Lucian T. Baldwin, III - Page 15




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          the early part of 1990.  From March 1990 through the end of 1992,           
          LFI billed BCC for every night petitioner, a member of his                  
          family, one of his business acquaintances, or one of his friends            
          stayed at Granot Loma.                                                      
               LFI did not bill any of the guests directly; all invoices              
          were sent either to BCC, BDC, or BAC.  In fact, almost none of              
          the guests were even aware that LFI was charging anyone for their           
          stay.  Even Mrs. Baldwin was not aware of LFI’s invoicing system            
          until the divorce proceedings commenced.                                    
               No rooms at Granot Loma were ever held out to the public for           
          rent, and no rooms were ever rented to the public.7  No leases or           
          rental contracts for the rental of Granot Loma were executed by             
          LFI, any guest, or any of petitioner’s other companies.  Only               
          petitioner’s relatives, friends, business acquaintances, and                
          other invited guests used Granot Loma.  In fact, petitioners                
          decided not to operate Granot Loma as a commercial lodge because            
          they did not want to curtail their use of the facility or to open           
          it up for use by guests they had not invited personally.                    
               When Mr. Ketter set the rental rates for Granot Loma, he did           
          not estimate an occupancy rate, project the frequency of use, or            

               7In September 1989, Worth Brown, a resort manager, visited             
          Granot Loma for the purpose of determining whether Granot Loma              
          could be operated as a luxury resort.  He concluded that it was             
          possible.  Petitioners, however, decided not to commence a bed              
          and breakfast or other business open to the public because they             
          did not want to share the lodge with outsiders.  Granot Loma was            
          never operated as a commercial lodge.                                       





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