Taiyo Hawaii Company, Ltd. - Page 7

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          Year                Seiyo               Taiyo Development                   
          1989           $5,000,000               $3,604,746                          
          1990                191,755                  ---                            
          1991           2,194,378                     ---                            
          The advances were not evidenced by promissory notes, had no fixed           
          maturity date, and were unsecured.  The advances were not repaid            
          during the years in issue.  During the years 1993 and 1994,                 
          petitioner repaid approximately $5 million and $400,000 of the              
          related party debt, respectively.  There was no stated rate of              
          interest, and no interest was paid by petitioner on the advances.           
          Seiyo and Taiyo Development did not demand payment or take legal            
          action against petitioner regarding the advances.                           
               At the end of the 1990 and 1991 fiscal years, petitioner's             
          outstanding liabilities (including advances from Seiyo and Taiyo            
          Development, bank indebtedness, and miscellaneous liabilities)              
          and the tax basis of its assets were as follows:                            
               Fiscal                                                                 
               Year Ended   Outstanding Total     Tax Basis                           
               Sept. 30       Liabilities          of Assets                          
               1990         $27,680,245      $20,858,967                              
               1991      21,955,602          16,907,976                               
          As of September 30, 1995, the outstanding advances (including               
          principal and accrued interest) totaled $23,875,036.82.                     
               On its Federal income tax returns, petitioner generally                
          reported that it was engaged in real estate development and                 
          property investment and real estate investment and development.             
          On its 1989, 1990, and 1991 tax returns, petitioner reported                




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