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Petitioner timely filed Form 706, United States Estate (and
Generation-Skipping Transfer) Tax Return (original return), on
May 19, 1993. On Schedule A, Real Estate, attached thereto,
petitioner valued Cane Mill at $2,882,000, its fair market value
(FMV) as determined by its appraiser, Eley C. Frazer III
(Frazer). Petitioner made a valid protective election for
special use valuation under section 2032A with respect to Cane
Mill on the Schedule A-1, Section 2032A Valuation, attached to
the original return. Petitioner also made a "qualified
woodlands" election pursuant to section 2032A(e)(13) with respect
to 2,929.1 acres of timberland located on Cane Mill. In
addition, petitioner claimed a deduction for interest on the Note
in the amount of $49,589 on Schedule J, Funeral Expenses and
Expenses Incurred in Administering Property Subject to Claims,
attached to the original return. Petitioner also claimed a
deduction in the amount of $545,536 for alimony due decedent's
former wife under the terms of their divorce on Schedule K, Debts
of the Decedent, and Mortgages and Liens, attached to the
original return.
By letter dated January 10, 1996, respondent's estate tax
attorney, Travis Vance III, advised petitioner that respondent
proposed to make certain adjustments to decedent's taxable
estate, none of which were related to the FMV of Cane Mill as
reported on the original return. On March 8, 1996, petitioner
timely filed an amended Form 706 (amended return) in an effort to
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