119 T.C. No. 13
UNITED STATES TAX COURT
ESTATE OF FRANK ARMSTRONG, JR., DECEASED, FRANK ARMSTRONG III,
EXECUTOR, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1118-98. Filed October 29, 2002.
In 1991 and 1992, D gave stock to Cs and other
donees. For gift tax purposes, D valued the stock at
$100 per share. As a condition of receiving certain of
these gifts, Cs agreed to pay additional gift taxes
arising if the gifts of stock were later determined to
have a fair market value greater than $100 per share.
In 1993, D died. Subsequently, R determined that D’s
gifts of stock should be valued at $109 per share,
resulting in gift tax deficiencies which were paid by a
trust that D had established. The total gift taxes
paid on D’s 1991 and 1992 gifts of stock were
$4,680,284. Cs paid none of these gift taxes.
D’s estate and the trust sued for refunds of gift
taxes paid, claiming that Cs’ obligations to pay
additional gift taxes as a condition of the gifts they
received reduced the value of the gifts. The U.S.
Court of Appeals for the Fourth Circuit rejected the
refund claims, holding that Cs’ obligations to pay
additional gift taxes were contingent and highly
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