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high debt-to-value ratio. In order to buy the property,
petitioner wanted to obtain some seller financing. Fourth,
petitioner could not decide if the property was acceptable
without the approval of Frederick R. Black (Black), his new
partner. Black saw the East Boulevard property in early March
1990. Petitioner did not look at any properties after February
27, 1990; he was extremely busy because of the tax season.
Smith intended to talk to petitioner on March 26 about making
an offer on the East Boulevard property, but it is unknown
whether he did so. Petitioner and Black did not make an offer to
buy the property until May 14, 1990.
On May 25, 1990, petitioner and Black, as SB Properties, a
North Carolina general partnership, contracted with Harold H. and
Loretta K. Brown (Mr. and Mrs. Brown) to buy the East Boulevard
property. Paragraph (2) of Addendum "A" of the Offer to Purchase
and Contract states as follows:
Exchange Provision. Buyer may wish to qualify this
transaction under Section 1031 of the Internal Revenue
Code; therefore, Buyer shall have the right to cause
Seller to accept suitable property in exchange for all or
part of Seller's property hereunder; provided that,
property exchanged to Seller shall be subject to immediate
purchase by a third party, and provided further that the
cost to Seller of accepting the exchange property and
transferring it to a third party shall be reimbursed to
Seller by Buyer, and provided that the terms and
conditions of such exchange shall in no event be more
onerous and burdensome to Seller.
On June 19, 1990, Mr. and Mrs. Brown transferred the East
Boulevard property to petitioner and Black as tenants in common.
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