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River, upon petitioner’s election to be treated as an S
corporation effective January 1, 1997.
Our decision relies on the record, which is sufficient in
this case to make a decision based on a preponderance of the
evidence. We do not rely on the burden of proof. In addition,
there is cogent proof in the record that the value of
petitioner’s water right was less than that stated on
petitioner’s 1999 Federal income tax return. Our decision that
the value was lower than that stated on petitioner’s return is
based on the factual circumstances surrounding an arm’s-length
sale of a portion of petitioner’s water right to the city of
Corpus Christi. We conclude that as of January 1, 1997, the
value of petitioner’s water right was $22,532,519.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner’s principal place of business was in the
city of Garwood, Texas.
Petitioner has been in the irrigation business in Texas
since 1900. Petitioner existed as an S corporation from 1948
until 1978, when William K. Lehrer, one of petitioner’s
shareholders, died. At his death, William K. Lehrer’s shares in
petitioner passed to two trusts. At that time and until 1996,
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