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for the final sale of all units in Moonlight
Beach Club, Inc.
In mid to late 1986, a number of club members stopped
making payments on their initiation fee notes. As a
result, the club defaulted on the permanent loan owed to
Sandia. About this time, petitioner realized that he would
not be able to resell his eight memberships in the club.
Accordingly, since the club was in default on the permanent
loan, and Sandia's foreclosure of the land and improvements
owned by the club seemed imminent, petitioner considered
his memberships in the club to be worthless.
Mr. Winslett prepared the joint venture's 1984 and
1985 tax returns. However, Mr. Winslett did not prepare
the joint venture's 1986 return because all of the
financial records of Dondi Associates and the joint venture
had been either seized by the FBI or subpoenaed by a grand
jury in connection with an investigation into Vernon's
activities. Accordingly, Mr. Winslett and petitioner's
accountant, Mr. Garry L. David, estimated the joint
venture's profit in 1986 from the transfer of the Moon-
light Beach Property to the club. They estimated that
petitioner's share of the profit was $664,200. The record
of these cases does not explain the basis for that
estimate. Based thereon, the aggregate gain realized by
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