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purchased nine class A memberships in the club. On or
about January 16, 1986, in connection with the closing of
the club's loan from Sandia, Mr. Dixon and petitioner each
paid $135,000 in cash to the club (i.e., $15,000 x 9) and
signed nine promissory notes payable to the club, in the
aggregate principal amount of $1,260,000 (i.e., $140,000
x 9). Mr. Dixon and petitioner each borrowed the cash
payment of $135,000 from the joint venture. These loans
were never repaid.
On or about January 24, 1986, petitioner sold one
of his club memberships to a California resident, Mr. Jack
Anderson, for $155,000. As discussed in more detail below,
each petitioner reported one-half of this sale on a
Schedule C, Profit or (Loss) from Business or Profession,
filed with his or her 1986 return. Petitioner and
Mr. Dixon used the toss of a coin to determine that
Mr. Anderson would purchase one of petitioner's club
memberships. They agreed that the next club membership
to be sold would be one of Mr. Dixon's and that they would
alternate until all of the club memberships were sold.
On November 2, 1986, the joint venture agreement was
again amended (Third Amended Agreement), to liquidate Value
Plus' interest in the joint venture in consideration of the
venture's payment of $75,000 pursuant to a promissory note.
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