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The sublease agreement, dated November 14, 1989, provided
that petitioner could occupy the new apartment rent free for 3
years. The fair rental value of the new apartment was $900 per
month. Petitioner occupied the new apartment during the entire
3-year lease period which began December 1, 1989, and terminated
November 30, 1992. The sublease agreement makes no reference to
the surrender agreement or the $322,500 payment by Seawall
pursuant to the surrender agreement. Petitioner and Seawall's
authorized representatives signed the sublease agreement.
Spyropoulos explained the terms of the surrender agreement
and the sublease agreement to petitioner. Petitioner never asked
Spyropoulos about the tax consequences of the surrender agreement
or the sublease agreement, and Spyropoulos never provided
petitioner with any tax advice.
Petitioner surrendered rooms 103 and 141 to Seawall, and
petitioner moved into the new apartment. In a letter dated
November 17, 1989, petitioner instructed Seawall to disburse the
$297,500 payable under the surrender agreement by certified
checks as follows: $100,000 to Mrs. Stotis, $100,000 to Maria,
and $97,500 to Evanthia.
Seawall issued three checks in accordance with petitioner's
instructions. Seawall's agent hand delivered the three checks to
petitioner. Prior to Seawall's agent relinquishing control of
the checks, petitioner acknowledged the receipt of each check by
signing the back.
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