Don Ballantyne and Susanne C. Ballantyne - Page 14

          that BTG subsequently contributed the 44.25 acres to the joint              
          venture.  In the alternative, petitioners contend that some or all          
          of the Escondido property was contributed to Balmac as a capital            
          contribution (which would also constitute a tax-free exchange).             
               In contrast, respondent argues that "the purported section 351         
          exchange asserted by petitioner [is] nothing more than an attempt,          
          engaged in subsequent to the completion of the Balmac transfer, to          
          recast the form of the sale transaction to obtain a more favorable          
          tax consequence."  Respondent maintains that the transfer by                
          petitioner to Balmac of the Escondido property on July 31, 1985,            
          should be characterized as a sale and that in 1985 petitioner               
          incurred a long-term capital gain in the amount of $1,648,722 (as           
          a result of receiving $2 million in cash) and that in 1986                  
          petitioner incurred a long-term capital gain in the amount of               
          $4,121,930 (as a result of the cancellation of the $5 million               
          installment note received in connection with the sale).                     
          Balmac Contract                                                             
               The structure of the transaction in this case is unmistakable.         
          All the documents and objective evidence support characterizing the         
          transfer of the Escondido property from petitioner to Balmac as a           
          sale.  The purchase agreement provided for the purchase of the              
          Escondido property by Balmac from petitioner for $7 million.                

               securities in such corporation and immediately after the               
               exchange such person or persons are in control (as defined             
               in section 368(c)) of the corporation.                                 

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