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property through the joint venture. Their plan called for
the construction of six villas and a duplex on the property
and the sale of the six villas to the public in the form
of "time-share" memberships in a club. To finance that
development, the joint venture entered into a construction
loan in the amount of $4.7 million. Petitioner and
Mr. Dixon personally guaranteed the loan. After construc-
tion of the improvements, they arranged for permanent
financing of the project in the form of a loan to the club,
the proceeds of which would be used to pay off the
construction loan. As a condition for the permanent loan,
the bank required, among other things, that all of the club
memberships be sold and that petitioner and Mr. Dixon
personally guarantee repayment of the permanent loan.
Petitioner and Mr. Dixon had no choice but to purchase
the 18 unsold club memberships in order to obtain the
permanent financing for the project. Otherwise, the need
to repay the construction loan, which was coming due,
threatened the survival of the project and the financial
position of the joint venturers, petitioner and Mr. Dixon,
who had personally guaranteed the loan. The joint
venturers purchased the memberships in their individual
names in order to obtain permanent financing for the
project with the hope that they could complete the sale of
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