James B. and Joan E. Murtaugh - Page 7

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          rental income from the timeshares of $3,480 and $3,579.36,                  
          respectively.                                                               
               Prior to the purchase of the timeshares, petitioner had some           
          previous experience with owning rental property.  Petitioner had            
          purchased a condominium on Cape Cod, Massachusetts, in 1985, and            
          sold it in 1988 at a profit of around $20,000 to $25,000.                   
          Petitioner rented the Cape Cod property to one individual as a              
          residence.  Petitioner decided that he could do better by renting           
          a property at $110-$150 per night, similar to a hotel or motel.             
          Petitioner looked at properties in Orlando, Florida, and Myrtle             
          Beach, South Carolina, and other places along the east coast.               
          Petitioner's investigation revealed that southern locations were            
          patronized heavily in the winter and lightly in the summer.                 
          Petitioner saw advantages with B'Mae's Resort.  The resort was              
          located on a resort lake, was close to snow skiing facilities,              
          and was also a suitable venue for viewing fall foliage.  Thus,              
          petitioner expected it would be well patronized for several                 
          months out of the year.  In addition, the timeshare interests               
          offered for sale by B'Mae's were suites, and petitioner thought             
          that suites, compared with single rooms, would be an advantage to           
          families.  When B'Mae's decided to add a new wing of condominiums           
          and offered quarter (13-week) timeshare interests in the                    
          properties, petitioner decided to purchase the timeshares.                  
          Petitioner felt that the timeshares had a good potential for                






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