-37-
for $500 cash, and later it was acquired by Mr. Welch through
some type of exchange with Mr. Hernandez. Lot 2160 consists of
about 5 acres of desert land about 100 miles north of Los
Angeles. Mr. Welch approached petitioner with the idea of
acquiring lot 2160 as the "up-leg" property in the section 1031
exchange.
When Mr. Welch received the $258,351.54 check through Star
Global, he converted it into several cashier's checks that were
used for the following purposes: (1) Payments to finance a
magazine Mr. Welch was working on; (2) payments to Mr. Welch's
contracting company; (3) payments to petitioner's new wife; and
(4) payments to Mr. Welch's wife. No part of the $258,351.54 was
invested on behalf of petitioner.
About 1 month after the closing on the lot 2160 property,
petitioner became suspicious about its value, and he came to the
conclusion that lot 2160 was worthless. After Mr. Welch was
confronted by petitioner, Mr. Welch, during the summer of 1989,
gave petitioner one-half of Mr. Welch's one-half interest (a 25-
percent interest) in Mr. Welch's magazine, in which approximately
$1 million had been invested, mostly by an individual other than
Mr. Welch and petitioner. Petitioner continued to associate with
Mr. Welch, and about a month or two later, Mr. Welch invested an
additional $200,000 of petitioner's newly advanced funds in a
different investment.
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