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At some point, TGE transferred Kupuohi II to Teruya. As of
the date the petition was filed, Teruya still owned Kupuohi II.
B. Royal Towers Transaction
In 1994, Teruya owned a fee simple interest in the Royal
Towers Apartment building (Royal Towers) in Honolulu, Hawaii. On
or about December 12, 1994, Teruya and Savio Development Co.
(Savio) entered into a $13.5 million contract for the sale of
Royal Towers. The contract stated that the sale was subject to
the “Seller [Teruya] being able to consummate [a section 1031]
exchange.” Teruya and Savio later agreed to decrease the price
for Royal Towers from $13.5 million to $11,932,000. In April
1995, Teruya’s board of directors approved the sale of Royal
Towers to Savio.
In anticipation of Teruya’s sale of Royal Towers, Teruya and
Times previously had agreed that Teruya would purchase Times’s
interests in two parcels of real property in Waipahu and Aiea,
Hawaii (respectively, Kupuohi I and Kaahumanu). One of the
purchase terms stated:
The purchase will be subject to a [section] 1031 four
party exchange.
* * * * * * *
3(...continued)
numerical stipulations. To avoid these inconsistencies, we have
found Times’s adjusted basis in Kupuohi II to be $1,475,361,
which is the number reflected on Times’s 1995 corporate income
tax return.
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