor Trustee.

All appointments, removals and revocations shall be by signed

written mstrument.

*

*

*

*

*

*

*

Article Five

Administration of My Trust Upon My Death

Section 5.01

My Trust Shall Become Irrevocable

Upon my death, my trust shall become irrevocable and my social

security number may no longer be used to identify my trust. My

Trustee shall apply for a separate taxpayer identification number for

my trust.

Section 5.02

Administrative Trust

After my death and prior to the distribution of trust property as

provided in the subsequent Articles of this agreement, my trust shall

be an administrative trust but may continue to be known as the

EDWARD G. BEYER LIVING TRUST. My administrative trust

- 25 [*25] shall exist for a reasonable period of time necessary to complete the

administrative tasks set forth in this Article.

Section 5.03

Payment of My Expenses and Taxes

My Trustee is authorized but not directed to pay from the

administrative trust:

Expenses of my last illness, funeral and burial or

cremation, including expenses of memorials and

memorial services;

Legally enforceable claims against me or my estate;

Expenses of administering my trust and my estate; and

Court ordered allowances for those dependent upon me.

These authorized payments are discretionary with my Trustee. My

Trustee may make decisions on these payments without regard to any

limitation on payment of such expenses imposed by law and may

make payments without obtaining the approval of any court. No third

party may enforce any claim or right to payment against my trust by

virtue of this discretionary authority. My Trustee shall not pay any

administrative expenses from assets passing to an organization that

qualifies for the federal estate tax, charitable deduction or to a

split-interest charitable trust.

My Trustee shall pay death taxes out of the principal of the trust

property as provided in Section 5.05. If, however, a probate estate is

opened within six months from the date of my death, my independent

executor shall pay claims expenses and death taxes from my probate

- 26 [*26] estate to the extent that the cash and readily marketable assets included in my probate estate are sufficient to pay such items unless my

Trustee has already paid them.

*

*

Section 5.05

*

*

*

*

*

Payment of Death Taxes

For the purposes of this Article, the term "death taxes" shall refer to

any taxes imposed by reason of my death by federal, state or local

authorities, including but not limited to estate, inheritance, gift, and

direct-skip generation-skipping transfer taxes. For purposes of this

Section, death taxes shall not include any additional estate tax

imposed by Section 2031(c)(5)(C), Section 2032A(c) or Section

2057(f) of the Internal Revenue Code or any other comparable

recapture tax imposed by any taxing authority. Nor shall death taxes

include any generation-skipping transfer tax, other than a direct skip

[sic] generation-skipping transfer tax.

Except as otherwise provided in this Section or elsewhere in this

agreement, my Trustee shall provide for payment of all death taxes

from the administrative trust [reference to Living Trust after Mr.

Beyer's death] without apportionment. My Trustee shall not seek

contribution toward or recovery of any such payments from any

individual.

*

*

*

*

*

*

*

Article Six

Specific Distributions and

Disposition of Tangible Personal Property

Section 6.01

Specific Distribution to RUTH E. PLASSMEYER and LUCILLE V. WILKINSON

Upon my death, my Trustee shall hold the sum of $325,000 and the

proceeds from the Value Line Tax Exempt Fund, Account number

- 27 [*27] * * * [ending] 326 in trust for the benefit of RUTH E. PLASSMEYER

and LUCILLE V. WILKINSON to be administered as provided in this

Section.

If RUTH E. PLASSMEYER and LUCILLE V. WILKINSON should

predecease me, this distribution shall lapse and the property subject to

this distribution shall instead be distributed under the other provisions

of this agreement.

Property passing under this Section shall pass free of any

administrative expenses or death taxes.

My Trustee shall administer the amount set aside for RUTH E.

PLASSMEYER and LUCILLE V. WILKINSON as follows:

(a)

Distributions of Income and Principal

My Trustee shall distribute to RUTH E. PLASSMEYER

and LUCILLE V. WILKINSON as much of the income

and principal of their trust as my Trustee determines is

necessary or advisable for the cost and expenses (except

for telephone and electric bills) of maintaining the

condominiums they each reside in and their respective

garages.

The proceeds from the Value Line Tax Exempt Fund are

to pay each of RUTH E. PLASSMEYER and LUCILLE

V. WILKINSON the amount of $800.00 per month for as

long as they shall live.

Any undistributed net income shall be accumulated and

added to principal.

- 28 [*28]

(b)

Distribution Upon the Death of

RUTH E. PLASSMEYER and

LUCILLE V. WILKINSON

If the survivor of RUTH E. PLASSMEYER and

LUCILLE V. WILKINSON should die before the

complete distribution of their trust, my Trustee shall

distribute the trust assets to CRAIG PLASSMEYER into

the trust created for his benefit in Article Nine herein. If

CRAIG PLASSMEYER is deceased the property shall

pass to CRAIG PLASSMEYER's descendants, per

stirpes in trust. If CRAIG PLASSMEYER has no

descendants, my Trustee shall distribute the balance of

the trust property as provided in Article Ten of this

agreement.

Section 6.02

Life Estate in Real Property

I bequeath unto my sister, RUTH E. PLASSMEYER, a life estate in

the property where she currently resides, commonly known as 4125

N. Keystone, Unit 502, Chicago, Illinois, 60644, as well as the 2

parking spaces that were sold with said unit. I bequeath unto my

sister, LUCILLE V. WILKERSON, a life estate in the property where

she currently resides, commonly known as 4125 N. Keystone, Unit

603, Chicago, Illinois, 60644, as well as the parking space that was

sold with said unit. RUTH and LUCILLE shall be referred to as "Life

Tenant" for their respective life estates under this article. The Life

Tenant shall have the right, rent free, to the exclusive use, possession

and enjoyment as a personal residence of the Property during her

lifetime.

The trust held under this Article shall terminate upon the death of the

Life Tenant, and the Trustee shall thereupon dispose of the principal

of the trust estate, as it is then constituted, by adding all assets owned

by the respective life estates to the trust share made for the benefit of

CRAIG PLASSMEYER under Article 9.01 herein. The assets

- 29 [*29] contained in the respective life estates are in addition to the assets

provided for CRAIG PLASSMEYER UNDER Article 9.01 hereof.

*

*

*

*

*

*

*

Article Eight

Distribution-of My Exempt Trust Property

My Trustee shall administer the Exempt Share as provided in this

Article.

Section 8.01

Division of My Exempt Trust Property

My Trustee shall divide the remaining exempt trust property into

shares as follows:

*

Name

Relationship

Share

CRAIG PLASSMEYER

Nephew

40%

BRUCE PLASSMEYER

Nephew

40%

DORIS KAMINSKI

Niece

20%

*

*

*

*

*

*

Article Nine

Distribution of My Nonexempt Property

My Trustee shall administer the Nonexempt Share as provided in this

Article.

Section 9.01

Division of Remaining Nonexempt Trust

Property

My Trustee shall divide the remaining nonexempt into shares as

follows:

- 30 [*30]

*

Name

Relationship

Share

CRAIG PLASSMEYER

Nephew

40%

BRUCE PLASSMEYER

Nephew

40%

DORIS KAMINSKI

Niece

20%

*

*

*

*

*

*

Schedule AD°1

Ten Dollars Cash

At no time did Mr. Beyer amend the Living Trust agreement to eliminate the

Living Trust's obligation, as set forth in section 5.03 and 5.05 of article five of

that agreement, to pay so-called death taxes that would be due after he died (death

taxes).

In order to implement the estate planning strategies that Mr. Beyer had

chosen, on October 13, 2003, Mr. Beyer also signed a trust agreement

(Management Trust agreement) that Madonia & Associates had prepared for him

and thereby formed the revocable grantor trust that he named the Edward G. Beyer

Management Trust (Management Trust), which was to be the general partner of

the limited partnership. In the Management Trust agreement, Mr. Beyer named

¹°Schedule A is attached to the Living Trust agreement.

- 31 [*31] Craig Plassmeyer and Bruce Plassmeyer as the two co-trustees of the

Management Trust." The Management Trust agreement provided in pertinent

part:

Article One

Creation of the Trust

Section 1.01.

Establishment of the Trust

This Management Trust is settled, established and dated October 13,

2003, by EDWARD G. BEYER as Trustmaker, and the following

initial Trustees:

CRAIG PLASSMEYER and BRUCE PLASSMEYER to

serve as Co-Trustees

All references to "the trust" or "trust," unless otherwise stated, shall

refer to this Management Trust and any trusts created in it. All

references to "Trustee" shall refer to the initial Trustee or Trustees, or

their successor or successors in trust.

When the term "Trustmaker" is used in this trust, it shall have the

same legal meaning as "Grantor," "Settlor," "Trustor," or any other

term referring to the maker of a trust.

This trust is intended to be a Grantor Trust within the meaning of

Sections 671 - 679 et seq. of the Internal Revenue Code and the

Regulations thereunder.

"Craig Plassmeyer and Bruce Plassmeyer remained the co-trustees of the

Management Trust at all relevant times, including after Mr. Beyer died.

- 32 [*32] Section 1.02.

The Name of the Trust

For convenience, the trust shall be known as the:

EDWARD G. BEYER MANAGEMENT TRUST, dated

October 13, 2003

For purposes of titling assets, beneficiary designations or transfer of

assets directly to the trust, the trust shall be referred to as:

CRAIG PLASSMEYER and BRUCE PLASSMEYER,

Co-Trustee, or the successors in trust, under the

EDWARD G. BEYER MANAGEMENT TRUST, dated

October 13, 2003, and any amendments thereto.

In addition to the above descriptions, any description for referring to

this trust shall be effective to transfer title to the trust or to designate

the trust as a beneficiary as long as that format includes the date of

this trust, the name of at least one initial or successor Trustee, and any

reference that indicates that assets are to be held in a fiduciary

capacity.

Section 1.03.

Trust Term

This trust is intended to exist for a limited term of years. Unless

earlier revoked by the beneficiaries, the trust will terminate at the 31st

day of December of the year in which the last partnership, limited

liability company, corporation or other entity owned by this trust has

ended unless extended by the unanimous consent of the Trustees and

the consent of a majority in interest of the then existing current

income beneficiaries.

In no event shall the trust term extend beyond the limitation period

imposed by the Rule Against Perpetuities as provided in Section

11.01 of this Agreement.

- 33 [*33] Section 1.04.

Amendment and Revocation

While the Trustmaker is alive, the Trustmaker shall have the sole and

exclusive right to amend and revoke this trust, in whole or in part at

any time. Any amendment or revocation must be in writing, signed

by the Trustmaker, and delivered to the Trustee. This trust shall

become irrevocable upon the death of the Trustmaker.

The right to amend or revoke this trust is personal to the Trustmaker,

and may not be exercised by any legal representative or agent acting

on the Trustmaker's behalf.

Section 1.05.

Trustmaker's Liability

The Trustmaker shall have no liability for the acts of the trust serving

as General Partner or Managing Partner of any partnership. Likewise,

the Trustmaker shall have no liability for the acts of the trust serving

as a Member or Managing Member or Manager of any Limited

Liability Company.

*

*

*

*

*

*

*

Article Two

Trust Purposes

Section 2.01.

General Purpose

The trust is specifically established and settled to serve as a partner of

one or more general or limited partnerships and as a member of one

or more limited liability companies. The trust is specifically

authorized to serve as general partner of a limited partnership, as a

- 34 [*34] managing partner of a general partnership, and as a manager of a

limited liability company.

*

*

*

*

*

*

*

Article Three

Funding the Trust

Section 3.01.

Initial Funding

The Trustmaker transferring, assigning shall initially fund the trust,

and conveying all right, title, and interest in and to all of the property

list in Schedule "A " attached hereto.

a.

Reliance by Third Parties

Upon presentation by the Trustee of a copy this Article

of this trust and a separate Affidavit or Certificate of

Trust stating the name and address of the current

Trustee(s), affirming that the trust is in full force and

effect, along with copies of any pertinent provisions of

the trust, all third parties shall rely on this transfer and

follow all of the Trustee's instructions without risk of

incurring any liability to the Trustmaker, the Trustee, or

the beneficiaries.

b.

Specific Transfers of Property

Any other person in any manner may additionally fund the trust

with property interests of all kinds. All property interests

assigned, conveyed, or delivered to the Trustee must be

- 35 [*35]

acceptable to and acceptable by the Trustee to become

trust property.

*

*

*

*

*

*

*

Article Four

Beneficial Ownership of the Trust and Trust Distributions

Section 4.01.

Beneficiaries and Beneficial Ownership

While the Trustmaker is alive, the Trustmaker shall be the sole

beneficiary of this trust, and the Trustee shall pay to the Trustmaker,

at least quarterly, all of the net income and net capital gains from the

trust. If the Trustmaker is alive when the trust terminates, or if the

Trustmaker revokes this trust the Trustee shall distribute all the trust

property and any accrued and undistributed income and gains to the

Trustmaker.

Following the death of the Trustmaker, the beneficiaries of the trust

and the extent of their beneficial interest in the trust shall be

maintained on Schedule "B" of the trust instrument and incorporated

in its entirety as an integral part of this trust agreement.

Schedule "B" shall specifically state:

a.

The name of each beneficiary of the trust;

b.

The percentage beneficial ownership of each trust

beneficiary; and

c.

The remainder beneficiary, if any. The term

"remainder beneficiary," when used in the

singular, refers to the person or persons, trust or

trusts, or other entities entitled to the designated

beneficial share or interest in the trust upon the

death of the beneficial owner. The interest of a

remainder beneficiary is to continue in trust for the

- 36 [*36]

stated remaining term of this trust. Any share or

interest of a remainder beneficiary is to be

distributed to the remainder beneficiary upon the

termination of the trust.

The Trustee shall update Schedule "B" to show changes in any of the

categories listed above.

Section 4.02.

Change of Beneficiary Designations

Unless otherwise prescribed by this trust instrument, the Trustmaker

has the unilateral right to change the beneficiary designation or

remainder beneficiary designation of the trust at any time.

However, if the Trustmaker makes an irrevocable designation of

beneficiary, the Trustmaker making an irrevocable designation (or

who releases the power to re-designate the beneficiary) cannot

thereafter change the designation of trust beneficiary or the

designation of the remainder beneficiary.

Section 4.03.

Remainder Beneficiary Interests

The term "remainder beneficiary," used in the singular, is the person,

persons, trust, trusts, or other entities entitled to the designated share

or interest in the trust upon the death of the beneficial owner.

The interest of a remainder beneficiary shall continue in trust for the

remaining stated term of this trust and be distributed to the remainder

beneficiary only upon termination of the trust. If the remainder

beneficiary is a trust that will end or in fact does end before the

termination of this trust, then the beneficiaries of the remainder

beneficiary trust shall become the remainder beneficiaries of this

trust.

- 37 [*37] Section 4.04.

Distributions of Income and Principal

Except as otherwise provided for herein, while the Trustmaker is

alive, all items of income, gain, loss, deduction, depreciation, and

credit of the trust shall be allocable and distributable to the

Trustmaker. However, all management service income, and costs of

administration shall be allocated or distributed to the Trustee.

After the Trustmaker's death, the Trustee may, in the Trustee's sole

and absolute discretion, allocate and distribute any items of

non-management income, gains, losses, deductions, depreciation, and

credits on a pro-rata basis to the remainder beneficiaries of the trust.

Except for liquidation distributions provided for in Article Seven,

until the termination of the trust, no principal (other than net capital

gains) shall be distributable from this trust.

*

*

*

*

*

*

*

Article Six

Resignation, Replacement, and Succession of Trustees

Section 6.01.

The Resignation of a Trustee

A Trustee may resign by giving thirty days written notice to all of the

beneficiaries then eligible to receive mandatory or discretionary

distributions of net income from any trust created under this

agreement.

If a beneficiary is a minor or is legally incapacitated, the notice shall

be delivered to that beneficiary's guardian or other legal

representative.

- 38 [*38] Section 6.02.

The Removal of a Trustee

Any Trustee may be removed as follows:

a.

Removal by Trustmaker

The Trustmaker reserves the right to remove any Trustee at any

time, with or without cause.

b.

Removal by Beneficiaries

After the death of the Trustmaker, a majority of the

beneficiaries then eligible to receive mandatory or

discretionary distributions of net income under this agreement

may remove and replace any Trustee.

*

*

*

Section 6.03.

*

*

*

*

Replacement of Trustees

Whenever a Trustee is removed, dies, resigns, becomes legally

incapacitated, or is otherwise unable or unwilling to serve, that

Trustee shall be replaced as follows:

a.

The Death or Disability of a Trustee While the

Trustmaker is Serving as Trustee

The Trustmaker may serve as the only Trustee or the

Trustmaker may name any number of Trustees to serve as

Co-Trustees or as replacement Trustees. If any of these other

Trustees subsequently die, resign, become legally

incapacitated, or are otherwise unable or unwilling to serve as a

Trustee, the Trustmaker may or may not fill the vacancy.

- 39 [*39]

b.

Resignation of a Trustmaker as Trustee

If the Trustmaker resigns as Trustee, the resigning Trustmaker

may appoint a successor Trustee to serve in his place.

Notwithstanding anything in this agreement to the contrary, the

resigning Trustee may provide that his appointed successor

Trustee may appoint his or their successor.

Section 6.04.

Trustee Succession

If the Trustmaker fails to appoint a successor or successors as

Trustee, or if an appointed Trustee is unwilling or unable, or cannot

continue to serve for any reason and no appointed successor has been

designated, then the following shall be named as successor Trustees

in the order in which their names appear:

CRAIG PLASSMEYER and BRUCE PLASSMEYER, as

Co-Trustees

GUARANTY TRUST COMPANY

*

*

*

*

*

*

*

*

*

Article Nine

General Matters and Instructions

with Regard to the Trusteeship

*

*

Section 9.09.

*

*

*

A Majority of Trustees Required to Control

When more than two Trustees are acting, the concurrence and joinder

of a majority of Trustees shall control in all matters pertaining to the

administration of any trust created under this agreement.

- 40 [*40] If only two Trustees are acting, the concurrence and joinder of both

shall be required.

*

*

*

*

*

*

*

Schedule A ¹²l

Initial Funding

Original Contribution of Capital:

$ [no amount listed]

Designated Percentage of Ownership:

100%

Schedule Bl¹³l

Trust Beneficiaries

Trustmaker

EDWARD G. BEYER

Designated Present Beneficiary

EDWARD G. BEYER

Designated Remainder Beneficiary

The EDWARD G. BEYER LIVING

TRUST, dated October 13, 2003

The Management Trust did not maintain a bank account until its co-trustees

opened one in October 2009, over two years after Mr. Beyer died.

In order to implement the estate planning strategies that Mr. Beyer had

chosen, on October 13, 2003, Mr. Beyer, acting on behalf of the Living Trust (the

limited partner), and Craig Plassmeyer and Bruce Plassmeyer, acting on behalf of

the Management Trust (the general partner), signed a limited partnership

¹²Schedule A is attached to the Management Trust agreement.

¹³Schedule B is attached to the Management Trust agreement.

- 41 [*41] agreement (EGBLP agreement) that Madonia & Associates had prepared

and thereby formed under Illinois law the limited partnership that they named the

Edward G. Beyer Limited Partnership (EGBLP).¹4 The EGBLP agreement

provided in pertinent part:

Article One

Creation of the Partnership

Section 1.01.

The Limited Partnership

This agreement, which is dated October 13, 2003, forms and

establishes a Limited Partnership under the laws of the State of

Illinois, and specifically under the auspices of the Uniform

Partnership Act 805 ICLS 205. The Partnership shall be effective

upon the filing of a Certificate of Limited Partnership as required by

the State of Illinois.usi The Partners and their percentages of

ownership are identified in the schedule attached to this agreement as

Exhibit "A."

This agreement sets forth the rights, duties, obligations, and

responsibilities of the Partners with respect to the partnership.

¹#At all relevant times, the sole general partner of EGBLP was the

Management Trust. At all relevant times until December 30, 2005, the sole

limited partner of EGBLP was the Living Trust.

¹5Sometime after October 13, 2003, and before February 18, 2004, EGBLP

filed a certificate of limited partnership with the secretary of state of Illinois.

- 42 [*42] In consideration of the mutual promises, obligations and agreements

set forth in this agreement, the parties to this agreement agree to be

legally bound by its terms.

*

*

*

Section 1.03.

*

*

*

*

Purpose and Scope of the Partnership

This Partnership is organized to accomplish the following purposes:

a.

To Make a Profit--The primary reason for creating this

Limited Partnership is to make a profit.

b.

To Increase Wealth--This Limited Partnership will

provide an effective legal vehicle to increase the wealth

of the partners and their families.

c.

To Consolidate Fractional Interests--This Limited

Partnership will consolidate fractional interests in the

assets held by the various partners into one block of

assets.

d.

To Provide Centralized Management of Investments-This Limited Partnership is designed to hold investment

assets and allow for centralized management of those

assets.

e.

To Manage and Develop Real Estate--This Limited

Partnership will provide the legal vehicle to effectively

manage and/or develop any real estate owned or acquired

by the Partnership.

f.

To Reduce Estate Taxes--Because of the manner in

which partnership interests are valued, this Limited

Partnership may reduce the potential estate tax liability

of the partners.

- 43 [*43]

g.

To Facilitate the Making of Intra-Family Loans--The

General Partner may make loans to family members and

provide for a variety of repayment options.

h.

To Avoid Two Layers of Taxation on Profits--This

Limited Partnership provides flexibility in business

planning not available to the Partners through trusts,

corporations, or other business entities.

i.

To Acquire Assets That S Corporations Cannot Hold-This Limited Partnership provides flexibility in the

management of family business because it is permitted to

own assets that cannot be held by S Corporations.

j.

To Avoid Compressed Income Tax Rates on Trusts-This Limited Partnership is not subject to compressed

income tax rates that apply to some irrevocable trusts.

k.

To Reduce State Taxes--Limited partnerships are not

subject to franchise tax in some states where the

Partnership may choose to do business, unlike

corporations and limited liability companies that

generally do pay a franchise tax.

1.

Reduce Income Taxes--Income tax may be reduced

because income distributed to limited partners is

generally not subject to self-employment tax.

m.

To Make Gifts Without Fractionalizing Assets--This

Limited Partnership establishes a method by which

annual gifts may be made without fractionalizing family

assets.

n.

To Make Gifts Without Causing a Loss of Incentive-This Limited Partnership provides a method of

ownership which allows gifts to be made to children and

- 44 [*44]

other beneficiaries without causing a loss of productivity

or the incentive to strive to do well.

o.

To Control Cash Flow to Limited Partners--This Limited

Partnership provides a structure by which the general

partner can control the assets and the cash flow to

Limited Partners to achieve the legitimate purposes of

the Partnership.

p.

To Resolve Disputes Privately--This Limited Partnership

provides for mediation and binding arbitration in

disputes by partners that is intended to prevent expensive

and embarrassing public litigation of private family

business matters.

q.

To Require the Losers of Disputes to Pay the Dispute

Costs--This Limited Partnership requires the loser in any

dispute to pay for the costs of the dispute.

r.

To Provide Confidentiality--This Limited Partnership

contains confidentiality provisions restricting family

members from publicly disclosing matters involving

private family business.

s.

To Avoid Probate--The Partnership is intended to assist

in preventing family assets from going through probate

upon the disability or death of any family member; or

alternatively, to simplify any probate proceeding that

may be required.

t.

To Establish an Order of Succession--This Limited

Partnership establishes and maintains an order of

succession and control of family business assets.

u.

To Restrict the Right of Non-Partners to Acquire

Interests--This Limited Partnership restricts the right of

non-partners to acquire interests in Partnership assets.

- 45 [*45]

v.

To Prevent Transfers of Partnership Interests Because of

Failed Marriages--This Limited Partnership prevents the

transfer of a family member's interest in the Partnership

because of a failed marriage.

w.

To Prevent Commingling of the Assets of Gift

Recipients--This Limited Partnership creates a method of

ownership that will prevent gifts made to family

members from being commingled with assets owned by

others.

x.

To Protect Partners from the Partnership's Creditor

Claims--This limited partnership limits the liability of

Limited Partners from the Partnership's creditors.

y.

To Provide Asset Protection for Partners--This Limited

Partnership protects the family resource base from the

claims of future creditors of Partners.

z.

To Promote Knowledge of Family Assets--This Limited

Partnership promotes knowledge of and communication

about the family assets and business among family

members.

aa.

To Reduce the Impact of Income in Respect of a

Decedent--This Limited Partnership may help the

partners reduce the impact of the income in respect of a

decedent (IRD) upon the death of a partner because the

partnership year closes on the death of a partner.

bb.

To Keep Family Members Close--This Limited

Partnership will require family members to continue to

maintain a relationship over a long period of time in

order to effectively manage the assets of the Partnership,

and accordingly, may provide a business structure that

will reduce the likelihood of family disputes and allow

- 46 [*46]

the family members to maintain a close relationship over

a long period of time.

The Partnership may conduct any lawful business and investment

activity permitted under the laws of the State of Illinois and in any

other nation or political subdivision in which it may have a business

or investment interest.

The Partnership may own, acquire, manage, develop, operate, sell,

exchange, finance, refinance, lease and otherwise deal with real

estate, personal property and any type of business as the General

Partner may from time to time deem to be in the best interest of the

Partnership.

The Partnership may engage in any other activities that are related or

incidental to the foregoing purposes.

Section 1.04.

Purpose of Partnership Restrictions

This Partnership is formed by those who know and trust one another,

and who in forming this Limited Partnership will have surrendered

certain management rights. One or more of the Partners may also

have assumed management responsibility and risk based upon their

relationship and trust.

Capital is material to the business and investment objectives of the

Partnership and its federal tax status. An unauthorized transfer of a

Partner's interest could create a substantial hardship to the

Partnership, jeopardize its capital base, and adversely affect its tax

structure.

There are, therefore, certain restrictions, as expressed in this

agreement, that attach to and affect both ownership of Partnership

Interests and the transfer of those interests. Those restrictions upon

ownership and transfer are not intended as a penalty, but as a method

to protect and preserve existing relationships based upon trust and to

- 47 [*47] protect the Partnership's capital and its financial ability to continue to

operate.

*

*

Section 1.07.

*

*

*

*

*

The Term of the Partnership

The period of duration of the Partnership shall be perpetual. The

Partnership shall begin on the date the Certificate of Limited

Partnership is filed with the Secretary of State of Illinois and shall

continue until terminated or dissolved in accordance with the

provisions of this agreement.

Section 1.08.

The Tax Matters Partner

The General Partner shall serve as the Tax Matters Partner pursuant

to the Code. If there is more than one General Partner, the General

Partners shall, by agreement, designate one of the General Partners to

serve as the Tax Matters Partner.

*

*

*

*

*

*

*

Article Three

Partnership Interests

Section 3.01.

Percentage interest in the Partnership

Each Partner's Initial Partnership Interest shall be the percentage

interest set forth in Exhibit "A" that is attached to this agreement.

Partnership Interests shall be adjusted from time to time to account

for non-pro rata Additional Capital Contributions and non-pro rata

distributions to Partners. When non-pro rata contributions or

distributions are made, each Partner's partnership interest shall then

be determined by dividing the Capital Account of each Partner by the

aggregate of the then existing capital accounts, after adjusting the

Partners' Capital Accounts to reflect the fair market value of the

contributed property.

- 48 [*48] For purposes of determining the respective voting rights of the

Partners, adjustments to Partnership Interests of the Partners resulting

from Additional Contributions or Distributions shall be deemed to

have been made on December 31 following the date of the

contribution or distribution.

The General Partner of Partnership shall maintain a correct record of

all Partners and their Partnership Interests together with amended and

revised schedules of ownership caused by changes in the Partners and

changes in Partnership Interests.

*

*

*

*

*

*

*

Article Four

Capital Contributions and Capital Accounts

Section 4.01.

Initial Capital Contributions

The Partners shall contribute as their initial capital contributions to

the Partnership all of their right, title and interest in and to the

property described in Exhibit A attached hereto. The Partners agree

that the property described in Exhibit A has the fair market value (net

of liabilities assumed or taken subject to by the Partnership to which

such property is subject) listed opposite such property.

Each Partner's Interest shall be credited with an initial contribution

equal to the fair market value listed opposite that Partner's name in

Exhibit A.

*

*

Section 4.05.

*

*

*

*

*

Establishment of Capital Accounts

A Capital Account shall be established for each Partner and shall be

maintained at all times throughout the existence of the Partnership in

a manner that complies with the Code and Regulations promulgated

- 49 [*49] thereunder. Each Partner's Capital Account shall be maintained

according to the following provisions:

a.

Credits to Partner's Interest

Each Partner's Interest shall be credited with the fair market

value of such Partner's contribution of cash or other property,

such Partner's distributive share of profits, and the amount of

any Partnership liabilities that are assumed by such Partner.

b.

Debits to Partner's Interest

Each Partner's Interest shall be debited the amount of cash and

the fair market value of any property distributed to such Partner

pursuant to any provision of this agreement, such Partner's

share of losses, and the amount of any liabilities of such Partner

that are secured by any property contributed by such Partner to

the Partnership.

Section 4.06.

Assignment of a Partner's Interest

Except as otherwise required by the Code or Regulations, if any

Partnership Interest is assigned according to the terms of this

agreement, the Assignee shall succeed to the Capital Account of the

assignor to the extent that it relates to the assigned Partnership

Interest. If the assignment of an interest in the Partnership causes a

termination of the Partnership under Code Section 708(b)(1)(B), the

capital account that carries over to the Assignee will be adjusted

according to Treas. Reg. Section 1.704-1(b)(2)(iv)(e).

Section 4.07.

Capital Account Adjustments for Capital

Events

The following capital events shall result in the following adjustments

to a Partner's Capital Account.

- 50 [*50]

a.

Assumption of Liability

An assumption of unsecured liability by the Partnership shall

be treated as a distribution of money to the Partner, and his

Capital Account shall be adjusted accordingly. An assumption

of an unsecured liability of the Partnership by a Partner shall be

treated as a cash contribution to the Partnership. In

determining the amount of any liability for this purpose,

Section 752(c) of the Internal Revenue Code and the Treasury

Regulations promulgated thereunder shall be taken into

account.

b.

Adjustments for Noncash Distributions

If the assets of the Partnership other than cash are distributed in

kind to a Partner, the Capital Accounts of the Partners shall be

adjusted for the hypothetical "book" gain or loss that would

have been realized by the Partnership if the distributed assets

had been sold for their fair market values in a cash sale in order

to reflect unrealized gain or loss.

c.

Adjustment to Fair Market Value Upon

Transfer of Partnership Interest

If an existing or new Partner acquires an Interest, the Capital

Accounts of the Partners shall be adjusted to reflect fair market

value of all properties held by the Partnership.

d.

Adjustment for Constructive Termination of

Partnership

Capital Accounts shall be adjusted to reflect fair market value

of all properties held by the Partnership as required by Treasury

Regulation Section 1.704-1(b)(2)(iv)(b) upon the constructive

- 51 [*51]

termination of the Partnership as provided under Section

708 of the Internal Revenue Code.

*

*

*

*

*

*

*

Article Five

Allocations and Distributions

Section 5.01.

Allocation of Profits and Losses

The Partnership shall allocate all net profits and losses, which shall

include every item of income, deduction, depreciation, gain, loss, and

credit, for each calendar year of the Partnership, to each Partner pro

rata in accordance with the Partner's respective Partnership Interest

during the period over which such profits, losses and tax items were

accrued. The Partners shall be bound by the provisions of this Article

in reporting their shares of Partnership income and loss for income

tax purposes.

Any Partnership net losses that cannot be allocated to one or more of

the Partners without creating a negative Capital Account shall be

allocated to the remaining Partners in proportion to their capital

accounts until all Partners have a Capital Account of zero. To the

extent that net losses were specially allocated to Partners with

positive Capital Account balances during a period in which Partners

with negative Capital Account balances were not allocated any net

losses, subsequent net profits shall be first allocated to those Partners

who were specially allocated net losses, to the extent of such net

losses, and thereafter such net profits shall be allocated

proportionately among the Partners according to their respective

Partnership Interests.

Net losses allocated when all Partners have a Capital Account of zero

shall be allocated proportionately among the Partners according to

their respective Partnership Interests.

- 52 [*52] Allocation of net profits and net losses may be modified by

subsequent agreement to conform to adjustments made to the

Percentage Interests because of loans to the Partnership converted to

contributions to capital, any distributions of cash and any liquidating

distributions.

If the Percentage Interest of a Partner is not the same throughout a

given fiscal year, the General Partner shall determine the allocation of

net profits and net losses to the Partners taking into account the

Partners' varying Percentage Interests during the year. Such

determination shall be in conformity with the requirements of Code

Section 706(d) and Treasury Regulations promulgated thereunder.

*

*

*

Section 5.03.

*

*

*

*

Distributions to Partners

The primary intent of the Partnership is to retain partnership funds in

amounts determined in the sole and absolute discretion of the General

Partner to meet the reasonable needs of the business or investments of

the Partnership and other needs as provided in this agreement.

No Partner shall have the right to demand distributions of any

Partnership funds or assets. Distributions of funds or other

Partnership assets, when made, shall be made as follows:

a.

Distributions of Cash

The General Partner may make distributions of Partnership

cash to the Partners on pro rata or non-pro rata basis as the

General Partner, in its discretion, shall determine. Such

distributions shall only be made from the cash reserves that

exceed the reasonable working reserves of the Partnership as

determined in the sole discretion of the General Partner.

The General Partner, in its sole and absolute discretion, rather

than making an actual distribution of Partnership assets to the

- 53 [*53]

Partner, may elect to treat such distribution as a liability of the

Partnership and execute a note to the Partner payable to the

Partner at the termination of the Partnership. The note shall

bear interest for any given month based on the Internal

Revenue Service's published annual interest rate for taxpayer

overpayments in effect on the first day of such month.

Subject to this agreement and applicable law, distributions of

cash shall first come from cash from operations as permitted

under this agreement, then from cash from the liquidation of

the Partnership as provided in this agreement.

b.

Distributions in Kind

The General Partner, in its sole and absolute discretion, may

make distributions in kind of Partnership property to the

Partners. Prior to any such distribution in kind, the difference

between such established fair market value and the book value

of the property to be distributed shall be adjusted by a credit or

charge, as is appropriate, to the Partners' Interests. Upon the

distribution of such property, such adjusted value shall be

charged to the Interests of the Partners receiving such

distributions.

*

*

*

*

*

*

*

Article Six

Management of the Partnership

Section 6.01.

General Authority of the General Partner

Subject to the specific rights given the Limited Partners in this

agreement, all decisions respecting any matter affecting or arising out

of the conduct of the business of the Partnership shall be made by the

General Partner who shall have the exclusive right and full authority

to manage, conduct, and operate the Partnership business.

- 54 [*54] The General Partner shall manage and administer the Partnership

according to this agreement and to perform all duties prescribed for a

General Partner by the laws of the State of Illinois.

*

*

a.

*

*

*

*

*

Acts Requiring 85% Approval of Partnership

Interests

The consent of 85% of all the Partnership Interests shall be

required to do any of the following:

Prior to actual termination of the Partnership, sell substantially

all of the property in liquidation or cessation of the business;

Confess a judgment against the Partnership;

File or consent to filing a petition for or against the Partnership

under any federal or state bankruptcy, insolvency, or

reorgamzation act;

Exercise an election under Section 754 of the Code.

b.

Acts Requiring Unanimous Approval of the Partners

The General Partner shall not have the power, without the unanimous

written consent of all Partners, to do any of the following:

Except as otherwise provided, admit any substitute or

additional Limited or General Partner into the Partnership.

¹6The information that follows in the quoted text appears to have been

intended to be included under a heading labeled "Section 6.06" of the EGBLP

agreement, which presumably would have been followed by a summary narrative

description of the topic to which that section pertained. However, no heading

appears in that agreement before that information.

- 55 [*55]

Except as provided in Section 15.03, amend this agreement.

Change or reorganize the Partnership into any other legal form.

Engage in any act that would subject any Limited Partner to

liability as a General Partner.

Dissolve and liquidate the Partnership.

Distribute more than twenty-five percent (25%) of the fair

market value of the Partnership's assets in any tax year.

Redeem, liquidate, purchase or otherwise acquire the

Partnership Interest of any Partner.

Return the Capital Contribution of any Partner.

Contribute partnership property to a Charity.

Register any interest in this Partnership for an offering under

any federal or state securities law.

*

*

*

*

*

*

*

Article Seven

The General Partner

Section 7.01.

General Partner

Each Partner shall manage and administer the property of the

Partnership and * * * perform all other duties prescribed for a General

Partner by the laws of the State of Illinois. A General Partner will

have personal liability for the obligations of the Partnership except as

- 56 [*56] may be specifically limited by the laws of the State of Illinois or any

other jurisdiction in which the Partnership has qualified to do

business.

*

*

c.

*

*

*

*

*

Fiduciary Duty of General Partner

In carrying out the duties of the General Partner under this

agreement, the General Partner shall act as a fiduciary for the

Limited Partners and in its fiduciary capacity shall exercise the

required standard of conduct with respect to the interest of the

Limited Partners. Accordingly, the General Partner may not act

in any manner contrary to this agreement; commingle

Partnership funds; fail to disclose material facts involving

transfers to and from the Partnership; take a Partnership

opportunity for its own benefit; or derive a secret personal

profit from dealing with the Partnership. The General Partner

must account to the Partnership for any benefit, and hold as

trustee for the Partnership any profits derived by the General

Partner without the consent of the other Partners from any

transaction connected with the formation, conduct, or

liquidation of the Partnership, or from any use by it of

Partnership property.

*

*

*

*

*

*

*

*

*

Article Eight

The Limited Partners

*

*

Section 8.03.

*

*

*

No Right to Withdraw for a Limited Partner

No Limited Partner shall have the right to withdraw from the

Partnership or to receive a return of any of its contributions to the

Partnership until the Partnership is terminated and its affairs wound

- 57 [*57] up according to the Act and this agreement. A Limited Partner will

breach this agreement if the Limited Partner:

Attempts to withdraw from the Partnership,

Interferes in the management of the Partnership affairs,

Engages in conduct which results in the Partnership losing its

tax status as a partnership,

Engages in conduct that tends to bring the Partnership into

disrepute,

Owns a Partnership Interest that becomes subject to a charging

order, attachment, garnishment, or similar legal proceedings,

Breaches any confidentiality provisions of this agreement, or

Fails to discharge a legal duty to the Partnership.

A Limited Partner who is in breach of this agreement shall be liable to

the Partnership for damages caused by the breach. The Partnership

may offset for the damages against any distributions or return of

capital to the Limited Partner who has breached this agreement.

*

*

*

*

*

*

*

Article Nine

Books, Records, and Bank Accounts

Section 9.01.

Books and Records

The General Partner shall keep books of account with respect to the

operation of the Partnership. Such books shall be maintained at the

principal office of the Partnership, or at such other place as the

General Partner shall determine, and all Partners and their duly

authorized representatives shall, at all reasonable times, have access

- 58 [*58] to such books. The following records of the Partnership shall be kept

at its principal office where they shall be subject to inspection and

copying at the reasonable request and the expense of any Partner

during ordinary business hours:

A current list of the full name and last known business address

of each Partner, separately identifying the General Partners and

the Limited Partners (in alphabetical order);

A copy of the Certificate of Limited Partnership and all

certificates of amendment thereto, together with executed

copies of any powers of attorney pursuant to which any

certificate has been executed;

Copies of the Partnership's federal, state and local income tax

returns and reports, if any, for the three most recent years;

Copies of this agreement, as amended, and of any financial

statements of the Partnership for the three most recent years;

and

Any other documents required by law.

Section 9.02.

Accounting Basis and Fiscal Year

The books of account of the Partnership shall be kept on a method

authorized or required by the Code and as determined by the General

Partner, and shall be closed and balanced at the end of each

Partnership year. The fiscal year of the Partnership shall be the

- 59 [*59] period authorized or required by the Code, and as determined by the

General Partner.

*

*

*

Section 9.04.

*

*

*

*

Bank Accounts and Partnership Funds

All cash receipts shall be deposited in the Partnership's bank or other

depository accounts maintained by the General Partner.

a.

Accounts Are Property of the Partnership

All accounts used by or on behalf of the Partnership shall be

and remain the property of the Partnership, and shall be

received, held and disbursed by the General Partner for the

purposes specified in this agreement.

b.

No Commingling of Funds

Partnership funds shall not be commingled with other

funds.

*

*

*

*

*

*

*

Article Twelve

Transfer of Partnership Interests by a Limited Partner

Section 12.01.

Restrictions on Transfer

Except as provided in this Article, a Limited Partner is prohibited

from selling, assigning, transferring, mortgaging, pledging,

encumbering, hypothecating or otherwise disposing of (collectively

hereinafter referred to in this Article as "transferring" or "transfer", as

the case may be) all or any part of any Limited Partnership Interest

without the unanimous written consent of all the Partners.

- 60 [*60] The Partners shall have no obligation to give such consent, nor shall

they be subject to liability for withholding consent.

Section 12.02.

Transfer of Interest

Each Limited Partner hereby agrees not to sell, assign, transfer,

mortgage, pledge, encumber, hypothecate, or otherwise dispose of all

or any part of its Partnership Interest without first offering in writing

to sell such interest to the Partnership, and to all other Partners. If the

Partnership does not agree to purchase the Partnership Interest and

none of the other Partners agree to purchase the Partnership Interest,

then the Limited Partner who wants to sell, assign, transfer, mortgage,

pledge, encumber, hypothecate, or otherwise dispose of all or any part

of its Partnership Interest may offer it to a third party according to the

terms of this Section.

a.

Notice

The transferring Limited Partner shall give written notice to the

Partnership and to all other Partners that it desires to transfer its

Partnership Interest.

1.

Written Offer

The transferring Limited Partner shall attach to the

written notice any written offer of a prospective

purchaser to buy the interest whether or not such offer is

from an existing Partner. This notice shall be complete

in all details respecting the purchase price and tenus of

payment.

2.

Genuine Offer

The transferring Limited Partner shall certify in writing

that the offer is genuine and in all respects what it

purports to be.

- 61 [*61]

b.

Right to Purchase

The Partnership or the other Partners, as they shall agree, shall

have the right either to purchase the Limited Partnership

Interest in accordance with the terms of the written offer

(except as modified below) by written notice to the transferring

Limited Partner of its intent to purchase such interest, such

notice to be delivered to the transferring Limited Partner within

90 days following the date on which the transferring Limited

Partner's written offer is delivered to the Partnership at any

time during the 30 days following the date on which the written

offer is delivered to the Partnership.

If the Partnership and the other Partners cannot agree as to the

identity of the purchaser, the Partnership shall have the sole

right to purchase hereunder. If such notice of intent to

purchase is given, closing of the sale shall occur at the

principal office of the Partnership (as designated in this

agreement) within 120 days from the date of the notice of intent

to purchase.

Payment of the purchase price shall be made, at the option of

the Partnership or the purchasing Partners, as the case may be

(1) upon the payment terms of the written offer or (2) by

delivery of an unsecured promissory note made by the

Partnership or the purchasing Partners, as the case may be, for

the amount of the purchase price. If a promissory note is given,

such note shall bear interest at market rates for such notes on

the unpaid balance of principal, principal to be payable in ten

equal annual installments together with interest thereon, the

first such installment to be due and payable on the first

- 62 [*62]

anniversary of the note and subsequent installments to be

due and payable on each anniversary date thereafter until

the note is paid in full. The terms of the note shall

provide for prepayment of the note in whole or in part at

any time without penalty and shall provide for a 60 day

right to cure after notice of any default on payment

before acceleration of the unpaid balance of principal

and interest.

c.

Right to Sell to Third Party

In the event the Partnership and the Partners elect not to

purchase the selling Limited Partner's Partnership Interest, the

transferring Limited Partner shall be free to transfer its interest

to the prospective purchaser who made the genuine offer to the

transferring Limited Partner for the purchase price, terms and

conditions contained in the original genuine offer for a period

of 60 days from the expiration of the 90 day period referred to

in subsection b. above or the earlier date upon which the

General Partner notifies the transferring Limited Partner in

writing that the Partnership and the other Partners elect not to

purchase such interest. If the transferring Limited Partner's

Partnership Interest is not sold to the prospective purchaser

within the 60 day period, then the transferring Limited Partner

may not transfer the transferring Limited Partner's Partnership

Interest to the prospective purchaser without once again

offering the Partnership Interest as provided in this Section.

If the transfer of the Limited Partner's Partnership Interest is

not approved by all of the remaining Partners, then the transfer

shall be only the interest of an Assignee.

- 63 [*63] Section 12.03.

Transfer to Other Partners and Immediate

Family Members

A Limited Partner may transfer without the consent of any other

Partner all or any portion of his or her Partnership Interest to another

Partner. Such transferred interest shall constitute only the interest of

an Assignee unless all of the remaining Partners agree in writing that

the transferred interest shall constitute a Limited Partnership Interest.

A Limited Partner may transfer with the consent of the General

Partner, but without the consent of any other Limited Partner, all or

any part of his or her Partnership Interest to a member of the

Immediate Family of any Partner or to any Trust established primarily

for the benefit of any member of the Immediate Family of a Partner or

to a Charity or Charitable Trust. Each such transfer shall convey only

the interest of an Assignee unless all remaining partners agree in

writing that the transferred interest shall constitute a Limited

Partnership Interest.

a.

Assignments to and from Trusts

A Limited Partner may, with the consent of the General

Partner, but without the consent of any other Limited Partner,

transfer all or any part of its Partnership Interest to any Trust in

which the Partner or member of the Immediate Family of the

Partner is a beneficiary. A Limited Partner that is a Trust may

assign all or any part of its Partnership Interest to any

Immediate Family member of the Partner or trust established

for the benefit of such Immediate Family member. All such

assignments shall convey only the interest of an Assignee

- 64 [*64]

unless all remaining partners agree in writing that the

transferred interest shall constitute a Limited Partnership

Interest.

*

*

*

*

*

*

*

*

*

*

Article Fifteen

General Matters

*

*

*

Section 15.08.

*

General Matters

The following general matters of construction shall apply to the

provisions of this agreement:

*

*

c.

*

*

*

*

*

Notices

All notices required to be given in this agreement shall made in

writing by either:

Personally delivering notice to the party requiring it, and

securmg a written receipt, or

Mailing notice by certified United States mail, return receipt

requested, to the last known address of the party requiring

notice, or

Electronic transmission by facsimile to the party requiring

notice, provided that such party's receipt of same is confirmed

m writmg, or

Electronic mail transmission to the party requiring notice,

provided that such party's receipt of same is confirmed in

- 65 [*65]

writing or by electronic mail transmission back to the sending

party.

The effective date of the notice shall be the date of the written

receipt or the date of the return receipt, if received, or if not, the

date it would have normally been received via certified mail,

provided there is evidence of mailing.

*

*

*

*

*

*

*

Exhibit Al¹71

The Initial Partners and their Contributions to the Partnership

Partner's Name

Type of

Interest

Contribution¹

Value

% Interest

[Blank]

General

See Schedule A-1

[Blank]

[Blank]%

[Blank]

Limited

See Schedule A-2

[Blank]

[Blank]%

[Blank]

Limited

See Schedule A-3

[Blank]

[Blank]%

[Blank]

Limited

See Schedule A-4

[Blank]

[Blank]%

[Blank]

Limited

See Schedule A-5

[Blank]

[Blank]%

¹EGBLP's agreement does not include any documents titled Schedules A-1, A-

2, A-3, A-4, or A-5.

At no time after EGBLP was formed on October 13, 2003, was Exhibit A to

the EGBLP agreement completed.

¹7Exhibit A is attached to the EGBLP agreement.

- 66 [*66] Around six months after the formation of EGBLP, Mr. Madonia sent an

email dated April 2, 2004 (Mr. Madonia's April 2, 2004 email) to Craig

Plassmeyer and Mr. Holup. In Mr. Madonia's April 2, 2004 email, Mr. Madonia

recommended (1) that most of Mr. Beyer's securities be transferred to an account

in EGBLP's name and (2) that Mr. Beyer's cash be left in his personal account.

Mr. Madonia concluded in that email: "We need to establish to the IRS that

Edward has enough assets outside of * * * [EGBLP] to live on, and, given

Edward's modest lifestyle, I think 1.5M will do that."

At least as of April 2004, EGBLP had opened a brokerage account in its

name at Banc One (EGBLP's Banc One account). On April 15, 2004, Mr. Beyer

authorized and directed the transfer of certain assets from the 1999 Trust Banc

One account to EGBLP's Banc One account. On April 20, 2004, Mr. Beyer's

directive was implemented, and Banc One transferred (April 2004 transfer) the

securities held in the 1999 Trust Banc One account to EGBLP's Banc One

account, thereby funding EGBLP for the first time since its formation. (We shall

refer to assets transferred from the 1999 Trust Banc One account to EGBLP's

Banc One account as EGBLP's assets.)

After the April 2004 transfer, the following shares of stocks and of mutual

funds were held in EGBLP's Bane One account:

- 67 [*67]

Stock¹

Transocean Ltd.

Number

of Shares

1,161

Abbott Laboratories

800,000

Altria Group, Inc.

2,400

Arbitron, Inc.

800

Ceridian Corp.

4,000

Chevron Corp.

462

ConocoPhillips Co.

525

Constellation

Energy Group

1,800

Edison Int'l

2,000

IBM

4,000

Mirant Corp.

788

Nicor, Inc.

1,052

PPL Corp.

600

Pepco Holdings, Inc.

1,200

Schlumberger Ltd.

6,000

Southern Co.

1,984

Mutual Funds

Number

of Shares

Putnam Municipal

Income Fund

10,578.598

¹We took judicial notice of the official names of the stocks listed above.

- 68 [*68] On April 15, 2004, Abbott had over 1.5 billion shares of stock outstanding.

As of that date, the 800,000 shares of Abbott stock that Mr. Beyer contributed to

EGBLP as part of his April 2004 transfer represented less than one percent of

Abbott's total outstanding stock. EGBLP did not sell any of the 800,000 shares of

Abbott stock that it held before Mr. Beyer died.

After Mr. Beyer's April 2004 transfer to EGBLP, he retained certain assets,

in his name or in the name of the 1999 Trust. In addition, Mr. Beyer maintained at

least two bank accounts in his name at Banc One (Mr. Beyer's Banc One

accounts), a checking account and a so-called money market account. In July

2004, the name of the account holder of Mr. Beyer's Banc One accounts was

changed from Mr. Beyer to the Living Trust (Living Trust Banc One account).

On January 6, 2005, Craig Plassmeyer, acting on behalf of the general

partner of EGBLP (i.e., the Management Trust),¹ª requested that Banc One issue a

$20,000 check to be drawn on EGBLP's Bane One account to each of Bruce

Plassmeyer and himself.¹° On March 14, 2005, Craig Plassmeyer, again acting on

behalf of the general partner of EGBLP, requested that Banc One issue a $12,000

¹ªCraig Plassmeyer was one of the two co-trustees of the Management Trust.

¹9The record does not establish the purpose for which Craig Plassmeyer,

acting on behalf of the general partner of EGBLP, authorized the $20,000 payment

to each of Bruce Plassmeyer and himself.

- 69 [*69] check to be drawn on EGBLP's Bane One account to each of Bruce

Plassmeyer and himself.2°

Around a year after EGBLP was initially funded, Mr. Madonia raised again

certain additional estate planning strategies in an email dated March 21, 2005

(March 21, 2005 email) to Craig Plassmeyer.2¹ Those strategies involved

(1) EGBLP's use of a restricted management account and (2) Mr. Beyer's

formation of an irrevocable trust and the Living Trust's sale to that newly formed

trust of its 99-percent limited partnership interest in EGBLP (99-percent limited

partnership interest) in exchange for that irrevocable trust's promissory note.

Mr. Beyer decided to implement the first step of one of the estate planning

strategies described in Mr. Madonia's March 21, 2005 email. On April 30, 2005,

Mr. Beyer signed a trust agreement (Beyer Irrevocable Trust agreement) that

2°The record does not establish the purpose for which Craig Plassmeyer,

acting on behalf of the general partner of EGBLP, authorized the $12,000 payment

to each of Bruce Plassmeyer and himself.

2¹Mr. Madonia discussed with Mr. Beyer and/or Craig Plassmeyer some

time before September 2, 2003, at least the second estate planning strategy

described in his March 21, 2005 email to Craig Plassmeyer. The record contains a

draft of an irrevocable trust agreement dated September 2, 2003, and another draft

of an irrevocable trust agreement dated October 13, 2003, the date on which

(1) Mr. Beyer formed the Living Trust and the Management Trust and (2) he,

acting on behalf of the limited partner (i.e., the Living Trust), and Craig Plassmeyer and Bruce Plassmeyer, acting on behalf of the general partner (i.e., the

Management Trust), formed EGBLP.

- 70 [*70] Madonia & Associates had prepared and that he named the Edward G. Beyer

Irrevocable Trust (Beyer Irrevocable Trust) and thereby formed an irrevocable

trust. In the Beyer Irrevocable Trust agreement, Mr. Beyer named Craig

Plassmeyer and Bruce Plassmeyer as co-trustees of the Beyer Irrevocable Trust.

The Beyer Irrevocable Trust agreement provided in pertinent part:

Article One

Establishing My Trust

*

*

Section 1.03

*

*

*

*

*

An Irrevocable Trust

This Trust is irrevocable, and I cannot alter, amend, revoke, or

terminate it in any way.

Section 1.04

Transfers to the Trust

I transfer to the Trustee the property listed in Schedule A, attached to

this agreement, to be held on the terms and conditions set forth in this

instrument. I retain no right, title or interest in the income or

principal of this trust or any other incident of ownership in any trust

property.

By execution of this agreement, my Trustee accepts and agrees to

hold the trust property described on Schedule A. All property

transferred to my trust after the date of this agreement must be

acceptable to my Trustee. My Trustee may refuse to accept any

property. My Trustee shall hold, administer and dispose of all trust

- 71 [*71] property accepted by my Trustee for the benefit of my beneficiaries in

accordance with the terms of this agreement.

*

*

Section 1.06

*

*

*

*

*

My Beneficiaries

The beneficiaries of my trust are Craig Plassmeyer, Bruce Plassmeyer

and Doris Kaminski.

*

*

*

*

*

*

*

*

*

Article Six

Trust Administration

*

*

Section 6.21

*

*

*

Grantor Trust Provisions

While I am alive, I intend that this trust be a grantor trust for federal

income tax purposes. I understand that the power granted in this

Section will cause the income of my trust to be taxed to me under

certain provisions of Section 671 - 677 of the Internal Revenue Code.

To carry out this intent, the following provisions shall apply in the

administration of my trust.

(a)

Power of Substitution

During my lifetime, Anthony J. Madonia or a successor

Nonadverse Individual, named under subsection (d) of this

Section shall have the right to direct that the Trustee transfer

any of the trust property to me in exchange for property of

equivalent value.

Notwithstanding the foregoing, in the event that the Trust owns

an interest in any closely held corporation, partnership or

limited liability company, and if the interest carried with it any

- 72 [*72]

voting rights, then the trustee shall have no power to transfer

any of the said closely held business interests in exchange for

assets of equivalent value.

(b)

Power to Add Charities as Beneficiaries

During my lifetime, Anthony J. Madonia or a successor

Nonadverse Individual, named under subsection (d) of this

Section shall have the power to add to the beneficiaries of this

trust by designating any charitable organization described in

Section 170 of the Internal Revenue Code, the contributions to

which are deductible under Sections 170(c), 642(c), and

2522(a) of the Internal Revenue Code, as an additional

beneficiary of the net income of the trust. Upon designation of

an additional charitable beneficiary, my Trustee may, but is not

required to, distribute the net income to the additional

charitable beneficiary, in such amounts and proportions as my

Trustee may determine. This addition shall be effected by a

writing retained with records of the trust, designating the date

of the addition of the new beneficiary.

(c)

Power to Enable Grantor to Borrow

During my lifetime, Anthony J. Madonia or a successor Nonadverse Individual, named under subsection (d) of this Section

shall have the power to grant to me the power to borrow

income or principal of my trust without adequate interest or

without adequate security, but not both.

The power to borrow income or principal of my trust without

adequate interest or without adequate security shall be granted

by Anthony J. Madonia or a successor Nonadverse Individual,

named under subsection (d) of this Section in writing. The

writing shall specify the terms upon which I may borrow and

shall also specify the amount of income or principal that I may

borrow upon those terms.

- 73 [*73]

(d)

Nonadverse Individual

The initial "Nonadverse Individual" is Anthony J. Madonia.

Anthony J. Madonia or any successor Nonadverse Individual

has the right to appoint a successor Nonadverse Individual by

an instrument in writing. The appointment of a successor

Nonadverse Individual shall take effect upon the death,

resignation or incapacity of the appointing Nonadverse

Individual. The appointment may be changed or revoked until

it takes effect. In the event the Nonadverse Individual fails to

make such appointment, then upon the death, resignation or

incapacity of the Nonadverse Individual, my Trustee shall have

the right to appoint a successor Nonadverse Individual by an

instrument in writing. Any individual so appointed shall be a

person who is not an adverse party within the meaning of

Section 672(a) of the Internal Revenue Code and shall not be

related or subordinate to me within the meaning of Section

672(c).

(e)

Nonfiduciary Capacity

The powers described in this Section are exercisable solely in a

nonfiduciary capacity without approval or consent of any

person acting in a fiduciary capacity. No fiduciary duty

imposed upon the Nonadverse Anthony J. Madonia or a

successor Nonadverse Individual is exonerated from any and

all liability to the beneficiaries to this trust that might otherwise

accrue as a result of exercising any of the powers granted under

this Article in a non-fiduciary capacity. My Trustee is

exonerated from any and all liability to the beneficiaries of this

trust that might otherwise accrue as a result of my Trustee

following the direction of a trust protector exercising any

power granted under this Article in a non-fiduciary capacity.

My Trustee may, but shall not be required to expend any or all

of the trust income and principal to pay premiums on life

insurance policies on my life.

- 74 [*74]

(f)

Estate Tax Impact

The powers described in this Section shall not be exercisable to

the extent that the exercise of these powers would reasonably

be expected to cause the assets of the trust or any portion

thereof to be included in my gross estate for federal estate tax

purposes.

(g)

Waiver

Any power contained in this Article may be waived or

renounced by the holder of said power. Unless some other date

or time is specified, such waiver or renouncement shall be

effective when notice if [sic] waiver or renouncement is given

in writing to a Trustee of this Trust.

*

*

*

*

*

*

*

Schedule A 221

Ten Dollars Cash

On April 30, 2005, Craig Plassmeyer and Bruce Plassmeyer, acting on

behalf of the general partner of EGBLP, implemented the other estate planning

strategy described in Mr. Madonia's March 21, 2005 email when they entered into

an agreement with the Capital Trust Co. of Delaware (Capital Trust) that was titled

"Capital Trust Investment Account Agreement" (investment agreement). Pursuant

to that agreement, the duration of which was four years, EGBLP was required to

deposit into a restricted management account (RMA) assets equal in value to 75

22Schedule A is attached to the Beyer Irrevocable Trust agreement.

- 75 [*75] percent of the fair market value of its assets. Nothing in the investment

agreement prohibited the sale of assets that the RMA was to hold pursuant to that

agreement.

The investment agreement provided in pertinent part:

WHEREAS, the Depositor [EGBLP] intends to deposit certain

property, such as cash, stocks, bonds, securities and other property, in

an Account [RMA] with the Agent * * * [Capital Trust], which

property is listed on Exhibit A, attached hereto and made a part of this

Agreement;

WHEREAS, the assets in the Account (which include the

income, dividends and interest therefrom and the reinvestment

thereof) are to be held for the Depositor, and are to be managed,

invested and distributed in accordance with the terms of this

Agreement by the Agent;

WHEREAS, the Depositor desires to obtain long-term

investment results on the Account's assets, and the Depositor and the

Agent are entering into this Agreement in order to relieve the Agent

of the pressure to produce superior short-term investment results

possibly at the expense of greater long-term investment results.

*

*

*

*

*

*

*

1.

Investment Adviser. The Investment Adviser may be a person

or entity nominated by the Depositor pursuant to an Investment

Adviser Nomination (in substantially the same form as the sample

attached hereto) and hired by the Agent. If an Investment Adviser has

not been nominated by the Depositor and the Agent has not engaged

an Investment Adviser for investment review and management

pursuant to a written agreement, the Agent may provide investment

review and management of the Account, taking such action as the

Agent, in its discretion, deems best with respect to the investment and

- 76 [*76] reinvestment of the property held therein as though the Agent were

the owner of such property. The Agent's authority extends, though it

is not limited to, the sale and purchase of securities, the sale or

exercise of warrants, subscription right and other rights of similar

nature, the voting of all proxies issued and participation in corporate

reorganizations. It is understood that the property in the Account will

be invested in accordance with any statement of investment

objectives by the Depositor on Exhibit B, attached hereto and made a

part of this Agreement.

If the Depositor nominates an Investment Adviser in writing

delivered to the Agent, the Agent may engage and use the investment

adviser selected by the Depositor for any period of time including the

entire term of this Agreement, subject to removal and replacement by

the Independent Adviser as hereinafter provided in Section 2 below.

*

*

*

*

*

*

*

3.

Income. With the exception of expenses associated with the

Account, which shall be paid from the income earned by the Account,

the dividends, interest and other income earned on property held in

the Account shall be distributed out to the Depositor in accordance

with this Agreement.

4.

Distribution of Account Principal During Term of

Agreement. Until the Termination Date (as hereinafter defined), no

distributions of Account principal shall be made from the Account by

the Agent to the Depositor or to any other person or entity for any

purpose.

*

*

*

*

*

*

*

6.

Transfers. The Depositor may not Transfer all or any part of

the Account, except as provided in this Section. Any purported

Transfer of an Account not in conformance with this Section [6] shall

be null, void and of no effect. The recipient of a validly transferred

- 77 [*77] account shall automatically be bound by the provisions of this

Agreement as applicable to such Account.

As used herein, Transfer means, as a noun, a transaction by which the

Depositor assigns all or any part of the Account or any interest therein

to another person or entity, and includes a sale, assignment, gift,

bequest, pledge, encumbrance, hypothecation, mortgage, exchange,

distribution from a trust, or any other disposition. As used herein,

Transfer means, as a verb, to voluntarily or involuntarily enter into a

transaction described above as a Transfer.

The Depositor may Transfer all or any part of the Account after

requesting and receiving the written consent of the Agent to make

such Transfer, provided that the transferee is a "Permitted Transferee"

(as hereinafter defined) and such Permitted Transferee executes a

counterpart of this Agreement agreeing to all the terms of this

Agreement and any other document reasonably requested by the

Agent in furtherance of the purpose of this Agreement. The Agent's

consent to a Transfer will not be unreasonably withheld.

A "Permitted Transferee" means any one or more of the following:

(a) his ancestors, and his descendants; (b) one or more organizations

described in Sections 170(c), 2055(a), and 2522(a) of the Code; (c)

the decedent's estate or guardianship estate of any of the persons

listed in (a), and (d) a trust the terms of which provide that the

Account is held, at the time of the Transfer of the Account to the

trust, exclusively for the benefit of one or more of the persons listed

in (a); provided, however, for purposes of (c) and (d) above, the

remaindermen of a trust shall not be considered in determining

whether a trust is exclusively for the benefit of one or more of the

persons listed in (a).

Any purported Transfer which is to a person or organization other

than a Permitted Transferee or that is not accompanied by an executed

counterpart of this Agreement shall be null, void and of no effect.

Upon the valid Transfer of an Account, the recipient of such Account

- 78 [*78] shall be considered the Depositor of such Account for purposes of

this Agreement.

If the Depositor Transfers only a portion of the Account to another

person or entity, the Agent shall divide the Account into two

Accounts: one of which shall consist of the portion of the Account

intended to be Transferred to such other person or entity (the New

Account), and the other of which shall consist of the balance of the

Account (the Original Account). The Agent shall have sole discretion

to determine which assets held by the Original Account will be

allocated to the New Account. This Agreement shall apply separately

to each New Account created hereunder.

If a valid Transfer results in an Account having a value less than

$250,000, the Agent may, in its discretion, terminate such Account

and distribute the assets held in such Account as provided under

Section 8 of this Agreement.

*

*

*

*

*

*

*

8.

Terms of Agreement. The agency hereby created shall

terminate on the fourth (4th) anniversary of the date hereof

(Termination Date); provided, however that the Termination Date for

an Account may be changed to a later date (but not an earlier date) at

any time upon written consent of both the Depositor of such Account

and the Agent. * * *

Upon the Termination Date of an Account, the Agent shall pay over

and deliver the assets held in such account to the Depositor (or to the

Depositor's legal representatives), or upon the Depositor's orders

make such other disposition of the assets held in the Account as the

Depositor may direct.

*

*

*

*

*

*

*

10. Fees. The agent shall receive reasonable compensation for all

services rendered by the Agent in performance of its duties in

- 79 [*79] accordance with the Agent's regularly adopted schedule of charges in

effect and applicable at the time of the performance of such services.

The Depositor acknowledges that a current schedule of the Agent's

charges has been given to the Depositor and further acknowledges

that the amount of the Agent's compensation shall be charged to the

Account at regular intervals during each accounting year. The

schedule is as follows:

Fifty-five (55) basis points of the balance of the account.

Exhibit B attached to the investment agreement, which was titled

"RESTRICTED MANAGEMENT ACCOUNT AGREEMENT STATEMENT OF

INVESTMENT OBJECTIVES", provided: "The partnership portfolio currently

has a significant built in capital gain. Care should be taken in the management of

this portfolio to avoid creating capital gains tax to the partners."

On June 30, 2005, Craig Plassmeyer, acting on behalf of the general partner

of EGBLP, directed that 5,363 shares of Putnam Tax-Free High Yield Fund and

the following shares of stock (RMA assets) be transferred from EGBLP's Banc

One account to an account at Chase in the name of the RMA (RMA Chase

account):

- 80 [*80]

Stock

Transocean Ltd.

Number

of Shares

870

Abbott Laboratories

600,000

Altria Group, Inc.

1,800

Arbitron, Inc.

600

Ceridian Corp.

3,000

Chevron Corp.

693

ConocoPhillips Co.

788

Constellation

Energy Group

1,350

Edison Int'l

1,500

Hospira, Inc.

60,000

IBM

3,000

Mirant Corp.

591

Nicor, Inc.

789

PPL Corp.

450

Pepco Holdings, Inc.

900

Schlumberger Ltd.

4,500

Southern Co.

1,488

On July 11, 2005, the directive of the general partner of EGBLP was

implemented and the RMA assets were transferred from the EGBLP Banc One

- 81 [*81] account to the RMA Chase account. The remaining assets in the EGBLP

Banc One account were transferred to another account at Chase in the name of

EGBLP (EGBLP Chase account).

On December 30, 2005, after the general partner of EGBLP entered into the

investment agreement, the Living Trust and the Beyer Irrevocable Trust

implemented the second step of one of the estate planning strategies described in

Mr. Madonia's March 21, 2005 email. On that date, they entered into an

agreement titled "PURCHASE and SALE AGREEMENT [of] LIMITED

PARTNERSHIP OWNERSHIP INTERESTS" (Living Trust transfer agreement).

Pursuant to that agreement, the Living Trust was to, and did on December 30,

2005, transfer to the Beyer Irrevocable Trust the 99-percent limited partnership

interest in exchange for that trust's promissory note in the face amount of

$20,866,725 (Beyer Irrevocable Trust promissory note).23 (We shall sometimes

refer to the Living Trust's transfer of the 99-percent limited partnership interest to

the Beyer Irrevocable Trust as the Living Trust 2005 transfer.) The principal

amount of the Beyer Irrevocable Trust promissory note was payable to the Living

23The Living Trust and the Beyer Irrevocable Trust agreed to the Living

Trust's transfer of the 99-percent limited partnership interest in exchange for the

Beyer Irrevocable Trust promissory note in the face amount of $20,866,725 on the

basis of a valuation of that interest as of November 30, 2005, that Iron Horse

Valuation Group performed.

- 82 [*82] Trust on December 30, 2005.24 The Beyer Irrevocable Trust promissory

note bore interest at a rate of 4.45 percent, compounded annually.25

Pursuant to the Living Trust transfer agreement, the Beyer Irrevocable Trust

promissory note was secured by a security agreement (Beyer Irrevocable Trust

security agreement) that was attached as Exhibit B to that agreement. The Beyer

Irrevocable Trust security agreement provided in pertinent part:

In order to secure the payment of the principal of and interest at a rate

of 4.45% on, and all other sums payable under, the Twenty Million

Eight Hundred Sixty-Six Thousand Seventy Hundred Twenty Five

00/100 ($20,866,725) Dollars, principal amount promissory note (the

"Debtor's Note") of the Debtor, payable to the order of the Secured

Party in accordance with the terms of the Debtor Note, the Debtor

hereby grants to the Secured Party a security interest in all accounts

and accounts receivable, all machinery, equipment, office furniture

and office equipment of the Debtor, and all other tangible personal

property, whether now owned or hereafter acquired, including

24The limited partner of EGBLP (i.e., the Living Trust) and the general

partner of EGBLP (i.e., the Management Trust) consented to the Living Trust's

transfer of the 99-percent limited partnership interest to the Beyer Irrevocable

Trust.

25As detailed in the Living Trust transfer agreement, the Beyer Irrevocable

Trust was required to make certain minimum payments of interest on the Beyer

Irrevocable Trust promissory note at interest rates and on certain dates specified in

that agreement, although it did have certain options regarding those minimum

payments.

- 83 [*83] without limitation, all accessions to and substitutions for the same (all

of said property being hereinafter called the "Collateral").

*

*

*

*

*

*

*

As used in this Agreement, the term "accounts receivable" includes

all rights to payment, all sums of money or other proceeds due or

becoming due thereon, all instruments pertaining thereto and all

guaranties and security therefore.

When the Beyer Irrevocable Trust issued the Beyer Irrevocable Trust

promissory note to the Living trust on December 30, 2005, the former had only

$10 of assets.

After the Living Trust 2005 transfer, Mr. Beyer knew that the Living Trust

was no longer a partner in EGBLP and that consequently the Living Trust was no

longer entitled to any distributions that EGBLP decided to make to its partners

pursuant to the EGBLP agreement. Mr. Beyer also knew after the Living Trust

2005 transfer that the Living Trust's total assets consisted of the Beyer Irrevocable

Trust promissory note in the face amount of $20,866,725 and the Living Trust

Banc One account, which around one month after the Living Trust 2005 transfer

contained approximately $600,000.

After the Living Trust 2005 transfer, Mr. Beyer did not contribute additional

assets to the Living Trust. Nor did he amend Mr. Beyer's will or the Living Trust

- 84 [*84] agreement to change the Living Trust's obligation to pay any death taxes

that would be due after he died.

On April 15, 2006, Mr. Beyer signed a check drawn on the Living Trust

Banc One account in the amount of $659,660 ($659,660 check) that was payable

to the Internal Revenue Service (IRS). The memorandum line on that check

stated: "Gift Tax". On April 17, 2006, Mr. Beyer filed Form 709, United States

Gift (and Generation-Skipping Transfer) Tax Return (Form 709), for his taxable

year 2005 (2005 gift tax return), in which he showed total gift tax of $659,660.

On the same date, when the Living Trust was not a partner in EGBLP and

consequently was not entitled to receive any distributions that EGBLP decided to

make to its partners pursuant to the EGBLP agreement, $659,660 was transferred

from EGBLP's Chase account to the Living Trust Banc One account. Mr. Beyer

used the $659,660 check to pay the gift tax due shown in his 2005 gift tax return.

In an email dated April 26, 2006, from Craig Plassmeyer to Monique

Tayyab (Ms. Tayyab), an attorney with Madonia & Associates, Craig Plassmeyer

stated in pertinent part: "[A]ll these trusts are getting confusing. Explain to me

how to record this interest payment. Which specific accounts * * * [should] show

the movement of cash[?]"

- 85 [*85] In an email dated April 26, 2006, from Ms. Tayyab to Craig Plassmeyer,

Ms. Tayyab stated in pertinent part:

The Limited Partnership is now owned by the [Beyer] Irrevocable

Trust, instead of the Living Trust. Therefore, the interest payment to

the Living Trust for the purchase of the Limited Partnership Units

should come from the Limited Partnership Account.

You will show a transfer from the Limited Partnership Account * * *

to the Living Trust Account.

After the Living Trust 2005 transfer on December 30, 2005, and while the

Beyer Irrevocable Trust owned a 99-percent interest in EGBLP and consequently

was entitled to receive distributions from EGBLP that it decided to make to its

partners pursuant to the EGBLP agreement, EGBLP made certain transfers from

the EGBLP Chase account to the Living Trust Banc One account on behalf of the

Beyer Irrevocable Trust. The respective amounts of those transfers and the

respective dates on which EGBLP made them are:

- 86 [*86]

Date

Amount

6/12/2006

¹$116,071.16

9/8/2006

116,071.16

12/14/2006

116,071.16

2/26/2007

116,071.16

5/18/2007

116,071.16

10/9/2007

116,071.16

12/7/2007

116,071.16

2/21/2008

116,071.16

¹In an email dated September 29, 2007, from Margareth Smid (Ms. Smid) to

Craig Plassmeyer, Ms. Smid stated that on June 12, 2006, a transfer of

$117,375.34, instead of $116,071.16, had been made from the EGBLP Chase

account to the Living Trust Banc One account. In the same email, Ms. Smid stated

that to correct that error Chase transferred the difference of $1,304.18 from the

Living Trust Banc One account to the EGBLP Chase account.

Each of the transfers of $116,071.16 (listed above) was an interest payment on the

Beyer Irrevocable Trust promissory note that EGBLP made to the Living Trust on

behalf of its limited partner, the Beyer Irrevocable Trust.

During January and February 2008, after Mr. Beyer's death on May 19,

2007, EGBLP sold 1,789 shares of Putnam Tax-Free High Yield Fund and the

following shares of stock:

- 87 [*87]

Stock

Transocean Ltd.

Abbott Laboratories

Number

of Shares

203

100,000

Altria Group, Inc.

600

Arbitron, Inc.

200

Chevron Corp.

231

ConocoPhillips Co.

262

Constellation

Energy Group

450

Edison Int'l

500

IBM

1,000

Kraft Foods

Group, Inc.

415

Mirant Corp.

17

Nicor, Inc.

263

PPL Corp.

300

Pepco Holdings, Inc.

300

Schlumberger Ltd.

3,000

Hospira, Inc.

20,000

On February 12, 2008, EGBLP transferred $250,000 from the EGBLP

Chase account to the Living Trust Banc One account. On the same date, Craig

Plassmeyer, as executor of decedent's estate, signed two checks, each for $75,000,

- 88 [*88] that were drawn on the EGBLP Chase account and that were payable to

Craig Plassmeyer and Bruce Plassmeyer, respectively. Each of those checks stated

on the memorandum line: "Administration Fee".

As discussed in more detail below, around February 14, 2008, Craig

Plassmeyer, as executor of decedent's estate, filed Form 706, United States Estate

(and Generation-Skipping Transfer) Tax Return (Form 706), (estate tax return).

That return showed net estate tax of $9,345,334. On February 18, 2008, Craig

Plassmeyer signed a check drawn on the EGBLP Chase account in the amount of

$9,345,334 that was payable to the IRS ($9,345,334 check). The memorandum

line of that check stated: "IRS 706". Decedent's estate used the $9,345,334 check

to pay the estate tax due shown in the estate tax return. On February 19, 2008, at a

time the Living Trust was not a partner in EGBLP and consequently was not

entitled to receive any distributions that EGBLP decided to make to its partners

pursuant to the EGBLP agreement, $9,945,000 was transferred from the EGBLP

Chase account to the Living Trust Banc One account.

The Capital Trust investment agreement terminated after the four-year term

of that agreement expired. As a result, in August 2009, assets held in the RMA

Chase account were transferred from that account to the EGBLP Chase account.

- 89 [*89] Section 529 Accounts and Certain Other Gifts

On December 28, 2001, Mr. Beyer established a so-called section 529

account26 for each of his following relatives: Wendy Aldrich, Mildred Beyer,

Molly Buck, Joan Buck-Plassmeyer, Rebecca Buck, Craig Plassmeyer, Bruce

Plassmeyer, Mark Plassmeyer, Ruth Plassmeyer, and Lucille Wilkinson. (We shall

refer collectively to the section 529 accounts that Mr. Beyer established in 2001 as

the 2001 section 529 accounts.) On the same date, Mr. Beyer contributed $10,000

to each of the 2001 section 529 accounts. On January 3, 2002, Mr. Beyer

contributed an additional $55,000 to each of the 2001 section 529 accounts.

In a facsimile dated December 18, 2004 (Craig Plassmeyer's December 18,

2004 facsimile) from Craig Plassmeyer to Mr. Holup, Craig Plassmeyer instructed

Mr. Holup to establish additional section 529 accounts for Mr. Beyer. In Craig

Plassmeyer's December 18, 2004 facsimile, Craig Plassmeyer stated:

529 PLANS TO BE SET-UP [sic] WITH FUNDING OF EACH FOR

$11,000 IN DECEMBER 2004. THEN, 5 YEAR FORWARD GIFTING OF $55,000 EACH IN JANUARY 2005.

TOTAL IN DECEMBER = $88,000; TOTAL IN JANUARY =

$440,000 FOR A GRAND TOTAL OF $528,000. ALL CASH

26A section 529 account is an account that qualifies as a "qualified tuition

plan" under sec. 529.

- 90 [*90] NEEDS TO COME OUT OF THE LIVING TRUST ACCOUNT

NOT THE FAMILY LIMITED PARTNERSHIP.

On December 21, 2004, Mr. Beyer established a section 529 account for

each of his following relatives: Sean Fantetti, Robert Fantetti, Scott Kaminski,

Richard Kaminski, Jean Fantetti, Heather Fantetti, Tara Fantetti, and Doris

Kaminski. (We shall refer collectively to the section 529 accounts that Mr. Beyer

established in 2004 as the 2004 section 529 accounts.) On the same date, Mr.

Beyer contributed $11,000 to each of the 2004 section 529 accounts. On January

6, 2005, Mr. Beyer contributed an additional $55,000 to each of the 2004 section

529 accounts. Decedent died within five years after he had made the transfers to

the 2004 section 529 accounts.

On May 20, 2005, Mr. Beyer made a gift of $1,250,000 to each of Craig

Plassmeyer and Bruce Plassmeyer. Mr. Beyer used certain assets held in the

Living Trust Banc One account to fund each of those gifts.

EGBLP's Partnership Returns

EGBLP did not file Form 1065, U.S. Return of Partnership Income (Form

1065), for its taxable year 2003. That was because EGBLP had not yet been

funded.

- 91 [*91] At times not established by the record, EGBLP filed respective Forms 1065

for taxable years 2004 (2004 EGBLP partnership return), 2005 (2005 EGBLP

partnership return), 2006 (2006 EGBLP partnership return), 2007 (2007 EGBLP

partnership return), and 2008 (2008 EGBLP partnership return). (We shall

sometimes refer collectively to the 2004 EGBLP partnership return, the 2005

EGBLP partnership return, the 2006 EGBLP partnership return, the 2007 EGBLP

partnership return, and the 2008 EGBLP partnership return as EGBLP's original

partnership returns.)

EGBLP attached to the 2004 EGBLP partnership return two Schedules K-1,

Partner's Share of Income, Deductions, Credits, etc. (Schedule K-1). In one of

those schedules, EGBLP showed that the Living Trust had a 99-percent

partnership ownership interest at the end of taxable year 2004 but did not show the

Living Trust's partnership ownership interest at the beginning of that year. In the

other Schedule K-1, EGBLP showed that the Management Trust had a one-percent

partnership ownership interest at the end of taxable year 2004 but did not show the

Living Trust's partnership ownership interest at the beginning of that year.

In the 2004 EGBLP partnership return, EGBLP showed the following with

respect to the capital accounts of its partners: (1) with respect to the Living Trust,

a beginning capital account balance of zero, capital contributions of $40,956,813,

- 92 [*92] a current-year increase of $430,842, and an ending capital account balance

of $41,387,655; and (2) with respect to the Management Trust, a beginning capital

account balance of zero, capital contributions of $413,705, a current-year increase

of $4,352, and an ending capital account balance of $418,057.

EGBLP attached to the 2005 EGBLP partnership return two Schedules K-1.

In one of those schedules, EGBLP showed that the Living Trust had a 99-percent

partnership ownership interest at the end of taxable year 2005 and a 24.75-percent

partnership ownership interest at the beginning of that year. In the other Schedule

K-1, EGBLP showed that the Management Trust had a one-percent partnership

ownership interest at the end of taxable year 2005 and a one-percent partnership

ownership interest at the beginning of that year. The 2005 EGBLP partnership

return did not include Schedule K-1 for the Beyer Irrevocable Trust, which

acquired the 99-percent limited partnership interest during EGBLP's taxable year

2005.

In the 2005 EGBLP partnership return, EGBLP showed the following with

respect to the capital accounts of its partners: (1) with respect to the Living Trust,

a beginning capital account balance of $41,387,655, a current-year increase of

$464,313, withdrawals and distributions of $32,993,796, and an ending capital

account balance of $8,858,172; and (2) with respect to the Management Trust, a

- 93 [*93] beginning capital account balance of $418,057, a current-year increase of

$8,513, withdrawals and distributions of $214,000, and an ending capital account

balance of $212,570.

EGBLP attached to the 2006 EGBLP partnership return three Schedules

K-1. In one of those schedules, EGBLP showed that the Living Trust had a 24.75percent partnership ownership interest at the end of taxable year 2006 and a 24.75percent partnership ownership interest at the beginning of that year. In another

Schedule K-1, EGBLP showed that the Management Trust had a one-percent

partnership ownership interest at the end of taxable year 2006 and a one-percent

partnership ownership interest at the beginning of that year. In the third Schedule

K-1, EGBLP showed that the Beyer Irrevocable Trust had a 74.25-percent

partnership ownership interest at the end of taxable year 2006 and a 74.25-percent

partnership ownership interest at the beginning of that year.

In the 2006 EGBLP partnership return, EGBLP showed the following with

respect to the capital accounts of its partners: (1) with respect to the Living Trust,

a beginning capital account balance of $8,608,928, a current-year increase of

$198,006, and an ending capital account balance of $8,806,934; (2) with respect to

the Management Trust, a beginning capital account balance of $207,392, a

current-year increase of $8,001, and an ending capital account balance of

- 94 [*94] $215,393; and (3) with respect to the Beyer Irrevocable Trust, a beginning

capital account balance of $33,502,640, a current-year increase of $594,022, and

an ending capital account balance of $34,096,662.

EGBLP attached to the 2007 EGBLP partnership return four Schedules K-1.

In one of those schedules, EGBLP showed that the Management Trust had a onepercent partnership ownership interest at the end of taxable year 2007 and a onepercent partnership ownership interest at the beginning of that year. In another

Schedule K-1, EGBLP showed that the Beyer Irrevocable Trust had a 99-percent

partnership ownership interest at the end of taxable year 2007 and a 99-percent

partnership ownership interest at the beginning of that year. In another Schedule

K-1, EGBLP did not show that the Management Trust had a partnership ownership

interest at the end of taxable year 2007 and did not show the Management Trust's

partnership ownership interest at the beginning of that year. In the fourth

Schedule K-1, EGBLP did not show the Beyer Irrevocable Trust's partnership

ownership interest at the end of taxable year 2007 and did not show the Beyer

Irrevocable Trust's partnership ownership interest at the beginning of that year.

The 2007 EGBLP partnership return contained two inconsistent Schedules

K-1 for each of the Management Trust and the Beyer Irrevocable Trust. With

respect to the Management Trust, one of those schedules showed a beginning

- 95 [*95] capital account balance of $214,526, a current-year decrease of $214,526,

and an ending capital account balance of zero. The other Schedule K-1 showed

with respect to the Management Trust a beginning capital account balance of zero,

a current-year increase of $224,177, and an ending capital account balance of

$224,177. With respect to the Beyer Irrevocable Trust, one of the Schedules K-1

showed a beginning capital account balance of $42,904,463, a current-year

decrease of $42,904,463, and an ending capital account balance of zero. The other

Schedule K-1 showed with respect to the Beyer Irrevocable Trust a beginning

capital account balance of zero, a current-year increase of $43,859,836, and an

ending capital account balance of $43,859,836.

EGBLP attached to the 2008 EGBLP partnership return two Schedules K-1.

In one of those schedules, EGBLP showed that the Management Trust had a onepercent partnership ownership interest at the end of taxable year 2008 and a onepercent partnership ownership interest at the beginning of that year. In the other

Schedule K-1, EGBLP showed that the Beyer Irrevocable Trust had a 99-percent

partnership ownership interest at the end of taxable year 2008 and a 99-percent

partnership ownership interest at the beginning of that year.

In the 2008 EGBLP partnership return, EGBLP showed the following with

respect to the capital accounts of its partners: (1) with respect to the Management

- 96 [*96] Trust, a beginning capital account balance of $7,852,265, a current-year

decrease of $26,018, and an ending capital account balance of $7,826,247; and (2)

with respect to the Beyer Irrevocable Trust, a beginning capital account balance of

$43,859,836, a current-year decrease of $2,575,934, and an ending capital account

balance of $41,283,902.

In the 2008 EGBLP partnership return, EGBLP showed long-term capital

gains for taxable year 2008 from the sale of securities during that taxable year. In

that return, EGBLP showed that the securities sold during taxable year 2008 had

been acquired by EGBLP on November 19, 2007, and had a basis equal to the

value of the securities on that date.

In 2008, EGBLP filed amended Forms 1065 for its taxable years 2005 (2005

EGBLP amended partnership return) and 2006 (2006 EGBLP amended

partnership return).27 (We shall sometimes refer collectively to the 2005 EGBLP

amended partnership return and 2006 EGBLP amended partnership return as

EGBLP's amended partnership returns filed in 2008.)

27The record does not establish the date(s) on which EGBLP filed the 2005

EGBLP amended partnership return and the 2006 EGBLP amended partnership

return. The date appearing in each of those returns next to the respective

signatures of the general partner and the return preparer is February 5, 2008.

- 97 [*97] EGBLP attached to the 2005 EGBLP amended partnership return three

Schedules K-1. In one of those schedules, EGBLP did not show the Living

Trust's ownership interest at the end of taxable year 2005 but showed that the

Living Trust had a 99-percent partnership ownership interest at the beginning of

that year. In another Schedule K-1, EGBLP showed that the Management Trust

had a one-percent partnership ownership interest at the end of taxable year 2005

and a one-percent partnership ownership interest at the beginning of that year. In

the third Schedule K-1, EGBLP showed that the Beyer Irrevocable Trust had a 99percent partnership ownership interest at the end of taxable year 2005 but did not

show the Beyer Irrevocable Trust's partnership ownership interest at the beginning

of that year.

In the 2005 EGBLP amended partnership return, EGBLP showed the

following with respect to the capital accounts of its partners: (1) with respect to

the Living Trust, a beginning capital account balance of $41,387,655, capital

contributions of ($41,768,415),28 a current-year increase of $380,760, and an

ending capital account balance of zero; (2) with respect to the Management Trust,

a beginning capital account balance of $418,057, capital contributions of

28The record does not establish why the 2005 EGBLP amended partnership

return showed that the Living Trust had negative capital contributions.

- 98 [*98] ($4,793),2° a current-year increase of $7,261, withdrawals and distributions

of $214,000, and an ending capital account balance of $206,525; and (3) with

respect to the Beyer Irrevocable Trust, a beginning capital account balance of zero,

capital contributions of $41,773,208, a current-year increase of $339,227, and an

ending capital account balance of $42,112,435.

EGBLP attached to the 2006 EGBLP amended partnership return two

Schedules K-1. In one of those schedules, EGBLP showed that the Management

Trust had a one-percent partnership ownership interest at the end of taxable year

2006 and a one-percent partnership ownership interest at the beginning of that

year. In the other Schedule K-1, EGBLP showed that the Beyer Irrevocable Trust

had a 99-percent partnership ownership interest at the end of taxable year 2006

and a 99-percent partnership ownership interest at the beginning of that year.

In the 2006 EGBLP amended partnership return, EGBLP showed the

following with respect to the capital accounts of its partners: (1) with respect to

the Management Trust, a beginning capital account balance of $206,525, a

current-year increase of $8,001, and an ending capital account balance of

$214,526; and (2) with respect to the Beyer Irrevocable Trust, a beginning capital

2°The record does not establish why the 2005 EGBLP amended partnership

tax return showed that the Management Trust had negative capital contributions.

- 99 [*99] account balance of $42,112,435 a current-year increase of $792,028, and an

ending capital account balance of $42,904,463.

In 2009, EGBLP filed amended Forms 1065 for its taxable years 2004 (2004

EGBLP amended partnership return), 2005 (2005 EGBLP second amended

partnership return), 2006 (2006 EGBLP second amended partnership return), 2007

(2007 EGBLP amended partnership return), and 2008 (2008 EGBLP amended

partnership return).3° (We shall sometimes refer collectively to the 2004 EGBLP

amended partnership return, 2005 EGBLP second amended partnership return, the

2006 EGBLP second amended partnership return, 2007 EGBLP amended

partnership return, and 2008 EGBLP amended partnership return as EGBLP's

amended partnership returns filed in 2009).

Attached to each of EGBLP's amended partnership returns filed in 2009

was a document titled "EXPLANATION STATEMENT". That statement

indicated as follows:

The Capital Accounts in the above-referenced return of partnership

income reflected a percentage ownership of one percent (1%) by the

3°The record does not establish the date on which EGBLP filed the 2004

EGBLP amended partnership return, 2005 EGBLP second amended partnership

return, 2006 EGBLP second amended partnership return, 2007 EGBLP amended

partnership return, or 2008 EGBLP amended partnership return. The date

appearing in each of those returns next to the respective signatures of the general

partner and the return preparer is December 9, 2009.

- 100 [*100] General Partner and ninety-nine percent (99%) by the Limited Partners.

Non-pro rata distributions in each of the partnership's years impacted

ownership percentage over time, though corresponding adjustments

were not reflected in the Partnership's Forms 1065. In November of

2009, a catch-up proportionate distribution in the amount of

$31,920.28 was made to the 1% General Partner, bringing the

ownership interests reflected in the Partners' capital accounts back to

99% and 1%. Given the de minimus [sic] nature of the proportionate

cumulative distribution, in conjunction with the magnitude of

accounting necessary to adjust ownership interests at each

distribution date, to bring them back to a 99/1 ratio on November 5,

2009, the General Partner of the Partnership has, in this amended

return and in all others, maintained the ownership interests at 99%

and 1%.

EGBLP attached to the 2004 EGBLP amended partnership return two

Schedules K-1. In one of those schedules, EGBLP showed that the Living Trust

had a 99-percent partnership ownership interest at the end of taxable year 2004 but

did not show the Living Trust's partnership ownership percentage at the beginning

of that year. In the other Schedule K-1, EGBLP showed that the Management

Trust had a one-percent partnership ownership interest at the end of taxable year

2004 but did not show the Management Trust's partnership ownership interest at

the beginning of that year.

In the 2004 EGBLP amended partnership return, EGBLP showed the

following with respect to the capital accounts of its partners: (1) with respect to

the Living Trust, a beginning capital account balance of zero, capital contributions

- 101 [*101] of $36,261,552, a current-year increase of $430,842, withdrawals or

distributions of $218,340, and an ending capital account balance of $36,474,054

and (2) with respect to the Management Trust, a beginning capital account balance

of zero, capital contributions of $366,278 a current-year increase of $4,352, and an

ending capital account balance of $370,630.

EGBLP attached to the 2005 EGBLP second amended partnership return

three Schedules K-1. In one of those schedules, EGBLP did not show the Living

Trust's partnership ownership interest at the end of taxable year 2005 but showed

that the Living Trust had a 99-percent partnership ownership interest at the

beginning of that year. In another Schedule K-1, EGBLP showed that the

Management Trust had a one-percent partnership ownership interest at the end of

taxable year 2005 and a one-percent partnership ownership interest at the

beginning of that year. In the third Schedule K-1, EGBLP showed that the Beyer

Irrevocable Trust had a 99-percent partnership ownership interest at the end of

taxable year 2005 but did not show the Beyer Irrevocable Trust's partnership

ownership interest at the beginning of that year.

In the 2005 EGBLP second amended partnership return, EGBLP showed the

following with respect to the capital accounts of its partners: (1) with respect to

the Living Trust, a beginning capital account balance of $36,474,054, a current-

- 102 [*102] year increase of $713,620, withdrawals or distributions of $37,187,674,

and an ending capital account balance of zero; (2) with respect to the Management

Trust, a beginning capital account balance of $370,630, a current-year increase of

$7,242, and an ending capital account balance of $377,872; and (3) with respect to

the Beyer Irrevocable Trust, a beginning capital account balance of zero, a currentyear increase of $3,909, withdrawals or distributions of $36,773,674, and an

ending capital account balance of $36,777,583 (not a negative ending capital

account balance).

EGBLP attached to the 2006 EGBLP second amended partnership return

two Schedules K-1. In one of those schedules, EGBLP showed that the

Management Trust had a one-percent partnership ownership interest at the end of

taxable year 2006 and a one-percent partnership ownership interest at the

beginning of that year. In the other Schedule K-1, EGBLP showed that the Beyer

Irrevocable Trust had a 99-percent partnership ownership interest at the end of

taxable year 2006 and a 99-percent partnership ownership interest at the beginning

of that year.

In the 2006 EGBLP second amended partnership return, EGBLP showed the

following with respect to the capital accounts of its partners: (1) with respect to

the Management Trust, a beginning capital account balance of $377,872, a current

- 103 [*103] year increase of $8,003, and an ending capital account balance of

$385,875; and (2) with respect to the Beyer Irrevocable Trust, a beginning capital

account balance of $36,777,583 (not a negative beginning capital account

balance), a current-year increase of $792,314, withdrawals or distributions of

$1,007,873, and an ending capital account balance of $36,562,024 (not a negative

ending capital account balance).

EGBLP attached to the 2007 EGBLP amended partnership return two

Schedules K-1. In one of those schedules, EGBLP showed that the Management

Trust had a one-percent partnership ownership interest at the end of taxable year

2007 and a one-percent partnership ownership interest at the beginning of that

year. In the other Schedule K-1, EGBLP showed that the Beyer Irrevocable Trust

had a 99-percent partnership ownership interest at the end of taxable year 2007

and a 99-percent partnership ownership interest at the beginning of that year.

In the 2007 EGBLP amended partnership return, EGBLP showed the

following with respect to the capital accounts of its partners: (1) with respect to

the Management Trust, a beginning capital account balance of $385,875, a

current-year increase of $219,679, and an ending capital account balance of

$605,554 and (2) with respect to the Beyer Irrevocable Trust, a beginning capital

account balance of $36,562,024 (not a negative beginning capital account

- 104 [*104] balance), a current-year increase of $741,980, withdrawals or distributions

of $464,285, and an ending capital account balance of $36,839,719 (not a negative

ending capital account balance).

EGBLP attached to the 2008 EGBLP amended partnership return two

Schedules K-1. In one of those schedules, EGBLP showed that the Management

Trust had a one-percent partnership ownership interest at the end of taxable year

2008 and a one-percent partnership ownership interest at the beginning of that

year. In the other Schedule K-1, EGBLP showed that the Beyer Irrevocable Trust

had a 99-percent partnership ownership interest at the end of taxable year 2008

and a 99-percent partnership ownership interest at the beginning of that year.

In the 2008 EGBLP amended partnership return, EGBLP showed the

following with respect to the capital accounts of its partners: (1) with respect to

the Management Trust, a beginning capital account balance of $605,554, a

current-year increase of $110,591, and an ending capital account balance of

$716,145, and (2) with respect to the Beyer Irrevocable Trust, a beginning capital

account balance of $37,931,678 (not a negative beginning capital account

balance), a current-year increase of $10,948,397, withdrawals or distributions of

$486,071, and an ending capital account balance of $48,394,004 (not a negative

ending capital account balance).

- 105 [*105]

In the 2008 EGBLP amended partnership return, EGBLP showed

long-term capital gains for taxable year 2008 from the sale of securities during that

taxable year. In that return, EGBLP showed that the securities sold during that

taxable year had been acquired by EGBLP on November 19, 2007, and had a basis

that was equal to the value of those securities on the alternate valuation date that

Mr. Beyer's estate had elected.

All Forms 1065, original and amended, that EGBLP filed were signed by

Mr. Madonia as preparer and by Craig Plassmeyer, acting on behalf of the general

partner of EGBLP.

At a time not established by the record, Madonia & Associates prepared, or

maintained, the following documents with respect to EGBLP: (1) purported cash

summaries for each of the taxable years from 2004 through 2008; (2) purported

working trial balances for each of the taxable years from 2004 through 2008; and

(3) purported adjusted journal entries for each of the taxable years 2006 and 2008.

Decedent's Income Tax Returns

At times not established by the record, Mr. Beyer filed Forms 1040, U.S.

Individual Income Tax Return (income tax return), for his taxable years 2003,

2004, 2005, 2006 (2006 income tax return), and 2007 (2007 income tax return).

- 106 [*106]

At all relevant times, including after Mr. Beyer, acting on behalf of

the limited partner, and Craig Plassmeyer and Bruce Plassmeyer, acting on behalf

of the general partner, formed EGBLP, Mr. Beyer continued to report in his

income tax returns all of the income from all assets that he had transferred from

the 1999 Trust Banc One account to the EGBLP Banc One account.

Mr. Beyer did not report any interest income with respect to the Beyer

Irrevocable Trust promissory note in his 2006 income tax return or his 2007

mcome tax return.

Mr. Beyer's Gift Tax Returns

Mr. Beyer did not file Form 709 for his taxable year 2002 and did not pay

any gift tax with respect to that taxable year.

Line B of Schedule A, Computation of Taxable Gifts (Schedule A), attached

to Form 709 for gifts made during calendar year 2002 contained a box and stated:

"Check here if you elect under section 529(c)(2)(B) to treat any transfers made

this year to a qualified state tuition program as made ratably over a 5-year period

beginning this year." The instructions for Form 709 for gifts made during

calendar year 2002 (instructions for Form 709) stated:

If your total 2002 contributions to a qualified state tuition program on

behalf of any individual beneficiary exceed $11,000, then for

purposes of the annual exclusion you may elect under section

- 107 [*107] 529(c)(2)(B) to treat up to $55,000 of your total contributions as

having been made ratably over a 5-year period beginning in 2002.

You must report in 2002 the entire amount of the contribution

in excess of $55,000.

You make the election by checking the box on line B at the top

of Schedule A. The election must be made for the calendar year in

which the contribution is made. Also attach an explanation that

includes the following:

042 The total amount contributed per individual beneficiary;

042 The amount for which the election is being made; and

042 The name of the individual for whom the contribution was

made.

If you make this election, report only 1/5 (20%) of your total

contributions (up to $55,000) on the 2002 Form 709. You must then

report an additional 20% of the total in each of the succeeding 4

years. * * * If, in any of the 4 years following the election, you are

not required to file Form 709 other than to report that year's portion

of the election, you do not need to file or otherwise report that year's

portion.

As discussed above, on April 17, 2006, Mr. Beyer timely filed his 2005 gift

tax return, in which he showed total gift tax due of $659,660. Mr. Beyer included

Schedule A (2005 Form 709 Schedule A) as part of his 2005 gift tax return. In the

2005 Form 709 Schedule A, Mr. Beyer showed that he had made cash gifts of

$1,250,000 to each of Craig Plassmeyer and Bruce Plassmeyer. In the 2005 Form

709 Schedule A, Mr. Beyer applied the section 2503(b) annual exclusion amount

- 108 [*108] of $11,000 to his cash gift of $1,250,000 to each of Craig Plassmeyer and

Bruce Plassmeyer.

Mr. Beyer did not show in the 2005 Form 709 Schedule A or anywhere else

in his 2005 gift tax return the $55,000 contribution to each of eight 2004 section

529 accounts that he had made during his taxable year 2005. Line B of Schedule

A attached to Form 709 for gifts made during calendar year 2005 contained a box

and stated: "Check here if you elect under section 529(c)(2)(B) to treat any

transfers made this year to a qualified tuition program as made ratably over a

5-year period beginning this year." The instructions for Form 709 for gifts made

during calendar year 2005 stated:

If in 2005, you contributed more than $11,000 to a qualified tuition

program (QTP) on behalf of any one person, you may elect to treat up

to $55,000 of the contribution for that person as if you had made it

ratably over a 5-year period. The election allows you to apply the

annual exclusion to a portion of the contribution in each of the 5

years, beginning in 2005. You can make this election for as many

separate people as you made QTP contributions.

You can only apply the election to a maximum of $55,000.

You must report in 2005 all of your QTP contributions for any single

person that exceed $55,000 (in addition to any other gifts you made to

that person).

For each of the 5 years, you report in Part 1 of Schedule A, 1/5

(20%) of the amount for which you made the election. In column E

of Part 1 (Schedule A), list the date of the gift as the calendar year for

- 109 [*109] which you are deemed to have made the gift. Do not list the year of

contribution for subsequent years.

However, if in any of the last 4 years of the election, you did

not make any other gifts that would require you to file a Form 709,

you do not need to file Form 709 to report that year's portion of the

election amount.

*

*

*

*

*

*

*

You make the election by checking the box on line B at the top

of Schedule A. The election must be made for the calendar year in

which the contribution is made. Also attach an explanation that

includes the following:

042 The total amount contributed per individual beneficiary,

042 The amount for which the election is being made, and

042 The name of the individual for whom the contribution was

made.

The box at line B of the Schedule A attached to Mr. Beyer's 2005 gift tax

return was left blank.

On January 24, 2011, pursuant to section 6020(b), respondent prepared a

substitute for Mr. Beyer's gift tax return for his taxable year 2002. Decedent's

estate did not pay the gift tax due shown in that gift tax return.

Estate Tax Return

As indicated previously, around February 14, 2008, Craig Plassmeyer, as

executor of decedent's estate, filed Form 706 on behalf of decedent (estate tax

return). That return showed net estate tax of $9,345,334. That tax was paid by a

- 110 [*110] check that Craig Plassmeyer signed on February 18, 2008, that was drawn

on the EGBLP Chase account, that was payable to the IRS, and that was in the

amount of $9,345,334. In the estate tax return, decedent's estate elected to use the

alternate valuation date of November 19, 2007.

Decedent's estate included with the estate tax return Schedule G, Transfers

During Decedent's Life (Form 706 Schedule G). Decedent's estate showed in that

schedule total assets of $24,838,479. Decedent's estate included in the value of

Mr. Beyer's gross estate the values of the respective assets that the Living Trust

and Management Trust held on the date of his death. That was because Mr. Beyer

had reserved for himself the power during his lifetime to amend and revoke each

of those trusts. Thus, in Form 706 Schedule G, decedent's estate reported, inter

alia, the value of the Beyer Irrevocable Trust promissory note that the Living Trust

held and the one-percent general partnership interest in EGBLP that the

Management Trust held.

In the estate tax return, decedent's estate included in the value of the gross

estate a portion of the total contributions that Mr. Beyer had made to each of the

- 111 [*111] 2004 section 529 accounts and noted that the value "represents [the]

unexpired period of the special 5-year averaging election."3¹

Notice of Deficiency

Sometime before March 27, 2009, respondent began an examination of the

estate tax return. As a result of respondent's examination, on February 8, 2011,

respondent timely issued to decedent's estate a notice of deficiency (notice). In

that notice, respondent determined a deficiency in estate tax with respect to

decedent's estate.

Respondent also determined in the notice a deficiency in, and additions

under section 6651(a)(1) and (2) to, Mr. Beyer's gift tax for his taxable year

200232 and a deficiency in, and an accuracy-related penalty under section 6662(a)

on, Mr. Beyer's gift tax for his taxable year 2005.

OPINION

Decedent's estate bears the burden of establishing that the determinations in

the notice that remain at issue are erroneous, see Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933), unless that burden shifts to respondent under section

3¹As note above, Mr. Beyer died within five years after he made the

contributions to each of the 2004 section 529 accounts.

32Respondent had prepared a substitute for gift tax return for Mr. Beyer's

taxable year 2002 that showed gift tax of $174,300.

-112[*112] 7491(a). The parties disagree over whether the burden of proof in this case

shifts to respondent under that section.

In order for the burden of proof to shift to the Commissioner of Internal

Revenue (Commissioner) under section 7491(a), the taxpayer must (1) provide

credible evidence with respect to any factual issue relevant to determining the tax

liability of the taxpayer and (2) comply with the applicable requirements of section

7491(a)(2). Although section 7491(a) does not define the term "credible

evidence", the legislative history of the statute does. The legislative history of

section 7491(a) provides in pertinent part:

Credible evidence is the quality of evidence which, after critical

analysis, the court would find sufficient upon which to base a

decision on the issue if no contrary evidence were submitted (without

regard to the judicial presumption of IRS correctness). * * * The

introduction of evidence will not meet this standard if the court is not

convinced that it is worthy of belief. * * *

H.R. Conf. Rept. No. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-995.

As discussed below, there are factual issues relevant to determining the

estate tax liability of decedent's estate and the gift tax liability of decedent for

each of his taxable years 2002 and 2005 with respect to which we conclude

decedent's estate did not introduce credible evidence within the meaning of

section 7491(a)(1). On the record before us, we find that the burden of proof does

- 113 [*113] not shift to respondent under section 7491(a) with respect to any respective

factual issues that pertain to the estate tax liability of decedent's estate and the gift

tax liability of decedent for each of his taxable years 2002 and 2005.

Estate Tax

Section 2036(a)

It is respondent's position that the value of assets that Mr. Beyer transferred,

through the 1999 Trust, to EGBLP and held by EGBLP on the date of Mr. Beyer's

death is includible in the value of his gross estate under section 2036(a).33

Decedent's estate disagrees.

33Respondent relies alternatively on secs. 2035(a) and 2038(a)(1) in support

of respondent's position that the value of assets that Mr. Beyer transferred,

through the 1999 Trust, to EGBLP and held by EGBLP on the date of Mr. Beyer's

death is includible in the value of his gross estate. The parties proceed on the

assumption that EGBLP should be treated as a partnership for purposes of

analyzing the issues under secs. 2035(a), 2036(a), and 2038(a)(1). We have

reservations regarding their assumption because a partnership for Federal tax

purposes requires at least two members. See sec. 761(a); sec. 301.7701-2(c)(1),

Proced. & Admin. Regs. Although the Living Trust and the Management Trust

were named the limited partner and the general partner, respectively, of EGBLP,

Mr. Beyer was considered to be the owner of the Living Trust and the

Management Trust for purposes of secs. 671-679. Nonetheless, we proceed on the

parties' assumption that EGBLP is a partnership for Federal tax purposes.

- 114 [*114]

In order to resolve the parties' dispute under section 2036(a),34 we

must consider the following factual issues with respect to Mr. Beyer's transfer of

property to EGBLP:

(1) Was there a transfer of property by Mr. Beyer?

(2) If there was a transfer of property by Mr. Beyer, was such a transfer not

a bona fide sale for an adequate and full consideration in money or money's

worth?

(3) If there was a transfer of property by Mr. Beyer that was not a bona fide

sale for an adequate and full consideration in money or money's worth, (a) did Mr.

34Sec. 2036(a) provides:

SEC. 2036. TRANSFERS WITH RETAINED LIFE ESTATE.

(a) General Rule.--The value of the gross estate shall

include the value of all property to the extent of any interest

therein of which the decedent has at any time made a transfer

(except in case of a bona fide sale for an adequate and full

consideration in money or money's worth), by trust or

otherwise, under which he has retained for his life or for any

period not ascertainable without reference to his death or for

any period which does not in fact end before his death-(1) the possession or enjoyment of, or the right to the

income from, the property, or

(2) the right, either alone or in conjunction with any

person, to designate the persons who shall possess or enjoy the

property or the income therefrom.

- 115 [*115] Beyer retain the possession or the enjoyment of, or the right to the income

from, the property transferred within the meaning of section 2036(a)(1) or (b) did

he retain, either alone or in conjunction with any person, the right to designate the

persons who shall possess or enjoy the property transferred or the income

therefrom within the meaning of section 2036(a)(2)?

Transfer of Property by Mr. Beyer

Decedent's estate acknowledges that Mr. Beyer, through the 1999 Trust,35

transferred property to EGBLP on April 20, 2004. (Mr. Beyer's April 2004

transfer to EGBLP). In the light of that acknowledgment by decedent's estate, we

find that Mr. Beyer's April 2004 transfer to EBGLP was a transfer of property

under section 2036(a).

Transfer Other Than a Bona Fide Sale for an Adequate

and Full Consideration in Money or Money's Worth

Section 2036(a) excepts from its application any transfer of property

otherwise subject to that section which is a "bona fide sale for an adequate and full

consideration in money or money's worth" (sometimes, bona fide sale exception).

The foregoing exception is limited to a transfer of property where the transferor

35For convenience, we shall generally refer only to Mr. Beyer when

discussing hereinafter Mr. Beyer's transfer, through the 1999 Trust, to EGBLP on

April 20, 2004.

- 116 [*116] "has received benefit in full consideration in a genuine arm's length

transaction". Estate of Goetchius v. Commissioner, 17 T.C. 495, 503 (1951).

We have held that the bona fide sale exception in section 2036(a) is

satisfied in the context of a family limited partnership

where the record establishes the existence of a legitimate and

significant nontax reason for creating the family limited partnership,

and the transferors received partnership interests proportionate to the

value of the property transferred. See, e.g., Estate of Stone v.

Commissioner, * * * [T.C. Memo. 2003-309]. The objective

evidence must indicate that the nontax reason was a signifi

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