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Meadowlark Homes and did not support petitioner's type of
development as well.
Further, there was no evidence presented to establish that
petitioner was equipped only for entry-level houses.
In regard to petitioner's second point, petitioner did not
establish that its borrowing policy limited the type of house
built and the number of houses built.13
From the record, we find that a market for single-family
residential homes existed at the time of the exchange in 1989.
Petitioner has not persuaded us that the market did not support
its development of "entry-level low income houses."
(3) Other Obstacles
Petitioner also asserts that other obstacles arose in
connection with subdividing the 48 lots, which led to Mr. Baker's
conclusion that development of the Exchange Property would not be
profitable.
First, petitioner points to the fact that Beaumont-Cherry
Valley Water District was increasing its water connection fee by
approximately $450 per lot. However, in June 1989, Meadowlark
Homes was able to purchase the water connection at the existing
rate (prior to the increase).
13 Mr. Baker testified that the maximum loan obtained by
petitioner was $400,000. However, petitioner authorized its
officers to obtain construction financing. For example, in the
taxable year 1989, petitioner had a $700,000 construction line of
credit which expired in Feb. 6, 1991.
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