Loren F. Paullus and Donna Paullus - Page 27

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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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