Jean-Remy Facq and Jennifer Huff-Facq - Page 7

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          and Quist and help resolve his precarious financial situation.              
          The loans from Mr. Jain and InfoSpace were secured by Mr. Facq’s            
          options and, in the case of the loan from Mr. Jain, Mr. Facq’s              
          InfoSpace shares.                                                           
               Despite all the margin calls, Mr. Facq continued to purchase           
          items using the account.  Because the margin account lacked                 
          sufficient assets, Mr. Facq had to accept a $5 million loan from            
          Mr. Jain to satisfy a contract he made to purchase a home on                
          Mercer Island, Washington.                                                  
               Mr. Facq also wanted to keep his shares in InfoSpace in case           
          the stock rebounded.  He tried to borrow from InfoSpace to pay              
          down the margin loans so that the shares in his margin account              
          would not be sold to satisfy his debt.  This was to no avail,               
          however.  Mr. Facq transferred his account to Salomon Smith                 
          Barney in September 2000.  In 2001, Salomon Smith Barney was                
          forced to sell all the shares of InfoSpace that Mr. Facq owned to           
          meet the margin requirements.                                               
          Petitioners’ Return                                                         
               Petitioners timely filed their Federal income tax return for           
          2000.  Petitioners reported $46,414,655 of income for the year              
          and tax due of $18,341,070, while the W-2, Wage and Tax                     
          Statement, from InfoSpace reported that Mr. Facq received                   
          $63,327,671.77 of income in 2000.  Petitioners attached a Form              
          8275, Disclosure Statement, to their return that cited section              
          1.83-3(k), Income Tax Regs., to explain the approximate $16.9               
          million difference between the amount of gross income shown on              





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