John H. and Mary E. Douglas - Page 3

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          $15,000.  In November 1989, he sold the property to Vinson L.               
          Baker and Danella M. Baker (the Bakers) for $61,000.  The Bakers            
          obtained a mortgage loan through First Security Federal Savings             
          and Loan Bank (hereinafter First Security) and paid petitioners             
          $39,100 in cash at settlement.  The Bakers also provided                    
          petitioner with a deferred purchase money second deed of trust              
          (hereinafter second deed) in the amount of $21,900.  The second             
          deed was payable in one year at 12-percent interest.                        
               A dispute arose between the Bakers and First Security, and             
          the Bakers were unable to meet the interest obligations on their            
          mortgage.  The Bakers brought a legal action against First                  
          Security, alleging that First Security had "set them up" to fail            
          in order to obtain possession of the property.  The dates with              
          respect to the dispute and the legal action against First                   
          Security are not clear from the record.  Petitioners agreed with            
          the Bakers' allegations and paid legal fees and costs in order to           
          protect petitioners' interests.                                             
               In 1989, Vinson Baker filed for Chapter 7 bankruptcy, and              
          petitioner filed a claim as a creditor for $21,900 from the                 
          second deed and for $3,285 in accrued interest.  In 1992, Danella           
          Baker filed for Chapter 7 bankruptcy, and petitioner claimed a              
          debt in the amount of $28,000, which represented $21,900 from the           
          second deed and $6,100 in accrued interest.  The U.S. Bankruptcy            
          Court for the District of Columbia discharged Vinson Baker's                
          debts in December 1991, and the U.S. Bankruptcy Court for the               

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