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were reasonable in claiming credits on their 1981 Federal income
tax return based upon each recycler's having a value of
$1,162,666. In support of this position, petitioners submitted
into evidence preliminary reports prepared for respondent by
Ernest D. Carmagnola (Carmagnola), the president of Professional
Plastic Associates. Carmagnola had been retained by the IRS in
1984 to evaluate the Sentinel EPE and EPS recyclers in light of
what he described as "the fantastic values placed on the
[recyclers] by the owners." Based on limited information
available to him at that time, Carmagnola preliminarily estimated
that the value of the Sentinel EPE recycler was $250,000.
However, after additional information became available to him,
Carmagnola concluded in a signed affidavit, dated March 16, 1993,
that the machines actually had a fair market value of not more
than $50,000 each in the Fall of 1981.
We accord no weight to the Carmagnola reports submitted by
petitioners. The projected valuations therein were based on
inadequate information, research, and investigation, and were
subsequently rejected and discredited by their author. In one
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
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