Highland Farms, Inc. and Subsidiary - Page 28

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          disaster, the cluster home would revert to petitioner without               
          repurchase by petitioner, but the owner received the insurance              
          proceeds.  Additionally, petitioner controlled whether it would             
          be obligated to repurchase through its power to grant or deny               
          permission to convey the property.  This "obligation" to                    
          repurchase was an advantage rather than a disadvantage in that              
          petitioner, by selling the cluster homes itself, reaped the                 
          difference between the repurchase amounts and the higher resale             
          prices.  Where petitioner repurchased cluster homes and resold              
          them, petitioner received all of the profits; this tends to weigh           
          against the transactions' being sales.  However, while the                  
          cluster home or condominium owner did not receive the benefit of            
          any appreciation in the fair market value of the unit, the owner            
          was assured of receiving at least 76 percent of the original                
          purchase price.  In the event that the real estate market for               
          retirement homes collapsed, petitioner could bear any loss.                 
          Thus, petitioner and the owner each had both a benefit and a                
          detriment in the repurchase arrangement.  While the cluster home            
          or condominium owner had to forgo the benefit of possible                   
          appreciation, he or his estate was assured of receiving at least            
          76 percent of his original purchase price, an assurance that                
          aging members of a retirement community might find attractive,              
          particularly compared to the usual church-sponsored retirement              
          communities that required large, nonrefundable upfront payments.            
               Some of the above aspects of this transaction support                  
          petitioner's proposed characterization while others support                 
          respondent's.  Under these circumstances, we believe that the               



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