Big Hong Ng - Page 24

          receive the exchange property by that time as required under                
          section 1031(a)(3)(B).  IES, Strong Hope, and Ms. Ng entered into           
          an agreement on that date providing that IES would purchase the             
          Stockton Street property from Strong Hope for $1.1 million, and             
          that Strong Hope would deed the property directly to Ms. Ng.  The           
          purchase price was to be paid as follows:                                   
               $  400,088.33 Assumption of deed of trust                              
               389,343.80 Cash in escrow                                              
               310,000.00     Promissory note from Ms. Ng to IES, assigned to         
               567.87 Paid by Ms. Ng                                                  
               Ms. Ng, as agent of Strong Hope, deeded Strong Hope's 50-              
          percent interest to herself on May 9, 1989. Ms. Ng wanted the               
          escrowed funds to be released on that date.  Founders refused to            
          pay the escrowed funds directly to Strong Hope because Founders             
          previously had been instructed to release the money only to IES.            
          On May 11, 1989, the escrow was canceled pursuant to instructions           
          from IES, and on May 16, 1989, Founders issued a check to IES for           
          $309,056.94, representing the proceeds from the sale of Ms. Ng's            
          Lombard Street property.                                                    
               The proceeds from the sale of the Larkin Street and Lombard            
          Street properties, ostensibly used to acquire the Stockton Street           
          property from Strong Hope in a section 1031 exchange, actually were         
          used by Ms. Ng for her own purposes as follows:                             
               *    January 12, 1989--IES issued a $85,165.54 check to Strong         
          Hope, representing net proceeds from the sale of the Larkin Street          

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