William N. Kellahan, Jr. and Alice H. Kellahan - Page 8




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          Structures, which stated that the cost of digging a canal of the            
          approximate dimensions of the Canal would be $107,134.50.                   
               As of October 5, 1988, the tax-assessed value of the Canal             
          was $1,000.  According to a ratio study completed by the State of           
          South Carolina, in Clarendon County during 1990 the average ratio           
          of tax-assessed value to sales price for nonresidential,                    
          nonagricultural property was 79.4 percent.                                  
               On April 15, 1991, petitioners filed a Form 4868, Extension            
          of Time to File U.S. Individual Income tax Return, seeking an               
          automatic 4-month extension of time to file their 1990 Federal              
          income tax return.  The Form 4868, signed by petitioners’ tax               
          return preparer, required the taxpayer to estimate the amount of            
          tax owed and stated that “If we later find that your estimate was           
          not reasonable, the extension will be null and void.”  On the               
          Form 4868, petitioners estimated a total tax liability of $0 for            
          1990.  On August 15, 1991, petitioners filed a Form 2688,                   
          Application for Additional Extension of Time to File U.S.                   
          Individual Income Tax Return, seeking an additional extension of            
          time to file their 1990 return until October 15, 1991.                      
               Petitioners hired an appraiser to value the Canal.  The                
          appraiser’s report, dated August 15, 1991, valued the Canal at              
          $111,750.  The appraisal used the cost method of valuation, under           
          which the appraiser’s estimated cost of constructing the Canal,             
          $98,010, was included in the value of the property.                         





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