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I. Acquisition of the Property
Corbin West was formed to purchase, manage, and syndicate
the Corbin West Apartments (the property). From approximately
March 17, 1970, until December 23, 1988, Norman Associates
(Norman) owned the property.
On December 8, 1987, Corbin West entered into an option
agreement (the first option) with Norman to purchase the property
for $1,760,000. On or about December 9, 1987, CDC, acting on
behalf of Corbin West, applied for a reservation of a Federal
low-income housing tax credit relating to the property with the
Connecticut Housing Finance Authority (CHFA application). The
CHFA application reflected a total acquisition cost of $1,760,000
plus estimated development and/or rehabilitation costs of
$1,698,315. Corbin West was unable to obtain the financing
required for rehabilitation of the property and allowed the first
option to lapse on April 1, 1988.
Corbin West remained interested in obtaining the property.
With the help of its attorneys, Corbin West devised a new plan to
acquire the property. Under the plan, Norman would sell the
property to a charitable organization for a price below an
alleged fair market value and take a charitable contribution
deduction for the difference between the sale price and the
alleged fair market value. The charitable organization in turn
would sell the property to Corbin West. Corbin West would
reimburse the charitable organization for the cash paid to Norman
to acquire the property and execute a promissory note for the
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