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an "Agreement to Release and Hold Harmless" (Release Agreement)
that was to be executed by petitioner, William, and Lakeview.
The Release Agreement was subsequently presented to William in
late 1992 or in 1993. The Release Agreement certified that the
parties had reviewed the Lakeview amended returns discussed above
and contained a representation by the parties that they would
file their individual State and Federal income tax returns
(including any amended returns) in a manner consistent with
Lakeview's amended returns. The Release Agreement further
contained an acknowledgment by William of an indebtedness of
$131,895 to Lakeview, Lakeview's forgiveness of the debt in 1992,
and William's acknowledgment of receipt of an IRS Form 1099
reporting nonemployee compensation in that amount from Lakeview
for 1992. Finally, the Release Agreement certified that the
parties had reviewed another IRS Form 1099 reporting income of
$75,000 paid to William by Lakeview in 1992, which was described
as "for consulting services rendered and in consideration for
this Agreement". The Release Agreement was not executed.
Notwithstanding the failure to execute the Release
Agreement, Lakeview issued a Form 1099 for 1992 reporting income
of $131,895 paid to William Stark, on which the payment was
characterized as "Nonemployee compensation". On its 1992 return,
Lakeview deducted $134,1164 as "forgiveness of debt". At no
4 The record is silent regarding the difference between the
$131,895 figure used both as the debt for which William Stark's
acknowledgment was sought in the Release Agreement and as the
(continued...)
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