Teruya Brothers, Ltd. & Subsidiaries - Page 5

                                        - 5 -                                         
               In August 1995, Teruya entered into an “exchange agreement”            
          with T.G. Exchange, Inc. (TGE), whereby TGE agreed to act as an             
          “exchange party to complete the exchange” of Ocean Vista for                
          replacement property to be designated by Teruya, with the stated            
          purpose of qualifying the exchange under section 1031.  TGE                 
          agreed to acquire the replacement property with proceeds from the           
          sale of Ocean Vista and additional funds from Teruya as necessary           
          to effect the acquisition.  Paragraph 6 of the exchange agreement           
          states:                                                                     
               Notwithstanding the foregoing, if * * * [Teruya] is                    
               unable to locate suitable Replacement Property by the                  
               date specified in the Acquisition Agreement [for Ocean                 
               Vista], then the Acquisition Agreement and this                        
               Exchange Agreement shall be terminated and the parties                 
               shall have no further obligations to each other * * *.                 
               Pursuant to the exchange agreement, Teruya transferred Ocean           
          Vista to TGE, and on September 1, 1995, TGE sold Ocean Vista to             
          the Association for $1,468,500.  At that time, Teruya had a                 
          $93,270 basis in Ocean Vista.                                               
               Also on September 1, 1995, TGE applied the proceeds from the           
          sale of Ocean Vista, as well as $1,366,056 in additional cash               
          from Teruya, to acquire Kupuohi II from Times for $2,828,000.               
          Times had a $1,475,361 adjusted basis in Kupuohi II and                     
          recognized a $1,352,639 gain on the sale.3                                  

               3 The parties have stipulated that Times had a $1,475,633              
          basis in Kupuohi II at the time of its sale; however, this number           
          yields computational inconsistencies with respect to other                  
                                                             (continued...)           





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011