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beneficiary, and (3) that the portion of income flowing out to
the beneficiary can be ascertained.” Id.; see also Md. Natl.
Bank v. United States, 609 F.2d 1078, 1080-1081 (4th Cir. 1979).
Here, the parties stipulated that the primary business
purpose of Treeco and its successors was to acquire and manage
timberland for long-term income and appreciation, “and not to
produce immediate income.” The parties further stipulated:
“Petitioners anticipated that all three entities would operate at
a loss for a number of years, and therefore, they did not expect
that these entities would be making distributions to members
during such years.” The record then validates these assumptions
by stipulating to losses, negative cashflows, and an absence of
distributions from 1995 to April of 2001. Hence, even the first
receipt of income prong has not been established on the facts
before us.
Furthermore, even if petitioners had shown that Treeco would
generate income at or near the time of the gifts, the record
fails to establish that any ascertainable portion of such income
would flow out to the donees. Members would receive income from
Treeco only in the event of a distribution. However, the
Operating Agreement states that distributions were to be made in
the manager’s discretion. This makes the timing and amount of
distributions a matter of pure speculation and also raises again
the specter of some form of joint action to oust a manager whose
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