Don Ballantyne and Susanne C. Ballantyne - Page 5

                                         -5-                                          
          an attorney, executed the purchase agreement on behalf of                   
          petitioner; petitioner signed the purchase agreement on behalf of           
          Balmac.                                                                     
               The purchase agreement provided that Balmac would make a $2            
          million cash down payment; the balance of the purchase price was to         
          be deferred and evidenced by a 5-year, interest-bearing note.               
          Closing was to take place by December 31, 1984.                             
               Sometime in early November 1984, Balmac entered into an                
          agreement with Palomar Systems and Machines, Inc. (Palomar), to             
          develop and sell to the latter a 10-acre lot in Wine Ridge                  
          Industrial Park.                                                            
               Closing under the purchase agreement did not occur by December         
          31, 1984.  Rather, on February 6, 1985, Halling and petitioner              
          executed escrow instructions (escrow No. 10425-04) with WTC with            
          respect to the contemplated purchase of the Escondido property by           
          Balmac.                                                                     
               In June 1985, Balmac applied for a loan from  First Commercial         
          Bank of San Diego (the bank) with respect to the development of the         
          Escondido property.  The borrowing was to occur in two stages.  The         
          first of the two stages was to be with respect to the acquisition           
          of the property; this loan was to be in the amount of $1.1 million.         
          The second was to be a $3 million development loan.  With respect           
          to the land acquisition loan, the loan application request stated:          
                    The land purchase calls for $2,000,000 cash                       
                    down.  We will be putting up $950,00, and                         
                    would like First Commercial Bank to loan the                      




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