J. Ramsay Farah and Elizabeth Farah - Page 4

          petitioners contend.  The contract for sale lists the purchase              
          price as $315,000.  The form HUD-1 settlement sheet issued at the           
          closing also lists the total purchase price as $315,000.  An                
          addendum to the contract provides that $50,000 is to be paid for            
          “personal property not specifically included in the contract for            
          purchase.”  Petitioners executed a promissory note in the amount            
          of $50,000 in favor of the sellers.  The note carried a term of 5           
          years and called for $5,000 of interest to be paid.                         
               Over the years, petitioners made significant improvements to           
          the Berlin house, costing a total of $274,375, to make it a                 
          suitable retirement home.  In addition to improving the house,              
          petitioners required additional land for a yard and septic                  
          drainage field as most of the property surrounding the Berlin               
          house was marshland.  To that end, petitioners planned to                   
          purchase the 2.39 acre unimproved lot adjacent to the Berlin                
          house, known as Lot 1, Minor Subdivision of W.V. Krewatch Land,             
          South Point Road Berlin, Maryland (South Point Road lot).                   
               On April 6, 1991, on the advice of counsel, petitioners                
          formed the J. Ramsay Farah Family Partnership (Family                       
          Partnership), a Maryland general partnership for the purpose of             
          owning and developing the South Point Road lot.  Petitioners                
          purchased the land through the partnership to help protect the              
          property from liabilities arising from Dr. Farah’s medical                  
          practice.  Dr. Farah was told by counsel that holding the land              

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