Donald L. Head - Page 3

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          Petitioner and Ms. Head began building a residential structure for          
          investment speculation purposes on the Jensen Road property (the            
          Jensen Road house or house) in that year.  During the construction,         
          petitioner and Ms. Head resided in a mobile home.  Construction of          
          the Jensen Road house was completed in September 1980.  The Jensen          
          Road house was immediately put up for sale; a potential purchaser           
          was located, but the anticipated sale did not materialize.  Because         
          petitioner and Ms. Head had no other residence, and the house could         
          not be insured if vacant, they moved into the Jensen Road house in          
          late October 1980.  Petitioner lived in the Jensen Road house until         
          June 1985.  Ms. Head lived in the Jensen Road house until May 1986.         
          The Norwest Commercial Bank Loans                                           
               In January 1983, petitioner borrowed funds in the amounts of           
          $10,000 and $40,000 from Norwest Commercial Bank (NCB), securing            
          both loans with a mortgage against the Jensen Road house.  In May           
          1984, petitioner borrowed an additional $2,000 from NCB, again              
          securing the loan with a mortgage against the Jensen Road house.            
               Petitioner used a portion of the loan proceeds to operate a            
          retail coin and stamp business and a portion of the loan proceeds           
          for personal purposes. He operated the coin and stamp business              
          until April or May 1985. In June 1985, petitioner moved to                  
          California, where he began working for The Boeing Co.                       
          The Foreclosure                                                             
               On May 27, 1986, NCB foreclosed upon its mortgages and took            
          possession of the Jensen Road property and house.  At this point in         
          time, Ms. Head moved out of the Jensen Road house.                          



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