UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                 SCHEDULE 13E-3


              RULE 13E-3 TRANSACTION STATEMENT UNDER SECTION 13(e)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                (AMENDMENT NO. 1)

                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                              (Name of the Issuer)

                         AMERICAN REALTY INVESTORS, INC.
                         BASIC CAPITAL MANAGEMENT, INC.
                                GENE E. PHILLIPS
                     TRANSCONTINENTAL REALTY INVESTORS, INC.
                 TRANSCONTINENTAL REALTY ACQUISITION CORPORATION
                   INCOME OPPORTUNITY ACQUISITION CORPORATION
                    INCOME OPPORTUNITY REALTY INVESTORS, INC.
                       (Names of Persons Filing Statement)

                      COMMON STOCK, PAR VALUE .01 PER SHARE
                         (Title of Class of Securities)

                                   452926-10-8
                      (CUSIP Number of Class of Securities)

                                ROBERT A. WALDMAN
                        1800 VALLEY VIEW LANE, SUITE 300
                               DALLAS, TEXAS 75234
                                 (469) 522-4200
                              (469) 522-4360 (FAX)


                                   ----------
                                   With copies
                                       to:
                                   ----------

       STEVEN C. METZGER, ESQ.                        JEFFREY M. SONE, ESQ.
    PRAGER METZGER & KROEMER, PLLC                    JACKSON WALKER L.L.P.
     2626 COLE AVENUE, SUITE 900                   901 MAIN STREET, SUITE 6000
        DALLAS, TEXAS 75204                            DALLAS, TEXAS 75202
            (214) 969-7600                               (214) 953-6000
         (214) 523-3838 (FAX)                          (214) 953-5822(FAX)
      (Name, Address, and Telephone Numbers of Person Authorized to Receive
      Notices and Communications on Behalf of the Persons Filing Statement)

This statement is filed in connection with (check the appropriate box):






a. [ ]   The filing of solicitation materials or an information statement
         subject to Regulation 14A (Sections 240.14a-1 through 240.14b-2),
         Regulation 14C (Sections 240.14c-1 through 240.14c-101) or Rule
         13e-3(c) (Section 240.13e-3(c)) under the Securities Exchange Act of
         1934 ("the Act").

b. [X]   The filing of a registration statement under the Securities Act of
         1933.

c. [ ]   A tender offer.

d. [ ]   None of the above.

         Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [ ]

         Check the following box if the filing is a final amendment reporting
the results of the transaction:

                            Calculation of Filing Fee



             Transaction valuation*                         Amount of filing fee
             ----------------------                         --------------------
                                                         
                 $1,366,564.00                                     $125.72


         *Filing fee determined by multiplying: (i) 683,282 shares of 10% Series
H Cumulative Redeemable Convertible preferred stock, par value $2.00 per share,
which represents the maximum number of shares of Series H Redeemable Convertible
preferred stock to be issued in connection with the merger of Income Opportunity
Realty Investors, Inc. ("IOT") described herein at the exchange ratio of one
share of Series H Redeemable Convertible preferred stock for each share of IOT
common stock outstanding (other than shares owned by American Realty Investors,
Inc. "ARL") or its subsidiaries), by (ii) $2.00, the par value of the Series H
Cumulative Redeemable Convertible preferred stock, by (iii) .000092.

[X]      Check the box if any part of the fee is offset as provided by Section
240.0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.


                                                  
Amount Previously Paid:  $2,283.61                   Filing Party:  American Realty Investors, Inc.
Form or Registration No.:  333-83292                 Date Filed:  February 22, 2002


                        RULE 13E-3 TRANSACTION STATEMENT

         Introduction

         This Amendment No. 1 to Transaction Statement on Schedule 13E-3 (this
"Transaction Statement") is filed pursuant to Section 13(e) of the Securities
Exchange Act of 1934, as amended, and is part of business combination being
proposed as part of a court approved settlement (the "Settlement Agreement") of
a lawsuit styled Jack Olive, et. al. v. National Income Realty Trust, et al,
Case No. C89 4331 MHP pending in the United States District Court for the
Northern District of California (the "Olive Litigation"). The claims in the
Olive Litigation related to the operation and management of Transcontinental
Realty Investors, Inc. ("TCI") and IOT. Defendants in the lawsuit included,
among others, American Realty Trust, Inc. ("ART") (a subsidiary of ARL), TCI,
IOT, Basic Capital Management, Inc. ("BCM") and Gene E. Phillips ("Mr.
Phillips"). BCM is a contractual advisor that is responsible for managing the
affairs of ARL, TCI and IOT and for advising the respective boards on setting
the policies which guide ARL, TCI and IOT.




                                       2


         TCI and IOT Mergers

         As a result of the Settlement Agreement, ARL has agreed to acquire all
of the outstanding common stock of TCI and IOT through the merger of TCI and IOT
with two newly formed wholly-owned subsidiaries of ARL, with TCI and IOT each
being the surviving corporations (the "Business Combination").

         Structure of the Transactions

         As part of the mergers, stockholders (other than Mr. Phillips, BCM, ARL
and ART (collectively the "Affiliated Entities") or their affiliates) are to
receive $17.50 per share in cash for TCI common stock or $19.00 per share in
cash for IOT common stock, which amounts shall be reduced by any dividends paid
after January 2, 2002 on the TCI or IOT common stock, respectively. In the
mergers, the stockholders of TCI and IOT not affiliated with the Affiliated
Entities have the opportunity (but no obligation) to affirmatively elect to
receive shares of 10% Series G redeemable convertible preferred stock of ARL
having a liquidation value of $20 per share in exchange for TCI common stock or
shares of 10% Series H redeemable convertible preferred stock of ARL having a
liquidation value of $21.50 per share in exchange for IOT common stock, which
amounts shall be reduced by any dividends paid after January 2, 2002 on the TCI
or IOT common stock, respectively. In the mergers, the Affiliated Entities will
receive shares of the ARL preferred stock for the shares of common stock of TCI
and IOT held by them, provided, however, that shares of TCI and IOT common stock
held by ARL and its subsidiaries will be cancelled. The purchase prices and
liquidation values have been established under the Settlement Agreement. The
cash consideration to be paid to the nonaffiliated TCI and IOT stockholders is
to be guaranteed by and become an obligation of the Affiliated Entities.

         The mergers are to occur only after the satisfaction of certain
conditions, including the approval of each merger by a majority of the shares
held by the nonaffiliated TCI and IOT stockholders, as applicable, who vote by
in person or by proxy at meetings of stockholders called for that purpose. ARL
does not currently have enough cash to pay the cash consideration that will be
due to stockholders of TCI and IOT as a result of the mergers. The ARL board of
directors has determined that it will not enter into the TCI and IOT mergers
until, in each case, sufficient cash is available to ARL, either from its own
resources or from TCI or IOT immediately after the mergers, to pay the cash
merger consideration due as a result of the mergers.

         Filing Persons

         The filing persons for this Transaction Statement are ARL, BCM, Mr.
Phillips, Transcontinental Acquisition Corporation ("TCI Merger Sub"), TCI,
Income Opportunity Acquisition Corporation ("IOT Merger Sub") and IOT.

         Joint Proxy Statement/Prospectus

         The Olive Litigation, Settlement Agreement and TCI and IOT merger
transactions are further described in the preliminary Joint Proxy
Statement/Prospectus dated as of _____ __, 2002. The Joint Proxy
Statement/Prospectus is part of the Registration Statement on Form S-4 (Reg. No.
333-83292), as amended by pre-effective Amendments Nos. 1, 2, 3 and 4 thereto,
filed by ARL with the Securities and Exchange Commission. As of the date of the
filing of this Transaction Statement, the Joint Proxy Statement/Prospectus is in
preliminary form and is subject to completion. This Transaction Statement will
be amended to reflect the completion of, or amendment to, the Joint Proxy
Statement/Prospectus.

         All information in this Transaction Statement concerning ARL, TCI
Merger Sub and IOT Merger Sub has been provided by ARL, all information
concerning TCI has been provided by TCI, all information concerning IOT has been
provided by IOT, all information concerning BCM has been provided by BCM, and
all information concerning Mr. Phillips has been provided by Mr. Phillips.




                                       3


         The responses and cross-references presented in the following table are
supplied pursuant to the General Instruction F to Schedule 13E-3 and show the
locations in the Joint Proxy Statement/Prospectus (including all appendices
thereto) of the information required to be included in response to the items of
this Transaction Statement. The information in the Joint Proxy
Statement/Prospectus and Registration Statement on Form S-4, as amended,
including all appendices and exhibits thereto, are expressly incorporated herein
by reference and the responses to each item in this Transaction Statement are
qualified in their entirety by the information contained in the Joint Proxy
Statement/Prospectus and Registration Statement of Form S-4, as amended and the
exhibits thereto.

ITEM 1. SUMMARY TERM SHEET.

Item 1001 of Regulation M-A.

Item 1001.        The information is set forth in the "Summary" of the Joint
                  Proxy Statement/Prospectus and is incorporated herein by
                  reference.

ITEM 2. SUBJECT COMPANY INFORMATION.

Item 1002 of Regulation M-A.

(a)               IOT is the subject company. The information is set forth in
                  the "SUMMARY" of the Joint Proxy Statement/Prospectus and is
                  incorporated herein by reference.

(b)               The subject class of equity securities are Common Stock, par
                  value $.01 per share, of TCI. The information is set forth in
                  the "SUMMARY" of the Joint Proxy Statement/Prospectus and is
                  incorporated herein by reference.

(c) and (d)       The information is set forth in the "SUMMARY - Market Prices
                  and Dividend Information" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(e)               None

(f)               The information is set forth in the "CERTAIN INFORMATION
                  REGARDING TCI COMMON STOCK AND IOT COMMON STOCK" of the Joint
                  Proxy Statement/Prospectus and is incorporated herein by
                  reference.

ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.

Item 1003 of Regulation M-A.

(a) - (c)         The filing persons for this Transaction Statement are ARL,
                  BCM, Mr. Phillips, TCI Merger Sub, TCI, IOT Merger Sub and
                  IOT. IOT is the subject company. ARL, TCI Merger Sub, TCI, IOT
                  Merger Sub, are parties to the Business Combination. BCM is a
                  contractual advisor that is responsible for managing the
                  affairs of ARL, TCI and IOT and for advising the respective
                  boards on setting the policies which guide ARL, TCI and IOT.
                  Mr. Phillips is a business man with substantial experience in
                  the real estate development industry. A trust for Mr.
                  Phillips's children, namely the May Trust, indirectly owns
                  BCM. For more than the last five years, Mr. Phillips has
                  served as a representative of the May Trust. As a
                  representative of the May Trust, Mr. Phillips is actively
                  involved in consultation with the officers of BCM, and thus
                  the officers of ARL, TCI and IOT, on a daily basis. As a
                  result, although Mr. Phillips does not own any stock of BCM,
                  ARL, TCI or IOT, he has significant





                                       4



                  influence over the conduct of their respective business
                  affairs and is involved in substantially all of their
                  respective material business decisions. Except as set forth
                  below, the name, business address and business telephone
                  number of each filing person and each other person or entity
                  set forth below is 1800 Valley View Lane, Suite 300, Dallas,
                  Texas 75234. The telephone number for each corporation is
                  469-522-4200.

                  Each of the individuals set forth below is a citizen of the
                  United States. Mr. Mizrachi is a citizen of the United States
                  and Israel. During the last five years, (i) neither ARL, TCI
                  Merger Sub, TCI, IOT Merger Sub, IOT, BCM, Mr. Phillips or any
                  of the reported persons in this Transaction Statement, nor
                  their executive officers or directors has been convicted in a
                  criminal proceeding (excluding traffic violations and/or
                  similar misdemeanors) and (ii) except as set forth below,
                  neither ARL, TCI Merger Sub, TCI, IOT Merger Sub, IOT, BCM,
                  Mr. Phillips or any of the reported persons in this
                  Transaction Statement, nor any of their respective executive
                  officers or directors has been a party to any civil proceeding
                  of a judicial or administrative body of competent jurisdiction
                  which resulted in a judgment, decree or final order enjoining
                  future violations of, or prohibiting or mandating activities
                  subject to, federal or state securities laws or finding any
                  violation with respect to such laws.

                  In August, 2002, Mr. Phillips and five corporations, including
                  BCM, affiliated with Mr. Phillips or the trust for his
                  children that indirectly owns BCM, agreed in negotiations with
                  the staff of the Securities and Exchange Commission to enter
                  into an Order Instituting Proceedings Pursuant to Section 21C
                  of the Securities Exchange Act of 1934, as amended, in an
                  administrative proceeding brought by the Securities and
                  Exchange Commission and pay a substantial civil penalty in
                  connection therewith. Although the Order has been agreed to by
                  Mr. Phillips, the five corporations affiliated with Mr.
                  Phillips or the trust and the staff of the SEC, it has not
                  been formally approved by the Securities and Exchange
                  Commission. The Order in its current form finds, among other
                  things, that Mr. Phillips and each of the five corporations,
                  including BCM, had violated Section 13(d) and 10(b) of the
                  Securities Exchange Act of 1934, as amended, and Rules 10b-5,
                  13d-1 and 13d-2 promulgated thereunder, by failing to file
                  reports required under Section 13(d) with respect to the
                  securities of Greenbriar Corporation. The Order further
                  determines that Mr. Phillips had substantial contact with the
                  management of BCM and had a significant influence on its
                  advisory services and investment decisions as well as the
                  investment decisions of the five other entities that are the
                  subject of the Order. The Order also determines that Mr.
                  Phillips exercised the same influence over the management and
                  investment decisions of ART, currently a subsidiary of ARL.
                  The Order requires Mr. Phillips and the five corporations,
                  including BCM, to cease and desist from committing or causing
                  any violation of Sections 10(b) and 13(d) of the Exchange Act
                  and Rules 10b-5, 13d-1 and 13d-2 promulgated thereunder.

                  FILING PERSONS

                  1.  ARL (FILING PERSON)

                  The information is set forth in the "MANAGEMENT OF ARL" and
                  "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT OF ARL", "MANAGEMENT OF ARL", "THE PLANS OF THE
                  MERGER - Management and Board of Directors after the Mergers"
                  and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT OF ARL" of the Joint Proxy Statement/Prospectus and
                  is incorporated herein by reference.

                  2.  BCM (FILING PERSON)

                  The information is set forth in the "RISK FACTORS - Control by
                  BCM and Related Conflicts of Interest", "THE ADVISOR-BCM" and
                  "THE ADVISOR-BCM - Directors and





                                       5


                  Principal Officers of Advisor" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

                  3.  GENE E. PHILLIPS (FILING PERSON)

                  The information is set forth in the "SUMMARY - The Parties -
                  Gene E. Phillips", "RISK FACTORS - Control by BCM and Related
                  Conflicts of Interest", "THE ADVISOR-BCM", "THE ADVISOR-BCM -
                  Directors and Principal Officers of Advisor", "CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS OF BCM, ARL, TCI AND
                  IOT - Certain Business Relationships", "INFORMATION ABOUT ARL
                  - BUSINESS OF ARL - Management of the Company", "MANAGEMENT
                  OF ARL - Directors and Executive Officers", "INFORMATION ABOUT
                  TCI - Management of Company", "MANAGEMENT OF TCI - Directors
                  and Executive Officers of TCI", INFORMATION ABOUT IOT -
                  Management of Company" and "MANAGEMENT OF IOT - Directors and
                  Executive Officers of IOT" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

                  4.  TCI MERGER SUB (FILING PERSON)

                  The information is set forth in the "SPECIAL FACTORS -
                  General" and "MANAGEMENT OF ARL" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.
                  Ronald E. Kimbrough is the President and Secretary of TCI
                  Merger Sub and is also the sole director of TCI Merger Sub.
                  TCI Merger Sub is a wholly owned subsidiary of ARL.

                  5.  TCI (FILING PERSON)

                  The information is set forth in the "MANAGEMENT OF TCI",
                  "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT OF TCI", "MANAGEMENT OF TCI", "THE PLANS OF THE
                  MERGER - Management and Board of Directors after the Mergers"
                  and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT OF TCI" of the Joint Proxy Statement/Prospectus and
                  is incorporated herein by reference.

                  6.  IOT MERGER SUB (FILING PERSON)

                  The information is set forth in the "MANAGEMENT OF ARL" of the
                  Joint Proxy Statement/Prospectus and is incorporated herein by
                  reference. Ronald E. Kimbrough is the President and Secretary
                  of IOT Merger Sub and is also the sole director of IOT Merger
                  Sub. ARL is the sole shareholder of IOT Merger Sub.

                  7.  IOT (FILING PERSON)

                  The information is set forth in the "MANAGEMENT OF IOT",
                  "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT OF IOT", "MANAGEMENT OF IOT", "THE PLANS OF THE
                  MERGER - Management and Board of Directors after the Mergers"
                  and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT OF IOT" of the Joint Proxy Statement/Prospectus and
                  is incorporated herein by reference.




                                       6




                  CONTROLLING PERSONS

                  1.  BCM (CONTROLLING PERSON OF ARL AND TCI)

                  The information is set forth in the "SECURITY OWNERSHIP OF
                  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ARL" and "SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TCI"
                  and is incorporated herein by reference. See the disclosures
                  set forth above under the caption "BCM (Filing Person)" with
                  respect to the executive officers and directors of BCM.

                  2.  ONE REALCO CORPORATION AND NEW STARR CORPORATION
                  (CONTROLLING PERSON OF ARL)

                  The information is set forth in the "SECURITY OWNERSHIP OF
                  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ARL" and is
                  incorporated herein by reference. According to the Schedule
                  13D/A-1 filed by One Realco and New Starr filed with the SEC
                  on October 10, 2001, (i) One Realco has its principal place
                  executive offices located at 555 Republic Drive, Suite 490,
                  Plano, Texas 75074 and New Starr has its principal executive
                  offices located at 1750 Valley View Lane, Suite 130, Farmers
                  Branch, Texas 75234. The name, business address, and capacity
                  of each of the executive officers and directors of One Realco
                  and New Starr are set forth below.

                 
                 
                               NAME                     POSITION WITH REALCO                BUSINESS ADDRESS
                               ----                     --------------------                ----------------
                                                                                
                          Ronald F. Akin               Director and President              555 Republic Drive
                                                                                               Suite 490
                                                                                           Plano, Texas 75074
                         F. Terry Shumate             Director, Vice President,            555 Republic Drive
                                                       Secretary and Treasurer                 Suite 490
                                                                                           Plano, Texas 75074


                 
                 
                               NAME                    POSITION WITH NEW STARR              BUSINESS ADDRESS
                               ----                    -----------------------              ----------------
                                                                                
                          Ronald F. Akin               Director, President and           1750 Valley View Lane
                                                              Treasurer                        Suite 130
                                                                                      Farmers Branch, Texas 75234
                         F. Terry Shumate            Director and Vice President         1750 Valley View Lane
                                                                                               Suite 130
                                                                                      Farmers Branch, Texas 75234
                          Mary K. Willet                      Secretary                  1750 Valley View Lane
                                                                                               Suite 130
                                                                                      Farmers Branch, Texas 75234


                  3.  EQK HOLDINGS, INC. (CONTROLLING PERSON OF TCI AND IOT)

                  The information is set forth in the "SECURITY OWNERSHIP OF
                  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TCI" and "SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF IOT"
                  and is incorporated herein by reference. EQK Holdings, Inc.
                  ("EQK Holdings"), a wholly owned subsidiary of ART. EQK
                  Holdings is a real estate investment company. The name and
                  capacity of each of the executive officers and directors of
                  EQK Holdings is set forth below. See the






                                       7


                  disclosures set forth above under the captions "ARL (Filing
                  Person)", "TCI (Filing Person)" and "IOT (Filing Person)"with
                  respect to the executive officers and directors of EQK
                  Holdings.



                                       NAME                                             POSITION
                                       ----                                             --------
                                                                           
                                Ronald E. Kimbrough                           Director and Vice President
                                 Mark W. Branigan                                    Vice President
                                  Louis J. Corna                                     Vice President
                                 Robert A. Waldman                               Director and Secretary
                                     John Cook                                       Vice President
                                    Thomas Bell                                      Vice President


                  4.  ART (CONTROLLING PERSON OF EQK HOLDINGS)

                  The information is set forth in the "SECURITY OWNERSHIP OF
                  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TCI" and "SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF IOT"
                  and is incorporated herein by reference. EQK Holdings is a
                  wholly owned subsidiary of ART. ART is a wholly owned
                  subsidiary of ARL. ART is a real estate investment company
                  engaged in the business of investing in and originating
                  mortgage loans and investing in real estate. The name and
                  capacity of each of the executive officers and directors of
                  ART is set forth below. See the disclosures set forth above
                  under the captions "ARL (Filing Person)", "TCI (Filing
                  Person)" and "IOT (Filing Person)"with respect to the
                  executive officers and directors of ART.



                                       NAME                                             POSITION
                                       ----                                             --------
                                                             
                                Ronald E. Kimbrough                    Director, and Executive Vice President and
                                                                                Chief Financial Officer
                                 Mark W. Branigan                        Executive Vice President - Residential
                                David W. Starowicz                    Executive Vice President - Commercial Asset
                                                                                       Management
                                  Louis J. Corna                             Executive Vice President - Tax
                                 Robert A. Waldman                   Director, Senior Vice President, Secretary and
                                                                                    General Counsel


                  5.  THE MAY TRUST (CONTROLLING PERSON OF BCM)

                  BCM is wholly owned by Realty Advisors, Inc. ("Realty
                  Advisors"). Realty Advisors is wholly owned by the May Trust.
                  The trustees of the May Trust are Donald W. Phillips, brother
                  of Mr. Phillips, Mickey Ned Phillips, brother of Mr. Phillips,
                  and Ryan Phillips, son of Mr. Phillips. Mr. Donald W.
                  Phillips' business address is 1800 Valley View Lane, Suite
                  200, Dallas, Texas 75234. Mr. Donald W. Phillips' present
                  principal occupation is Vice President - Construction of Regis
                  Property Management, Inc. and has served in such capacity
                  since 1995. Mickey Ned Phillips and Ryan Phillips are also
                  directors of BCM. See the disclosures set forth above under
                  the caption "BCM (Filing Person)" with respect to information
                  concerning Mickey Ned Phillips and Ryan Phillips. Mr. Phillips
                  is a representative of the May Trust. See the disclosures set
                  forth above under the caption "Gene E. Phillips (Filing
                  Person)".




                                       8




                  6.  TCI (CONTROLLING PERSON OF IOT)

                  The information is set forth in the "SECURITY OWNERSHIP OF
                  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF IOT". See the
                  disclosures set forth above under the caption "TCI (Filing
                  Person)" with respect to the executive officers and directors
                  of TCI.

ITEM 4.  TERMS OF THE TRANSACTION.

Item 1004 of Regulation M-A.

(a)               The information is set forth in the "SUMMARY", "SPECIAL
                  FACTORS - Federal Income Tax Considerations" and "THE PLANS OF
                  MERGER" of the Joint Proxy Statement/Prospectus and is
                  incorporated herein by reference.

(c)               The information is set forth in the "SUMMARY" and "THE PLANS
                  OF MERGER" of the Joint Proxy Statement/Prospectus and is
                  incorporated herein by reference.

(d)               The information is set forth in the "SUMMARY" and "THE SPECIAL
                  MEETINGS - Appraisal Rights" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(e)               None

(f)               The information is set forth in the "SUMMARY" and "RISK
                  FACTORS - Risks Related to the ARL Preferred Stock" of the
                  Joint Proxy Statement/Prospectus and is incorporated herein by
                  reference.

ITEM 5.  PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.

Item 1005 of Regulation M-A.

(a)               The information is set forth in the "CERTAIN RELATIONS AND
                  RELATED TRANSACTIONS OF BCM, ARL, TCI AND IOT - Certain
                  Business Relationships" "CERTAIN RELATIONS AND RELATED
                  TRANSACTIONS OF BCM, ARL, TCI AND IOT - Related Party
                  Transactions" and "CERTAIN RELATIONS AND RELATED TRANSACTIONS
                  OF BCM, ARL, TCI AND IOT - Indebtedness of Management" of the
                  Joint Proxy Statement/Prospectus and is incorporated herein by
                  reference.

(b) and (c)       The information is set forth in the "SPECIAL FACTORS -
                  Background of the Business Combination" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(e)               The information is set forth in the "SPECIAL FACTORS -
                  Background of the Business Combination", "CERTAIN RELATIONS
                  AND RELATED TRANSACTIONS OF BCM, ARL, TCI AND IOT - Certain
                  Business Relationships" "CERTAIN RELATIONS AND RELATED
                  TRANSACTIONS OF BCM, ARL, TCI AND IOT - Related Party
                  Transactions" and "CERTAIN RELATIONS AND RELATED TRANSACTIONS
                  OF BCM, ARL, TCI AND IOT - Indebtedness of Management" and
                  "THE PLANS OF MERGER" of the Joint Proxy Statement/Prospectus
                  and is incorporated herein by reference.




                                       9




ITEM 6.  PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.

Item 1006 of Regulation M-A.

(b)               The information is set forth in the "SUMMARY" and "THE PLANS
                  OF MERGER - Exchange of Certificates" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(c)(1)-(7)        The information is set forth in the "SPECIAL FACTORS - Effects
                  of the Mergers; ARL after the Mergers" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(c)(8)            Not applicable

ITEM 7.  PURPOSES, ALTERNATIVES, REASONS AND EFFECTS.

Item 1013 of Regulation M-A.

(a)               The information is set forth in the "SPECIAL FACTORS - TCI's
                  Purpose and Reasons for the TCI Merger", "SPECIAL FACTORS -
                  IOT's Purpose and Reasons for the IOT Merger" and "SPECIAL
                  FACTORS - ARL's Purpose and Reasons for the Merger" of the
                  Joint Proxy Statement/Prospectus and is incorporated herein by
                  reference.

(b)               The information is set forth in the "SPECIAL FACTORS -
                  Background of the Business Combination" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(c)               The information is set forth in the "SPECIAL FACTORS - TCI's
                  Purpose and Reasons for the TCI Merger", "SPECIAL FACTORS -
                  IOT's Purpose and Reasons for the IOT Merger" and "SPECIAL
                  FACTORS - ARL's Purpose and Reasons for the Merger" of the
                  Joint Proxy Statement/Prospectus and is incorporated herein by
                  reference.

(d)               The information is set forth in the "RISK FACTORS - Risks
                  Related to the Combined Business", "SPECIAL FACTORS - TCI's
                  Purpose and Reasons for the TCI Merger", "SPECIAL FACTORS -
                  IOT's Purpose and Reasons for the IOT Merger", "SPECIAL
                  FACTORS - ARL's Purpose and Reasons for the Merger", "SPECIAL
                  FACTORS - Effects of the Mergers; ARL after the Mergers",
                  "SPECIAL FACTORS - Conduct of Business of Either or Both TCI
                  or IOT if Either Merger is Not Consummated", "SPECIAL FACTORS
                  - Federal Income Tax Considerations" and "INTERESTS OF
                  DIRECTORS AND OFFICERS OF ARL, TCI AND IOT IN THE BUSINESS
                  COMBINATION" of the Joint Proxy Statement/Prospectus and is
                  incorporated herein by reference and "UNAUDITED PRO FORMA
                  CONSOLIDATED FINANCIAL INFORMATION" of the Registration
                  Statement of Form S-4 and is incorporated herein by reference.

ITEM 8.  FAIRNESS OF THE TRANSACTION.

Item 1014 of Regulation M-A.

(a) and (b)       The information is set forth in the SPECIAL FACTORS -
                  Background of the Business Combination", "SPECIAL FACTORS -
                  Determination of Merger Consideration", "SPECIAL FACTORS -
                  ARL's Purpose and Reasons for the Merger", "SPECIAL





                                       10


                  FACTORS - TCI's Purpose and Reasons for the TCI Merger",
                  SPECIAL FACTORS - IOT's Purpose and Reasons for the IOT
                  Merger", "SPECIAL FACTORS - Determination and Recommendation
                  of the TCI Board of Directors", "SPECIAL FACTORS -
                  Determination and Recommendation of IOT Board of Directors",
                  "SPECIAL FACTORS - Fairness Determination of ARL" and "SPECIAL
                  FACTORS - Fairness Determination of BCM and Mr. Phillips" of
                  the Joint Proxy Statement/Prospectus and is incorporated
                  herein by reference.

(c)               The information is set forth in the "THE SPECIAL MEETINGS -
                  Record Date; Votes Required" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(d)               The information is set forth in the "SPECIAL FACTORS -
                  Determination and Recommendation of the TCI Board of
                  Directors", "MANAGEMENT OF TCI - Directors and Executive
                  Officers", "SPECIAL FACTORS - Determination and Recommendation
                  of the TCI Board of Directors" and "MANAGEMENT OF IOT -
                  Directors and Executive Officers" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(e)               The information is set forth in the SPECIAL FACTORS -
                  Background of the Business Combination", "SPECIAL FACTORS -
                  Determination of Merger Consideration", "SPECIAL FACTORS -
                  TCI's Purpose and Reasons for the TCI Merger", SPECIAL FACTORS
                  - IOT's Purpose and Reasons for the IOT Merger", "SPECIAL
                  FACTORS - ARL's Purpose and Reasons for the Merger" of the
                  Joint Proxy Statement/Prospectus and is incorporated herein by
                  reference.

(f)               The information is set forth in the "SPECIAL FACTORS -
                  Background of the Business Combination" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

ITEM 9.  REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS.

Item 1015 of Regulation M-A.

(a) and (b)       The information is set forth in the "SPECIAL FACTORS - Opinion
                  of Financial Advisor", "SPECIAL FACTORS - Analyses", "SPECIAL
                  FACTORS - Net Asset Value Approach-Income Producing Property",
                  SPECIAL FACTORS - Portfolio (Market)-Income Producing
                  Property", "SPECIAL FACTORS - ARL Valuation", "SPECIAL FACTORS
                  - IOT Valuation", "SPECIAL FACTORS - TCI Valuation", "SPECIAL
                  FACTORS - Exchange Ratio Analysis" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(c)               The Fairness Opinion prepared by Houlihan Lokey pertaining to
                  IOT is set forth in the Proxy Statement/Prospectus at Appendix
                  F and is incorporated herein by reference.

(d)               The information is set forth in the "CERTAIN RELATIONSHIPS AND
                  RELATED TRANSACTIONS OF ARL, TCI AND IOT" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(e)               The information is set forth in the "SUMMARY - Olive
                  Settlement" "SPECIAL FACTORS - Background of the Business
                  Combination" of the Joint Proxy Statement/Prospectus and is
                  incorporated herein by reference.




                                       11


ITEM 10.  SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.

Item 1007 of Regulation M-A.

(a) and (b)       The information is set forth in the "SPECIAL FACTORS -
                  Financing of the Business Combination" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(c)               The information is set forth in the "THE PLANS OF MERGER -
                  Expenses of the Mergers" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

(d)               The information is set forth in the "SPECIAL FACTORS -
                  Financing of the Business Combination" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

ITEM 11.  INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

Item 1008 of Regulation M-A.

(a) and (b)       The information is set forth in the "SUMMARY - Overview", "THE
                  ADVISOR - BCM", "CERTAIN INFORMATION REGARDING TCI COMMON
                  STOCK AND IOT COMMON STOCK", "SECURITY OWNERSHIP OF CERTAIN
                  BENEFICIAL OWNERS AND MANAGEMENT OF ARL", "SECURITY OWNERSHIP
                  OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TCI" and
                  "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT OF IOT" of the Joint Proxy Statement/Prospectus and
                  is incorporated herein by reference.

ITEM 12.  THE SOLICITATION OR RECOMMENDATION.

Item 1012(d) and (e) of Regulation M-A.

(d) and (e)       The information is set forth in the "SPECIAL FACTORS -
                  Background of the Business Combination", "SPECIAL FACTORS -
                  Determination of Merger Consideration", "SPECIAL FACTORS -
                  ARL's Purpose and Reasons for the Merger", "SPECIAL FACTORS -
                  TCI's Purpose and Reasons for the TCI Merger", SPECIAL FACTORS
                  - IOT's Purpose and Reasons for the IOT Merger", "SPECIAL
                  FACTORS - Determination and Recommendation of the TCI Board of
                  Directors", "SPECIAL FACTORS - Determination and
                  Recommendation of IOT Board of Directors", "SPECIAL FACTORS -
                  Fairness Determination of ARL", "SPECIAL FACTORS - Fairness
                  Determination of BCM and Mr. Phillips" and "SPECIAL FACTORS -
                  Intent to Vote in Merger Transactions" of the Joint Proxy
                  Statement/Prospectus and is incorporated herein by reference.

ITEM 13.  FINANCIAL STATEMENTS.

Item 1010(a) through (b) of Regulation M-A.

(a)               The information is set forth in IOT's Annual Report on Form
                  10-K for the Year Ended December 31, 2001, IOT's Quarterly
                  Report on Form 10-Q for the quarter ended March 31, 2002 and
                  IOT's Quarterly Report on Form 10-Q for the quarter ended June
                  30, 2002, and "SUMMARY-Ratio of Earnings to Fixed Charges",
                  "SUMMARY-Summary of Financial





                                       12


                  Data of IOT", "SELECTED FINANCIAL DATA OF IOT", Exhibit 12.1
                  and Exhibit 12.3 of the Joint Proxy Statement/Prospectus and
                  is incorporated herein by reference.

(b)               The information is set forth in the "UNAUDITED PRO FORMA
                  CONSOLIDATED FINANCIAL INFORMATION" of the Registration
                  Statement of Form S-4 and is incorporated herein by reference.

ITEM 14.  PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED.

Item 1009 of Regulation M-A.

(a)               The information is set forth in the "THE SUMMARY - The Olive
                  Settlement", "THE SPECIAL MEETINGS - Solicitation of the
                  Proxies" and "SPECIAL FACTORS - Opinion of Financial Advisor"
                  of the Joint Proxy Statement/Prospectus and is incorporated
                  herein by reference.

(b)               None

ITEM 15.  ADDITIONAL INFORMATION.

Item of 1011 of Regulation M-A.

(b)               Reference is made to the Joint Proxy Statement/Prospectus
                  which is incorporated herein by reference.

ITEM 16.  EXHIBITS.

Item of 1016 Regulation M-A.

(a)(2) and (4)    ARL's Registration Statement on Form S-4 (Reg. No. 333-83292),
                  filed by ARL with the Securities and Exchange Commission as
                  amended by pre-effective Amendments Nos. 1, 2, 3, and 4
                  thereto and the Joint Proxy Statement/Prospectus, part of the
                  Registration Statement on Form S-4 (Reg. No. 333-83292) are
                  incorporated herein by reference.

(a)(5)            (i) TCI's Annual Report on Form 10-K for the Year Ended
                  December 31, 2001, TCI's Quarterly Report on Form 10-Q for the
                  quarter ended March 31, 2002 and TCI's Quarterly Report on
                  Form 10-Q for the quarter ended June 30, 2002 are incorporated
                  herein by reference. (ii) IOT's Annual Report on Form 10-K for
                  the Year Ended December 31, 2001, IOT's Quarterly Report on
                  Form 10-Q for the quarter ended March 31, 2002 and IOT's
                  Quarterly Report on Form 10-Q for the quarter ended June 30,
                  2002 are incorporated herein by reference.

(b)               Not Applicable

(c)               (i) The Fairness Opinion of Houlihan Lokey pertaining to IOT
                  is set forth in the Proxy Statement/Prospectus at Appendix D
                  is incorporated herein by reference. (ii) ARL/IORI/TCI Merger:
                  Board Presentation - Executive Summary, January 31, 2002,
                  prepared by Houlihan Lokey Howard & Zukin. The Board
                  Presentation is attached to this Transaction Statement as
                  Exhibit 99.1. (iii) ARL/IORI/TCI Merger: Exhibits to Board
                  Presentation, January 2002, prepared by Houlihan Lokey Howard
                  & Zukin. The Exhibits to Board Presentation are attached to
                  this Transaction Statement as Exhibit 99.2. (iv) Discounted
                  Cash Flow Analysis - Detail prepared by Houlihan Lokey Howard
                  & Zukin. The Analysis - Detail is attached to this Transaction
                  Statement as Exhibit 99.3.

(d)               (i) Agreement and Plan of Merger among ARL, IOT Merger Sub,
                  and IOT included as part of Appendix B of the Joint Proxy
                  Statement/Prospectus is incorporated herein by reference. (ii)
                  The Second Amendment to the Modification of Stipulation of
                  Settlement dated October





                                       13


                  17, 2001 to the Olive Litigation included as Exhibit 10.1 of
                  the Form 8-K filed by IOT on January 29, 2002 is incorporated
                  herein by reference.

(f)               Not Applicable

(g)               Not Applicable




                                       14

                                    SIGNATURE

         After due inquiry and to the best of my knowledge and belief, I certify
that the information is set forth in this statement is true, complete and
correct.


                                      AMERICAN REALTY INVESTORS, INC.


Date:  August 30, 2002                By: /s/ Ronald E. Kimbrough
                                          --------------------------------------
                                      Printed Name:  Ronald E. Kimbrough
                                      Title:  Executive Vice President and Chief
                                               Financial Officer


                                      BASIC CAPITAL MANAGEMENT, INC.


Date:  August 30, 2002                By: /s/ Ronald E. Kimbrough
                                          --------------------------------------
                                      Printed Name:  Ronald E. Kimbrough
                                      Title:  Executive Vice President and Chief
                                               Financial Officer


Date:  August 30, 2002                /s/ Gene E. Phillips
                                      ------------------------------------------
                                      Printed Name:  Gene E. Phillips


                                      TRANSCONTINENTAL REALTY
                                        INVESTORS, INC.


Date:  August 30, 2002                By: /s/ Ronald E. Kimbrough
                                          --------------------------------------
                                      Printed Name:  Ronald E. Kimbrough
                                      Title:  Executive Vice President and Chief
                                               Financial Officer


                                      TRANSCONTINENTAL REALTY
                                        ACQUISITION CORPORATION


Date:  August 30, 2002                By: /s/ Ronald E. Kimbrough
                                          --------------------------------------
                                      Printed Name:  Ronald E. Kimbrough
                                      Title:  Director and President






                                      INCOME OPPORTUNITY ACQUISITION
                                        CORPORATION


Date:  August 30, 2002                By: /s/ Ronald E. Kimbrough
                                          --------------------------------------
                                      Printed Name:  Ronald E. Kimbrough
                                      Title:  Director and President



                                      INCOME OPPORTUNITY REALTY
                                        INVESTORS, INC.


Date:  August 30, 2002                By: /s/ Ronald E. Kimbrough
                                          --------------------------------------
                                      Printed Name:  Ronald E. Kimbrough
                                      Title:  Executive Vice President and Chief
                                               Financial Officer












                                       16








                                 EXHIBIT INDEX





EXHIBIT
NUMBER                    DESCRIPTION
-------                   -----------
                       

99.1                      ARL/IORI/TCI Merger: Board Presentation -- Executive Summary, January 31, 2002, prepared by
                          Houlihan Lokey Howard & Zukin.

99.2                      ARL/IORI/TCI Merger: Exhibits to Board Presentation, January 2002, prepared by Houlihan Lokey
                          Howard & Zukin.

99.3                      Discounted Cash Flow Analysis - Detail prepared by Houlihan Lokey Howard & Zukin.