William T. Shipes, Jr. and Kathy D. Shipes - Page 3

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          destroyed Mr. Shipes' entire nursery stock because it was                   
          suspected that such stock was infected with a bacterial disease             
          known as citrus canker.  As a result of this condemnation, Mr.              
          Shipes received $8,661 (the conversion proceeds) on July 28,                
               Petitioners reported the $8,661 in conversion proceeds on              
          their 1986 Federal income tax return.  They did not, however,               
          make an election on that return in accordance with section 1033             
          to defer the gain realized with respect to the conversion                   
               Sometime after July 28, 1986, an entity named Mid-Florida              
          Growers, Inc. (MFGI) initiated a lawsuit against SFDA in which it           
          sought additional compensation for the loss it incurred as a                
          result of the Eradication Project.  That lawsuit was selected as            
          the test case for nursery owners affected by the Eradication                
          Project and was ultimately decided in MFGI's favor by Florida's             
          Supreme Court.  See Department of Agric. & Consumer Servs. v.               
          Mid-Florida Growers, Inc., 521 So. 2d 101 (Fla. 1988).  The State           
          of Florida subsequently established an administrative process by            
          which nursery owners affected by the Eradication Project could              
          file claims for additional compensation.  Such claims were to be            
          filed with the Office of Citrus Canker Claims (the OCCC).  Mr.              
          Shipes filed a claim with the OCCC and received $197,512.08 (the            

               2 Specifically, the USDA paid Mr. Shipes $6,252, and the               
          SFDA paid him $2,109.                                                       

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