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FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioners resided in
Gold Run, California, at the time they filed their petition.
In 1990, petitioners were interested in finding investment
property. Petitioners saw a brochure advertising the Truckee
Hotel, located in Truckee, California, near Lake Tahoe, for the
price of $1.2 million. The brochure included some financial and
room rental information regarding the hotel. At that time, the
Truckee Hotel was owned by the Meglin Hotel Partnership (MHP).
Gerhard Meglin (Mr. Meglin) was the general partner of MHP and
owned an 82-percent interest in the partnership.
On February 20, 1991, petitioners executed a “Commercial
Real Estate Contract and Receipt for Deposit” (real estate
contract) offering to purchase the Truckee Hotel for $1.2
million. Mr. Meglin made a counteroffer, and the parties
ultimately agreed on the terms of the sale.1 The real estate
contract required Mr. Meglin to provide income and expense
statements for the hotel for 1989, 1990, and 1991. The
statements were to be based on records maintained in the ordinary
course of business and used in the computation of Federal and
State income tax returns. The statements were to be prepared
1The purchase price remained at $1.2 million.
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