Maurice E. Hodgkins and Barbara J. Hodgkins - Page 8

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          1991.  John, meanwhile, asserted ownership.  He asked Sid to                
          return the property to him.                                                 
               At first Sid refused to deed the property back to John.                
          Larry had not explained to Sid either the Westlake Agreement or             
          the buy-out arrangement, and furthermore Sid's attorney advised             
          him against deeding the property to John since both the I.R.S.              
          and the Sacramento Sheriff's Office were making inquiries.  But             
          then John wrote Sid a letter on September 27, 1991, the pertinent           
          part of which provides:                                                     
               Your Brother and I were involved in a 32 lot                           
               subdivision.  He was asked to sign a Recession Contract                
               eliminating him from the limited partnership.  He                      
               wanted some temporary collat[e]ral to guarantee his                    
               purported, Westlake Venture capital and profit.  He                    
               agreed upon 7786 Chancery Court.  However, because of                  
               his "[e]stranged situation", with Patty Buchannon and                  
               possible "palimony" problem, I refused to deed it to                   
               him, so we agreed to deed it to you Sid.  Sid, it's                    
               time to deed it back."  * * *                                          
               The letter further explains that John had made the mortgage            
          payments for 5 years.  Shortly thereafter, on October 17, 1991,             
          Sid deeded the property to John.  John's efforts, however, proved           
          futile.  Jack Rice foreclosed on Chancery Court and sold it for             
          $78,000 on November 21, 1991.                                               
               John's desire to avoid the acceleration clause in the Jack             
          Rice mortgage produced evidence that petitioners continued to be            
          owners of Chancery Court after they executed the Exchange                   
          Agreement.  Jack Rice issued a Form 1098 listing petitioner                 





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