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perfect its protective election for special use valuation. On
Schedule A-1, petitioner claimed a special use value for the
qualified woodlands in the amount of $375,711 (compared to the
woodlands' reported FMV of $2,028,730). The remainder of the
Cane Mill property was reported at its FMV of $853,270.
On the Schedule A attached to the amended return, petitioner
reported a total value of $2,132,000 for the Cane Mill property.
This amount represents the FMV of Cane Mill as reported on the
original return, $2,882,000, less $750,000, the maximum allowable
reduction for special use valuation under section 2032A. See
sec. 2032A(a)(2). Furthermore, on Schedule J of the amended
return, petitioner increased the amount of its section 2053(a)(2)
interest expense deduction with respect to funds borrowed from
the Trust to a total of $265,754. In connection with these
amendments, petitioner claimed a refund for an overpayment of
estate tax in the amount of $369,248 on line 28 of the amended
return.
Respondent issued a statutory notice of deficiency to
petitioner on April 23, 1996. Among other adjustments to
decedent's gross estate, respondent disallowed the interest
expense deduction in its entirety. Respondent further disallowed
the deduction for alimony paid to decedent's former spouse to the
extent it exceeded $400,000. (Petitioner has conceded that the
proper amount of the alimony deduction is $400,000.) Respondent
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