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<SEC-DOCUMENT>0000950134-08-001070.txt : 20080410
<SEC-HEADER>0000950134-08-001070.hdr.sgml : 20080410
<ACCEPTANCE-DATETIME>20080124191018
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950134-08-001070
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20080124

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INCOME OPPORTUNITY REALTY INVESTORS INC /TX/
		CENTRAL INDEX KEY:			0000949961
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		IRS NUMBER:				752615944
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		4685224200

	MAIL ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="d53335d5333501.gif" alt="(METZGER &#38; McDONALD LOGO)">
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">January&nbsp;22, 2008
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Via EDGAR</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Securities and Exchange Commission<BR>
100 F Street N.E., Mail Stop 4561<BR>
Washington, D.C. 20549<BR>
Attn: Evan Woody, Branch Chief<BR>
Jennifer Monick, Staff Accountant

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Re:</TD>
    <TD>&nbsp;</TD>
    <TD>Income Opportunity Realty Investors, Inc. (Commission File
No. 001-14784;<BR>
CIK No.&nbsp;0000949961) &#151; Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 2006 <BR>
filed March&nbsp;30, 2007</TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ladies and Gentlemen:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On behalf of Income Opportunity Realty Investors, Inc., a Nevada corporation (&#147;IOT&#148;), this
letter is being filed as correspondence uploaded on the EDGAR system on behalf of IOT in response
to a letter of additional comment from the Staff of the Securities and Exchange Commission dated
January&nbsp;10, 2008. Schedule&nbsp;1 annexed to this letter contains the response to the comment of the
Staff. In each instance on such Schedule, for convenience, each comment of the Staff is repeated,
followed in each instance by the applicable response to such comment or explanation. Also included
in such response, where appropriate, is a letter/page reference to the text to the applicable
document or instrument referenced in the comment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This letter is being filed under the EDGAR system in direct response to the comment of the
Staff. If you would like to discuss any item concerning the referenced matter or included in this
letter or Schedule&nbsp;1, please do not hesitate to contact the undersigned at any time at 214-740-5030
direct or Steven A. Abney, Executive Vice President and Chief Financial Officer of IOT at
469-522-4238 direct. For your future reference, the facsimile transmission number for IOT should
be 469-522-4240.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very truly yours,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">/s/ Steven C. Metzger
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Steven C. Metzger&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">cc:</TD>
    <TD>&nbsp;</TD>
    <TD>Steven A. Abney<BR>
Executive Vice President and Chief Financial Officer<BR>
Income Opportunity Realty Investors, Inc.<BR>
1800 Valley View Lane, Suite&nbsp;300<BR>
Dallas, Texas 75234</TD>
</TR>
</TABLE>
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SCHEDULE 1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RESPONSE TO COMMENT OF THE STAFF OF</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THE SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BY LETTER DATED JANUARY 10, 2008 WITH RESPECT TO FORM 10-K</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 OF</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMMISSION FILE NO. 1-14784</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following information is to provide a further response to an additional comment of the
Staff of the Securities and Exchange Commission rendered by letter dated January&nbsp;10, 2008 with
respect to Form 10-K Annual Report to the Securities and Exchange Commission for the fiscal year
ended December&nbsp;31, 2006 of Income Opportunity Realty Investors, Inc. (the &#147;Company&#148;). For
convenience, each comment of the Staff is restated below, with our response noted immediately
following the comment. Also included in such response is a letter/page reference to the text in
the Form 10-K for the fiscal year ended December&nbsp;31, 2006 (which was filed on March&nbsp;30, 2007).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Form&nbsp;10-K for the year ended December&nbsp;31, 2006</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Financial Statements</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Consolidated Balance Sheets, page 28</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Comment/Observation No.&nbsp;1.</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We note your response to our prior comment one. Please tell us how you have accounted for
the acquisition of the 29.04% interest in MOPI. In addition, please tell us your basis for
consolidation subsequent and the literature relied upon. Lastly, it appears you
consolidate 100% of MOPI, and only allocate 9.14% of MOPI&#146;s income to minority interest.
Please tell us how you determined it was not necessary to record minority interest for the
additional 71% owned by the two affiliated entities. Within your response to each of the
previous requests, please reference the authoritative literature relied upon by management.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Response to Comment/Observation No.&nbsp;1.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Due to the complexity of the issues raised in your comment a review of the history of events
would aid in the explanation of the accounting and disclosures in question. There are three
significant events relevant to the issue, each discussed in turn below.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In April, 2002, as disclosed in Note 5 to the December&nbsp;31, 2002 financial statements
and as modified in Note 5 to the December&nbsp;31, 2003 financial statements filed in Form
10-K/A on September&nbsp;29, 2005 (reprinted in part below) the Company (along with some of it&#146;s
affiliates) entered into a transaction to transfer its&#146; residential real estate properties
to partnerships formed with Metra Capital LLC
(the &#147;Metra Transaction&#148;). In accordance with SFAS 66, the transaction was accounted for as
a financing transaction due to</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>significant continuing involvement by the Company and it&#146;s
affiliates and other considerations. As a result, the residential real estate remained
assets of the Company for Generally Accepted Accounting Principles (&#147;GAAP&#148;) but was treated
as a sale for tax/legal basis. The accounting for this transaction was the subject of
several comment letters (the final letter being dated November&nbsp;9, 2005) from the Securities
and Exchange Commission accounting staff with the result being certain improvements to the
footnote disclosure and correction of the accounting for certain operating items but no
changes to the accounting as a financing transaction.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Note 5 (in part) to the December&nbsp;31, 2003 financial statements:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In April&nbsp;2002, the Company transferred all of its residential properties to
partnerships formed with Metra Capital LLC (&#147;Metra&#148;). The properties included
the 60-unit Brighton Court, the 92-unit Del Mar, the 68-unit Enclave, the
280-unit Meridian, the 57-unit Signature, and the 114-unit Sinclair, all
located in Midland, Texas, and the 106-unit Treehouse located in San Antonio,
Texas. Innovo Realty, Inc., a subsidiary of Innovo Group, Inc. (&#147;Innovo&#148;) is a
limited partner in the partnerships that purchased the properties. A former
director of ARI, a related party, controlled approximately 11.67% of the
outstanding common stock of Innovo. The transfer constituted 23% of the total
assets of the Company as of December&nbsp;31, 2001. The transfer price for the
properties totaled $26.2&nbsp;million, of which the Company received $5.3&nbsp;million in
cash after the payment of $15.9&nbsp;million in debt and various closing costs.
Management determined to account for the transaction as a refinancing
transaction (rather than a sale) in accordance with SFAS 66 &#147;Accounting for
Sales of Real Estate.&#148; At the time of the transaction in April&nbsp;2002, ARI was a
related party to the Company by virtue of ARI&#146;s subsidiaries&#146; ownership of
approximately 28.5% of the then outstanding common stock of the Company, and
the fact that ARI and the Company had the same persons as executive officers.
The compensation price for the properties transferred totaled $26.2&nbsp;million and
possible additional contingent consideration depending upon the sale price of
the properties by the Metra partnerships. The Company also received $5.2
million in value of 8% in non-recourse, non-convertible preferred stock of
Innovo. Based upon the prospect of additional consideration, ultimate continued
involvement through the preferred stock and the related-party nature of the
former ARI director&#146;s involvement, as well as the Company retaining a right to
approve the price of any ultimate sale by a Metra partnership of the
properties, and a process by which the Company effectively guaranteed a
preferential return to the Metra investors, management determined that the
transaction must be classified as a financing transaction and not a sale. The
Company continued to be able to exert control over the Metra partnerships, and
no sale was recorded. The Treehouse property was subsequently sold to a
non-related party in February&nbsp;2004, and all of its debts have been repaid to
the lenders at the time of the sale.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In August, 2004 the Company and its&#146; affiliates commenced litigation against certain
parties to the Metra Transaction for failure to comply with certain terms of the
agreements. The litigation was settled in August, 2005 as disclosed in Note 5, to the
December&nbsp;31, 2005 financial statements (reprinted in part below). The settlement
agreement, a modification </TD>
</TR>

</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to the financing agreement, transferred a portion of the
residential real estate properties back to the Company and its&#146; affiliates for tax/legal
basis in the form of stock in Midland Odessa Properties, Inc. (&#147;MOPI&#148;). The Company
received 29.4% of the shares of MOPI as part of the settlement (the &#147;MOPI Settlement&#148;),
representing its&#146; proportionate interest in the residential real estate transferred in the
Metra Transaction, with the balance of the shares distributed to its&#146; affiliates in the
Metra Transaction. MOPI, in turn, is a 30% limited partner in certain partnerships formed
in the Metra Transaction to hold the residential real estate properties.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Note 5 (in part) to the December&nbsp;31, 2005 financial statements:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During August, 2004, certain entities, including the Company, instituted
an action in a Texas state court against Innovo and Metra and others over
the process, as well as distribution questions. During April&nbsp;2005, a
resolution of the litigation occurred settling all liabilities remaining
from the original partnership arrangements which included a return of the
Metra investor equity, prepayment of prospective asset management fees and
miscellaneous fees and transaction costs from the Company and the other
plaintiffs as a payment of the Preferential Return along with the
delegation of management to another entity. Of the payment made, the
Company recognized expense of $56,000 and a reduction of $1,476,000 in
liabilities during the second quarter of 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>From Item&nbsp;13. Certain Relationships and Related Transactions (December&nbsp;31,
2005 Form 10-K)</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During April&nbsp;2005, in connection with the resolution of certain litigation filed August&nbsp;10, 2004 by
the Company, ARI, and TCI, the Company owns 19.9% of Midland Odessa Properties, Inc. (formerly
Innovo Realty, Inc.) (&#147;MOPI&#148;), the balance of which is owned by ARI and TCI. MOPI in turn is a 30%
limited partner in several &#147;METRA&#148; partnerships formed in 2002 when the Company sold all of its
then owned residential properties to partnerships controlled by METRA Capital LLC. The original
sale transactions were accounted for as refinancing transactions with the Company continuing to
report the assets and new debt incurred by the &#147;METRA partnerships on the Company&#146;s financial
statements. As properties are sold to independent third parties, the transactions are reported as
sales. See Notes 5 and 6 to the Consolidated Financial Statements.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Since the Company had been accounting for the residential real estate properties as directly
owned assets in accordance with its&#146; accounting for the previously discussed financing
transaction (see No.&nbsp;1 above), this event did not have any effect on the Company&#146;s GAAP
accounting for the residential real estate assets in the financial statements. The MOPI
Settlement did affect the amount of debt incurred in the Metra Transaction and the
accounting for certain operating items.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Contemporaneously with the MOPI Settlement the Company sold (the &#147;MOPI Sale&#148;), for
approximately $475,000, 9.14% of MOPI (reducing its&#146; interest to
19.9%) to one of its&#146; affiliates in the Metra Transaction as that affiliate desired to own
80% of MOPI so that it could be consolidated for income tax purposes. This sale, for GAAP
purposes, represents </TD>
</TR>

</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the sale of a 2.742% (9.14% of 30%) interest in the Company&#146;s directly
owned residential real estate assets and was accounted for a &#147;minority interest&#148; as each
residential real estate asset is held by a separate corporation. A proportionate share of
the residential real estate income or loss is allocated to the affiliate.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In response to comment 1, the Company did not &#147;acquire&#148; its&#146; interest in MOPI for GAAP financial
statement purposes. The interest in MOPI was received in a legal settlement and represents the
return of a portion of certain assets, for tax purposes, transferred in the Metra financing
transaction. The Company does not consolidate MOPI for GAAP purposes but has continued to account
for the residential real estate as directly owned assets in accordance with SFAS 66. The portion
of the residential real estate sold to an affiliate, represented by the MOPI Sale, has been
accounted for as a minority interest in accordance with the guidance ARB 51, APB 16, and SFAS 141.
</DIV>



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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
