Ingo H. Jensen - Page 3

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               The letter stated that the proposed inclusion of                       
          cancellation of debt income was the result of third-party                   
          information, specifically referencing the Form 1099-C received              
          from Guild.  The letter set forth in detail the procedures for              
          petitioner to follow should he choose to contest the proposed               
          changes.  The letter also stated that petitioner’s response was             
          required by February 12, 1998, and that if petitioner failed to             
          respond by February 12, 1998, respondent would presume that the             
          proposed changes were correct and issue petitioner a notice of              
               Petitioner retained the law firm of Brouse McDowell on March           
          27, 1998.  No response to the 30-day letter, however, was                   
          submitted to respondent.  On April 22, 1998, respondent issued a            
          notice of deficiency to petitioner based on the changes proposed            
          in the 30–day letter.  On July 23, 1998, Jeffrey W. Leonard (Mr.            
          Leonard), an attorney with Brouse McDowell, filed a petition on             
          behalf of petitioner with this Court.  The petition alleged that            
          petitioner was insolvent at the time the debt was canceled and,             
          therefore, no income was recognized.  See sec. 108.                         
               Petitioner never requested an Appeals Office conference                
          before the filing of his petition with the Tax Court.  When Mr.             
          Leonard was offered a conference by Appeals Officer John Mazur              
          during a telephone conversation on September 17, 1998, the offer            
          was declined.  Instead, Mr. Leonard promised the Appeals officer            

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