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and the other entities involved in this transaction had for all
intents and purposes (apart from L&C Springs' reporting of the
income in question for 1991) treated L&C Springs as having no
continuing substantive ownership interest in the L&C Properties.
Effectively, as of November 1, 1990, L&C Springs' ownership
interest in the L&C Properties was not regarded as viable by the
parties, had no value, and was effectively extinguished.
The October 1990 Agreement between Tanglewood and Cal Fed
transferred all attributes of ownership (except nominal title) of
the L&C Properties from Tanglewood to Cal Fed. It effectively
relieved L&C Springs of its $2,250,000 debt obligation to
Tanglewood and disposed of L&C Springs' leasehold interest in the
L&C Properties.
Neither in 1987, 1988, 1989, 1990, nor in any later year,
did Tanglewood seek to collect the defaulted $2,250,000 debt
obligation due from L&C Springs. Tanglewood's financial
disclosures in its bankruptcy proceeding in 1990 did not disclose
L&C Springs’ stated debt obligation to Tanglewood as an asset of
Tanglewood.
The credible evidence indicates that L&C Springs' tax return
treatment of the termination of its ownership interest in the L&C
Properties as not having occurred until 1991 constituted simply
an attempt, by the various individuals associated with L&C
Springs and Tanglewood, to defer, for income tax purposes,
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