Lucian T. Baldwin, III - Page 9

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          paid $4,380,000 for Granot Loma and took title to the property as           
          tenants by the entireties.4                                                 
               Around the time of Granot Loma’s purchase, petitioner                  
          discussed with Eugene Portman, an attorney who specialized in               
          real estate law, the creation of several corporate entities to              
          house several new businesses and investments petitioner was                 
          acquiring in an attempt to diversify his assets.  Mr. Portman               
          handled Granot Loma’s closing and associated preclosing matters             
          for petitioner.                                                             
               On April 14, 1988, Mr. Portman filed articles of                       
          incorporation with the Illinois secretary of state for a company            
          that was later renamed Loma Farms, Inc. (LFI).  The articles                
          stated that the company was formed for the purpose of “engaging             
          in the business of * * * property manager and convention, hotel             
          and resort manager.”  Petitioner was LFI’s sole shareholder.                
          Petitioner’s Restoration of Granot Loma                                     
               Petitioner engaged Mr. Matre as his general contractor for             
          the restoration of Granot Loma.  In exchange for Mr. Matre’s                
          services, petitioner promised him 10 percent of any profit upon             
          the sale of Granot Loma and free use of the property when space             
          was available.                                                              

               4This amount includes $125,000 paid to George and Carmen               
          Johnson to purchase the depot property.                                     

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