FRGC Investment, LLC, James P. Mehen, Tax Matters Partner - Page 6




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          for a significant period and because it was clear to Walker that            
          petitioner was not going to obtain the requested zoning approval.           
          Petitioner withdrew the zoning request after the hearing but                
          before a vote was taken.                                                    
               Walker began to market the property to other major                     
          developers after the November 17, 1997, meeting, as he expected             
          petitioner to cancel escrow on the property.  Petitioner                    
          contacted Joseph Janas (Janas), FRGC’s certified public                     
          accountant, a few days after the hearing and told Janas that the            
          real estate transaction would not go forward.  Petitioner then              
          instructed Janas to do a final accounting to determine how much             
          cash in the partnership was available to distribute to the                  
          investors.                                                                  
               PCB and Cherry executed mutual cancellation instructions for           
          the 1996 purchase agreement to the escrow company on December 29,           
          1997.  The escrow company refunded the $25,000 in earnest money             
          to PCB upon cancellation of the escrow.  At the time that PCB and           
          Cherry canceled escrow, petitioner did not attempt to renegotiate           
          a new purchase agreement for the subject property.                          
               Sometime in early January 1998, Walker approached petitioner           
          and suggested new terms for the purchase that would be acceptable           
          to Rex Maughan.  The terms included a nonrefundable payment of              
          $150,000, an increase in the purchase price from $5.25 million to           
          $5.775 million, closing in 6 months with no contingencies, and              






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