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commission from Capco Enterprises, the mortgagee under the
preexisting mortgage on the Mall that was satisfied as a result
of the consummation of the transaction. See supra note 4. The
record does not show whether petitioner included the amount of
this commission in the income reported on the Schedule C of
petitioners' 1988 Federal income tax return.
Upon conveyance of the Mall from Pecaris to Coastal,
petitioner’s partnership interest in the Mall, by virtue of the
difference between his interests in Pecaris and Coastal,
increased from 25 percent to 90 percent, without any outlay of
funds by him. As a result, petitioner’s share of mortgage
liabilities associated with the Mall increased from $441,336
(25 percent of the Capco Enterprises mortgage to which the Mall
was subject in the hands of Pecaris) to $3,690,000 (90 percent of
the Canada Life mortgage loan of $4.1 million to which the Mall
became subject in the hands of Coastal at the time of the
conveyance.7
Messrs. Boyas and Spillas did not become aware of
petitioner’s partnership interest in Coastal, and of his
participation on both sides of the transaction, until after the
7Canada Life viewed the transaction as both a refinancing of
the Mall, and as a “buying out” by petitioner of the interests of
the other Pecaris partners. In addition, the loan agreement
stated that “The purpose of the loan is to provide permanent
financing for the Real Property and to discharge all existing
financing."
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Last modified: May 25, 2011