D. G. Smalley and Nell R. Smalley - Page 7


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                                         7.                                           
                           *    *    *    *    *    *    *                            
                    In no event shall Seller have use or control of                   
               the funds contained in escrow on or before termination                 
               of said escrow.  Seller shall not have the right                       
               to sell, assign, transfer, encumber or in any other                    
               manner anticipate or dispose of his interest in said                   
               escrow until the same is actually paid over to and                     
               received by Seller.                                                    
               Pursuant to the escrow agreement and the timber contract, on           
          November 29, 1994, Lewis received from Rayonier net proceeds of             
          $504,935 (the escrow funds), which he deposited into a checking             
          account at Farmers & Merchants Bank in Dublin, Georgia.  By three           
          separate letters, dated December 18, 1994, December 21, 1994, and           
          January 2, 1995, petitioner identified to Lewis as replacement              
          properties three parcels of land (the replacement properties),              
          ownership of each of which was transferred directly to petitioner           
          by warranty deed from the respective owners as follows:                     
                                                  Ownership                           
          Petitioner’s       Replacement        transferred                           
          letter to Lewis     property acreage     to petitioner                      
          Dec. 18, 1994       488.57 acres       Feb. 16, 1995                        
          Dec. 21, 1994        1316.82 acres       Mar. 14, 1995                      
          Jan.  2, 1995       105.7  acres       Feb. 15, 1995                        
               1 The parties have stipulated that the land contained 316.82           
          acres, although the letter to Lewis states that the property                
          contains 312 acres.  To the extent there is a discrepancy, it is            
          immaterial to the result reached herein.                                    
                                                                                     
               The replacement properties are all within 30 miles of the 95           
          acres.  When petitioner acquired these replacement properties,              
          they all contained standing timber that accounted for a                     
          significant part of their value.                                            






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