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Western loan) in exchange for a note secured by a first deed of
trust to the Atascadero property. The balance of the purchase
price was financed by the loans to Stephanie and David from
petitioner’s profit-sharing plan.
David moved into the residence on the Atascadero property
shortly after the purchase and immediately began making
improvements. Stephanie continued to work and live in Hercules
but traveled to Atascadero on the weekends to be with David and
to help him with the improvements. When Stephanie and David
acquired the property, Stephanie intended to reside there full
time when her financial situation improved. At no time did
Stephanie become a full-time resident of the Atascadero property.
The improvements made by Stephanie and David included:
Paving the driveway; converting the existing carport to living
space; building a new carport, bathroom, jacuzzi, and master
bedroom with a full bath; and adding two fireplaces. David was
paid $1,000 per month out of the funds borrowed from petitioner
and, as expected, made approximately 80 percent of the
improvements. By all accounts, the craftsmanship on the
residence was well regarded. The improvements were completed
after approximately 1 year, and the property was listed for sale
shortly thereafter in 1991.
Stephanie and David first listed the Atascadero property for
sale with a real estate agent on April 19, 1991, at an asking
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Last modified: May 25, 2011