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preliminary report, Carmagnola states that he has "a serious
concern of actual profit" of a Sentinel EPE recycler and that to
determine whether the machines actually could be profitable, he
required additional information from PI. Carmagnola also
indicates that in preparing the report, he did not have
information available concerning research and development costs
of the machines and that he estimated those costs in his
valuations of the machines.
Respondent rejected the Carmagnola reports and considered
them unsatisfactory for any purpose. There is no indication in
the records that respondent used them as a basis for any
determinations in the notices of deficiency. Even so, counsel
for petitioners obtained copies of these reports and urge that
they support the reasonableness of the values reported on
petitioners' returns. Not surprisingly, petitioners' counsel did
not call Carmagnola to testify in these cases, but preferred
instead to rely solely upon his preliminary, ill-founded
valuation estimates. (Carmagnola has not been called to testify
in any of the Plastics Recycling cases before us). The
Carmagnola reports were a part of the record considered by this
Court and reviewed by the Court of Appeals for the Sixth Circuit
in the Provizer case, where we held the taxpayers negligent.
Consistent therewith, we find in these cases, as we have found
previously, that the reports prepared by Carmagnola are
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