Taiyo Hawaii Company, Ltd. - Page 5

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          properties was too large to warrant development.  Petitioner did            
          not receive any revenue from either the Gomes or Ginter                     
          properties during the years at issue.  Petitioner did not                   
          advertise the properties for sale, and no bona fide purchase                
          offers were received until 1995.                                            
               On May 2, 1995, an unrelated company, Towne Development of             
          Hawaii, Inc., made an offer to purchase and did eventually                  
          purchase the Ginter and Gomes properties.  The purchase price was           
          to be approximately $3 million.  A possible cloud on the title,             
          however, caused the price to be reduced to $2.4 million.                    
               With respect to the joint venture, T-3 Wailea partnership,             
          petitioner owned a 50-percent interest and was also the managing            
          partner.  The joint venture owned approximately 600 acres of land           
          immediately above Wailea, Hawaii.  In 1990, petitioner liquidated           
          its interest in the T-3 Wailea partnership in exchange for a                
          $5,963,431 distribution, resulting in a $2,450,722 profit.                  
               Sometime in 1990, petitioner acquired a 50-percent interest            
          in Pines Plaza Associates, a Hawaiian general partnership engaged           
          in real property construction.  Petitioner utilized certain                 
          portions of advances from Seiyo and Taiyo Development Co. (Taiyo            
          Development) to develop the Pines Plaza project.                            
               Petitioner obtained financing from unrelated financial                 
          institutions including Mitsubishi Trust & Banking (Mitsubishi               
          Trust), Bank of Tokyo, and Dai-Ichi Bank in order to conduct its            

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