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FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The
stipulations of facts and the exhibits submitted therewith are
incorporated herein by this reference.
Background
Petitioners, husband and wife, resided in Tomball, Texas, at
the time they filed their petition.
Harold Kahla (petitioner) received a bachelor of business
administration degree in marketing and management in 1961; he
subsequently attended law school but did not graduate. Julia Kahla
(Mrs. Kahla) received a bachelor of arts degree in speech
communication; she later earned a master’s degree in education.
During the years in issue, petitioners were the sole
shareholders of United Galvanizing, Inc. (United), a Texas
corporation. For Federal income tax purposes, United is an S
corporation. Since its inception in 1970, United has operated at
a profit. For the years in issue, United’s income was as follows:
Year Amount
1992 $45,174
1993 235,410
1994 224,221
The North Ranch
The North Ranch is approximately 100 miles from petitioners’
home in Tomball. It comprises approximately 1,223 acres. The land
was acquired, in substantially undeveloped condition, as follows:
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Last modified: May 25, 2011