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difference between the alleged fair market value and the cash
paid (the same amount as Norman's charitable contribution
deduction). The so-called bargain sale would be advantageous to
Norman because it would provide Norman with a large charitable
contribution deduction. The bargain sale would also provide
Corbin West a high basis in the property.
On or about November 30, 1988, Financial approached the New
Britain Housing Authority (NBHA) and asked if the NBHA would
participate in Corbin West's bargain sale plan. The NBHA
officials believed this was a strange request but nonetheless
agreed to participate. At the NBHA's request, Financial
indemnified the NBHA against any and all loss, cost, claim,
demand, or damage arising out of or in connection with the NBHA's
purchase of the property (hold harmless agreement).
On or about December 23, 1988, the NBHA entered into a
purchase and sale agreement with Norman whereby the NBHA was
granted the right to acquire the property for $1,808,500. Norman
took a charitable contribution deduction for the difference
between the alleged fair market value of $3,150,000 and the sale
price of $1,808,500 (i.e., $1,341,500). Respondent denied
Norman's charitable contribution deduction, and Norman never
challenged respondent's determination in court.
On or about December 23, 1988, the NBHA entered into an
option agreement (the second option) with Corbin West under which
Corbin West acquired the right of the NBHA to purchase the
property. Corbin West exercised the second option and purchased
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