National Industrial Investors, Inc. - Page 12

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            thereafter, OPEC cut off the United States' supply of benzene,                             
            and in 1974 Shell stopped producing the resin.  With "no relief                            
            in sight", petitioner liquidated the subsidiary in 1976.                                   
                  Industrial Management, another 80-percent subsidiary,                                
            provided real estate expertise to clients.  It acquired and                                
            developed property, designed buildings, found financing, and, if                           
            necessary, dealt with related government legislation.                                      
                  Far Western, a wholly owned subsidiary, operated a real                              
            estate brokerage business.  When petitioner formed Far Western,                            
            Hugh McMahon III (Hugh) provided the necessary brokerage license                           
            required by the California Department of Real Estate.  Far                                 
            Western operated actively from 1983 until 1985, but Far Western                            
            never generated any taxable income.  The only gross income                                 
            reported for Far Western was $2,031 in 1984.                                               
                  Petitioner's other wholly owned subsidiary, Sale By Owner,                           
            experimented with an alternative real estate brokerage business.                           
            For a $290 fee, a homeowner selling his own home could list his                            
            house on the multiple listing service without engaging an                                  
            exclusive real estate agent.  But, if a broker found a buyer, the                          
            homeowner could use the broker and pay his fee.                                            
                  Byrne, his wife, and Hugh incorporated Sale By Owner on                              
            April 15, 1982, and obtained a corporate broker's license from                             
            the Department of Real Estate, using Hugh's brokerage license.                             

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