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annuity trust. The probate judge signed a proposed order to that
effect. At that time $667,000, representing the annuity payments
due to Birchfield accrued from decedent’s death, was set aside
for Birchfield. MacQuarrie delayed paying the accrued amount to
Birchfield due to concern over a possible estate audit but
motioned the court for approval to distribute the funds before a
closing letter was obtained. The probate judge ordered that
those funds be distributed to Birchfield, and a payment of
$667,000 was made to Birchfield on December 31, 1996. Four
additional payments were made to Birchfield towards her 5-percent
annuity amount. No Federal estate or State death taxes were paid
by Birchfield on the amounts she received. It was subsequently
determined that funds from the administrative trust were
insufficient to pay both the estate tax attributable to
Birchfield’s interest and the administration expenses and
retirement of decedent’s debts. Accordingly, it will be
necessary to invade the CRAT to make up the shortfall.
Birchfield died of breast cancer on April 22, 1997. At the
time of the estate valuation calculation, MacQuarrie had asked
for and received an affidavit from Birchfield’s doctor stating
that Birchfield had a less than 5-year life expectancy. In
accordance with section 7520,1 the estate valued the charitable
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect as of the date of decedent’s
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