Don Ballantyne and Susanne C. Ballantyne - Page 13

                                        -13-                                          
                                       OPINION                                        
          Positions of the Parties                                                    
               Petitioners contend that the sale of the Escondido property to         
          Balmac was a fiction and that it was in essence part of a financing         
          transaction.  They maintain that the $950,000 deposited by Balmac           
          with WTC was never intended to be for the benefit of petitioner or          
          distributed to him.  According to petitioners, the loan from the            
          bank (purportedly for the purchase of the Escondido property) was           
          in reality a loan to the joint venture (which then lent the                 
          proceeds to BTG, which in turn lent the proceeds to petitioner).            
          Petitioners request that we find, as an ultimate fact, that                 
          petitioner "received no net proceeds from the sale of any portion           
          of the Escondido property in 1985 or 1986" and that petitioner              
          "received no compensation or other consideration in exchange for            
          the $5 million deed of trust."                                              


               Petitioners' version of events is that petitioner transferred          
          44.25 acres of the Escondido property to BTG in exchange for stock          
          and caused the remaining 41.75 acres to be deeded to Balmac as              
          nominee for petitioner.  Accordingly, petitioners characterized the         
          transfers as tax-free exchanges under section 351.4  They contend           


               4    Sec. 351(a) provides:                                             
                    SEC. 351(a). General Rule.--No gain or loss shall be              
               recognized if property is transferred to a corporation by              
               one or more persons solely in exchange for stock or                    
                                                             (continued...)           




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