Csaba L. Magassy and Frances H. Magassy - Page 9

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          restoration of the Feadship totaled approximately $2 million.  A            
          memorandum petitioner received from the law firm noted that                 
          petitioner’s cumulative costs in purchasing and restoring the               
          Feadship exceeded the Feadship’s fair market value and that yet             
          additional significant costs would be necessary to complete the             
          restoration of the Feadship.  Petitioner was advised that a sale            
          of the Feadship before completion of the restoration work and               
          without establishing a yacht chartering operation for the                   
          Feadship would preclude treatment by petitioner of any loss on              
          the sale of the Feadship as an ordinary loss under section 1231.            
               In November of 1992, petitioners and Angus settled the                 
          above-referenced lawsuit pursuant to which petitioner agreed to             
          pay Angus an additional $480,000 -- $300,000 in cash and a                  
          $180,000 promissory note with principal and interest due in                 
          3 years.  Petitioner paid Angus the $300,000, and Angus released            
          the maritime lien on the Feadship.  With petitioner’s consent,              
          Captain Coby then transported the Feadship to a shipyard in Bayou           
          La Batre, Alabama.                                                          
               At the shipyard in Bayou La Batre, much of the prior                   
          restoration work that had been done by Angus on the Feadship, at            
          a cost to petitioner of approximately $1 million, was determined            
          to be in need of being redone either because the work was                   
          defective or for other reasons.  From late 1992 until June of               








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