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length between unrelated parties. The advanced royalty
obligations of the S-J partnerships ran in favor of and the
payments were to be made to Prodamat, N.V. and Bombardon
Investments, N.V., corporations controlled by petitioner and
Osserman.
The S-J partnerships never entered into mining agreements
with mining contractors, owned any mining equipment, employed
coal operators, or obtained rail siding to transport coal.
During the time the S-J partnerships owned the leases, no coal
was mined or sold on the property.
The lease transactions through which the S-J partnerships
acquired mining leases in the property occurred on or after
November 1, 1976. Material documents relating to the lease
transactions were backdated to either October 25, 1976 or
October 28, 1976, in order to attempt to establish the ownership
interests of the S-J partnerships in the property prior to
October 29, 1976, the effective date of a change in Federal law
eliminating the deductibility of advanced royalty payments made
in years in which no mineral is sold. In a deposition given as
part of a plea agreement in a criminal proceeding relating to
petitioner's promotion of the S-J partnerships, petitioner
admitted that documents were backdated at his request.
Outside consultants hired by S-J partnerships to determine
the feasibility of mining coal on the leased property identified
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