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working at the engineering firm, petitioner took a leave of
absence to manage a blueprinting company, Southern Blueprint Co.
He acquired that company while it was in bankruptcy by borrowing
money to pay some of the company's creditors. Petitioner
operated the company for less than a year and then sold the
company for a profit.
Petitioner had also been involved in a number of other
residential and commercial real estate development projects. One
of the real estate ventures was Fairfield Communities, Inc., in
which petitioner became involved in 1966. Petitioner provided
engineering and planning services to the business, dividing his
time equally between it and the engineering firm. Petitioner
retained an interest in Fairfield Communities until at least
1985. On their 1985 tax return, petitioners reported gain from
the sale of stock in Fairfield Communities as long-term capital
gain. In 1968, petitioner sold his partnership interest in the
engineering firm where he had worked since college. He founded
his own engineering firm and held an interest in that second firm
until 1973.
In the mid-1970's, petitioner lent about $200,000 to Nygem
Corp., which had manufactured snowmobile gas gauges. Nygem was
in bankruptcy at the time of the loan. After petitioner became
involved in the company, it began to manufacture printed circuit
boards and became a profitable business. Although petitioner did
not own any capital in the company, he received $1 million and
stock in a hazardous waste disposal company, discussed below, for
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