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The issues for decision are: (1) Whether petitioners are
entitled to exclude all of their income from Federal income
taxation, and (2) whether petitioners are entitled to deduct
payments made into a reserve account.
FINDINGS OF FACT
The parties submitted this case fully stipulated. The
stipulation of facts, the supplemental stipulation of facts, and
the attached exhibits are incorporated herein by this reference.
Petitioners resided in Cherokee, North Carolina, at the time they
filed their petition.
Petitioner Frela D. Beck is an enrolled member of the
Eastern Band of the Cherokee Indians. During 1992 and 1993,
petitioners owned and operated apartment buildings located on a
Cherokee Indian Reservation in North Carolina. The legal title
to the land on which the apartment buildings sit is vested in the
United States of America and held in trust for the Eastern Band
of Cherokee Indians.
Petitioners entered into a loan agreement in the amount of
$376,000 with the Farmers Home Administration (FmHA) of the U.S.
Department of Agriculture in order to construct the apartment
buildings. The loan agreement required petitioners to deposit a
total of 10 percent of the loan amount into a reserve account.
1(...continued)
Procedure.
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