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In 1981, petitioner transferred the 40.8-acre fishing
property, plus an additional sum of $34,900, to the State of
Illinois in exchange for 63.8 acres of farmland. Petitioner
accepted the 63.8-acre tract subject to development restrictions
imposed by the State of Illinois that remained in effect for 5
years from the date of the transfer. As a consequence of these
development restrictions, petitioner rented out the 63.8-acre
tract as farmland from 1981 to 1986.
During the 5-year period that the property was rented out as
farmland, petitioner engaged a layout designer to develop plans
for constructing an additional 9-hole golf course, a swimming
pool, and tennis courts on the 63.8-acre tract. The layout
designer produced, and petitioner's board of directors
considered, various plans that would utilize the entire 63.8-acre
tract for recreational facilities. However, after consulting
with the banks that would provide financing for the planned
expansion, petitioner was forced to adopt a plan under which a
portion of the 63.8-acre tract would be devoted to a housing
development as opposed to recreational facilities. The plan that
petitioner finally settled on provided for 59 acres to be devoted
to new recreational facilities with the remaining 4.8 acres to be
subdivided as homesites for sale.
Construction of the new recreational facilities on the 59-
acre tract was completed prior to the close of petitioner's
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