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expenses, as compared with petitioners' original Federal income
tax returns as filed with respondent, petitioners' proposed
revised returns, with regard to these new items and issues, are
to be ignored except to the extent that petitioners have filed
with the Court amendments to their pleadings to properly raise
new issues with regard to such alleged reductions in income and
alleged increases in expenses. Rule 41.
We also note that as a result of information provided by
petitioners to respondent during the course of the audit and
litigation, including the proposed revised returns, respondent
has significantly revised and lowered her original deficiency
determinations against petitioners.
Timber Farm
Prior to 1984, petitioner had no experience in the timber
industry, in farming, or in cattle raising. Petitioner, however,
in 1984 and 1985, after receiving approximately $20 million from
his sale of ALS, investigated and consulted with a number of real
estate and forestry experts about the timber industry and
forestry management.
Specifically, with regard to 621 acres of timber property in
Coos County, Oregon (timber farm), petitioner inspected the
timber farm and the trees growing thereon with real estate agents
and forestry experts. Petitioner and the experts considered the
type and quantity of trees growing on the timber farm, the type
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