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The parties settled the lawsuit without trial on May 24,
1993. Petitioner agreed to pay $155,000. He borrowed money to
make this payment, and gave his house and securities as
collateral.
Petitioner was never criminally charged for any conduct
relating to Activewear.
G. Petitioner's Use of the O'Key Property in 1993-94
In 1992, Jackson filed for bankruptcy protection under
Chapter 11. The O'Keys stopped paying Jackson. Petitioner told
the O'Keys that they must make all the payments that were due or
move out. In August 1993, they moved out and petitioner moved
in. He lived there rent-free until August 1994 when Jackson's
bankruptcy proceedings ended and the bank foreclosed on the
house. The Resolution Trust Corp. sold the house at auction for
$152,000.
H. Petitioner's Income Tax Returns and Respondent's
Determination
Petitioner received an extension of time to file his 1990
income tax return until October 15, 1991. Petitioner filed his
income tax returns for 1990 and 1991 on August 26, 1992. He
filed married filing separately.
On his income tax return for 1990, petitioner attached a
disclosure statement which said:
2. The taxpayer made unauthorized loans from
Activewear corporate funds in the amount of $2,070,900,
less repayments of $1,752,900 = $318,000 balance due.
The corporation is pursuing the taxpayer with charges
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