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benefit that Balmac acquire title to the entire 86-acre Escondido
property to enable Balmac to conclude arrangements to borrow
$1,100,000 from First Commercial Bank; (2) the parties intend to
effect a section 351 tax free capitalization; and (3) the tax base
on the 44.25 acres is a carryover basis.
The Capitalization Agreement requires Balmac to lend the
proceeds of the $1.1 million land acquisition loan to BTG, which
thereafter is to lend the proceeds to petitioner. Petitioner is
then required to transfer approximately $940,000 to Balmac as a
repayment on his prior indebtedness to Balmac.
The transactions contemplated by the Capitalization Agreement
occurred. Petitioner contributed 44.25 acres of the Escondido
property to BTG in exchange for 1,000 shares of BTG stock. BTG
entered into a joint venture agreement with Balmac and contributed
the 44.25 acres of the Escondido property to the joint venture (the
Wine Ridge Joint Venture). The proceeds of the bank loan were lent
to BTG, which then lent such proceeds to petitioner, who then
transferred the money to Balmac in repayment of his prior purported
debt.
EPIC, Oi Weng, and the Marwick Trust
EPIC was incorporated on March 24, 1986. Oi Weng Co., Ltd.
(Oi Weng), a Hong Kong corporation, was the sole shareholder of
EPIC. Oi Weng was wholly owned by the Marwick Trust. The trustee
of the Marwick Trust was Grange Trustees Ltd., a wholly owned
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