Daniel C. Noonan - Page 3

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               On or about April 15, 1989, petitioner filed for an                    
          extension to file the 1988 Federal income tax return together               
          with a payment of $469.  On the extension form, petitioner                  
          indicated that he would claim joint filing status.                          
               On October 5, 1990, after substantial negotiation,                     
          petitioner and Mrs. Noonan signed an Indemnification and Hold               
          Harmless Agreement (the indemnification agreement).  The                    
          indemnification agreement recited that the Noonans had not filed            
          tax returns for the years 1986, 1987, and 1989, and that they               
          agreed to file joint tax returns for 1986 and 1987 reflecting               
          refunds due.  According to the indemnification agreement,                   
          petitioner agreed to accept sole financial responsibility for all           
          taxes, interest, and penalties connected with the 1988 Federal              
          return in exchange for Mrs. Noonan's agreement to sign a 1988               
          Federal tax return claiming joint filing status.  Petitioner and            
          Mrs. Noonan further agreed that a 1988 California State income              
          tax return (the California return) would be filed after execution           
          of the indemnification agreement, but that a 1988 Federal return            
          would not be filed at that time because petitioner was                      
          financially unable to pay the indicated liability.  Petitioner              
          and Mrs. Noonan further agreed that Mrs. Noonan would sign a                
          completed 1988 joint Federal return which would be retained by              
          Hill, Farrer, & Burrill (the law firm) until petitioner notified            
          the law firm that he was able to pay the entire tax liability.              

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