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enough below its $630,000 tax assessment value that it would
allow the Foundation a substantial profit.
In 1992, petitioner entered into a plea bargain relating to
the Federal income tax evasion indictment. The plea bargain
required him to pay fines and back taxes of $135,000. Pursuant
to the purchase agreement, on June 3, 1993, Mr. Hofheinz
transferred to petitioner an additional $135,000 of Foundation
funds.
Petitioner and Mr. Hofheinz’s relationship deteriorated in
1995. In 1996, after Mr. Hofheinz began proceedings to evict
them from the residence, Mrs. Graham filed a bankruptcy petition.
In the bankruptcy proceeding, Mrs. Graham contended that the sale
was invalid because petitioner had no interest in the residence
owned by Bluff Creek and, therefore, could not sell it.
Although a backdated document (i.e., signed by Mr. Hofheinz
and petitioner sometime after June 3, 1993) stated that the
$135,000 payment was for the Grahams’ furniture, the furniture
remained in their possession. During Mrs. Graham’s bankruptcy
proceeding, the Foundation did not file a claim relating to the
furniture, and Mr. Hofheinz testified that the additional
$135,000 was consideration provided to the Grahams in exchange
for the residence. The bankruptcy court concluded that the 1992
transaction was a sale of the residence to the Foundation but did
not determine what constituted the consideration exchanged for
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