Don Ballantyne and Susanne C. Ballantyne - Page 11

          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         
          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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