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Respondent makes much of the fact that (1) Mr. Johnson
reminded Lancaster city officials to include in written documents
the fact that Lancaster was acquiring the 23d Street property
under threat of condemnation, and (2) Mr. Johnson was concerned
about the tax implications of a move to the Lancaster Auto Mall.
Contrary to respondent's contentions, the fact that petitioner
may have had tax concerns regarding his sale of the 23d Street
property to Lancaster while under threat of condemnation does not
lead us to conclude that the deal struck between Lancaster and
Mr. Johnson was structured or collusive. See Balistrieri v.
Commissioner, T.C. Memo. 1979-115.
We conclude that petitioners had reasonable grounds to
believe, and did believe, that Lancaster authorized the threats
of condemnation and was likely to carry them out unless a sale or
exchange was arranged.
4. Conclusion
The witnesses consistently and credibly testified that
Lancaster city officials threatened Mr. Johnson with condemnation
of the 23d Street property and that Mr. Johnson believed, and had
reason to believe, these threats.
Based on the record, we conclude that a "threat of
condemnation" existed, and petitioners sold the 23d Street
property because of repeated threats of condemnation from a
number of Lancaster city officials.
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