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Ridgemark’s success can be seen in the price increases for
golf and country club membership from $700 in 1971 to
approximately $14,000 in 1990, when the golf and country club was
sold to its members. As significant, Ridgemark did not intend to
sell the unit 10 property on an individual basis. In early 1987,
a number of Ridgemark’s shareholders decided to disassociate
themselves from the business of owning and operating Ridgemark
Golf and Country Club. This was to be accomplished by selling
all of Ridgemark’s assets, including the real property holdings.
Originally, it was to be accomplished by a cash sale of
Ridgemark’s outstanding shares. Shen was the ostensible
purchaser until the adverse tax consequences deterred him. Shen
then became interested in the business of Ridgemark Golf and
Country Club until Paullus advised him that he would not manage
the facility after its sale. Shen thereafter developed an
interest in the developable real property held by Ridgemark,
including the unit 10 property.
Throughout the period, 1980 through 1989, Ridgemark
consistently reported its business activity as the operator of a
golf and country club. We find this to be probative evidence of
Ridgemark’s primary involvement in the golf and country club
business. See Malinowski v. Commissioner, 71 T.C. 1120, 1125
(1979).
Appreciation in value of the unit 10 property stems from its
proximity to the facilities extant in the Ridgemark Golf and
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