George Tsakopoulos and Drousoula Tsakopoulos - Page 4




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          By 1994, Angelo owned 77.86 percent of Stockton/Elsie, and                  
          petitioner owned the remaining 22.14-percent interest.                      
               Angelo attempted to sell Stockton/Elsie in 1985; the sale,             
          however, did not occur because the prospective purchaser learned            
          that Stockton/Elsie would need to be cleaned up due to                      
          contamination.  In 1987 and 1988, Angelo received reports which             
          confirmed contamination in Stockton/Elsie’s soil and groundwater.           
          On March 17, 1992, Angelo filed a lawsuit against several oil               
          companies, including Phillips Petroleum, former owners and                  
          tenants, and insurance companies alleging that they were                    
          responsible for the cleanup costs.  In 1993, the California                 
          Regional Water Quality Control Board issued a cleanup and                   
          abatement order on Stockton/Elsie to certain past and present               
          owners, including Angelo.  Petitioner deducted his share (i.e.,             
          22.14 percent) of these toxic cleanup expenses on his 1993 and              
          1994 tax returns, and respondent allowed these expenses.  Angelo            
          advanced these expenses to petitioner.  By 1995, petitioner had             
          not paid these amounts back to Angelo.                                      
               On August 1, 1995, due to his health problems, financial               
          problems, and fear of potential lawsuits regarding the                      
          contamination of Stockton/Elsie, petitioner deeded his entire               
          interest in this property to Angelo.  This deed was recorded on             
          January 21, 2000.  The deed indicated that there was no value to            
          Stockton/Elsie.                                                             






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