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In addition to Byrne's consulting agreement, petitioner also
asked Byrne's son, Charles M. Byrne, III, (Charles) to
occasionally inspect prospective exchange property. Petitioner
also subscribed to two Northern California newspapers that
Charles collected and sent to Byrne or Frances, who searched in
the papers' real estate and business sections for an exchange
property. Ultimately, petitioner failed to find a suitable
exchange property. The value of the Burke Property declined as
the 1997 termination of the Burke Lease approached. In 1991,
with only 5 years left on the lease, interest in the Burke
Property vanished. Petitioner stopped searching for a swap
property in late 1991.
Petitioner had other normal operating expenses during 1989
and 1990, including a separate phone line at Byrne's residence,
used exclusively for business, and a Spellmaster for Frances
because she was "an atrocious speller". Petitioner also paid
part of the premium on Byrne's life insurance, asserting that it
was "key man insurance". As of 1988 NII was a 40-percent
beneficiary under the policy.
Petitioner also rented a storage space in Rancho Mirage
during 1989 and 1990. Petitioner stored brochures about Far
Western's services, and homeowner kits produced for Sale By
Owner, which provide how-to-sell-your-own-home information to
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