Thomas C. Sandoval, Jr. and Bobbie J. Sandoval - Page 18

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               Petitioner and Burnett agreed to form TGR II on May 14,                
          1993.  They signed the Warfield Drive property agreement on May             
          17, 1993, which memorialized their May 14, 1993, agreement.  The            
          terms of the Warfield Drive property agreement are essentially              
          the same as those in the Babcock Road property agreement, except            
          for the purpose for acquiring the real property.  Exhibits A and            
          B to the Warfield Drive property agreement state that petitioner            
          and Burnett formed TGR II to acquire the Warfield Drive property.           
          The Warfield Drive property agreement stated that petitioner and            
          Burnett intended to collect rental income from that property for            
          many years and to hold it to appreciate in value.  TGR II bought            
          and held the Warfield Drive property to carry on a business.                
          Petitioner and Burnett adopted the TGR name, acquired the                   
          property under that name, and held out TGR II as a partnership.             
          Petitioners reported active partnership income and loss from TGR            
          II for 1993, 1994, 1996, and 1997.  Petitioner and Burnett                  
          intended to and did operate a real estate rental business                   
               Petitioners contend that TGR II did not buy the Warfield               
          Drive property because petitioner and Burnett signed the joint              
          venture agreement after they bought the property.  We disagree.             
          The written agreement that petitioner signed on May 17, 1993,               
          states that Burnett and petitioner agreed on May 14, 1993, to               
          establish TGR II to buy and hold rental real property for 3 to 5            

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