Robert K. & Dawn E. Lowry - Page 3

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               The following is a summary of the relevant facts that do not           
          appear to be in dispute.  They are stated solely for purposes of            
          deciding the pending motions and are not findings of fact for               
          this case.  Fed. R. Civ. P. 52(a); Rule 1(a); Sundstrand Corp. v.           
          Commissioner, supra.                                                        
               During the years in issue, petitioner was a 50-percent                 
          partner in a partnership known as Lowry Wells Investments (the              
          partnership).  The partnership owned a building located at 17862            
          Fitch Street, Irvine, California (Fitch Property), that was                 
          subject to a mortgage reflecting a loan from Aid Association of             
          Lutherans (AAL).                                                            
               On December 15, 1993, the partnership as borrower and AAL as           
          lender entered into a “Covenant Not to Sue”.  The covenant stated           
          in pertinent part:                                                          
                    In consideration of the hereinafter granted                       
               release from [the partnership] * * *, the conveyance of                
               the real property located at 17862 Fitch Street, and                   
               other good and valuable consideration, * * * [AAL]                     
               hereby covenants not to sue Borrower * * * in                          
               connection with * * * those mortgage loans made by                     
               Lender to Borrower * * *.  [Emphasis added.]                           
          The release referred to above was contained within the covenant             
          and stated that the partnership released all claims it might have           
          had against AAL in connection with the loans.  On May 27, 1994,             
          escrow closed on the Fitch property, and title to the Fitch                 
          property passed from the partnership to AAL.                                

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