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deduction of $209,173, yielding taxable gifts of $2,206,724 and
$2,213,432, respectively.
The Notices
By the notices, respondent determined deficiencies in gift
tax with respect to Mr. and Mrs. McCord in the amounts of
$2,053,525 and $2,047,903, respectively, based on increases in
1996 taxable gifts in the amounts of $3,740,904 and $3,730,439,
respectively. Respondent determined that each petitioner (1)
understated the gross value of his or her share of the gifted
interest, and (2) improperly reduced such gross value by the
actuarial value of the children’s obligation to pay additional
estate taxes potentially attributable to the transaction.
OPINION
I. Introduction
MIL is a Texas limited partnership formed on June 30, 1995.
In exchange for their class B limited partnership interests in
MIL, petitioners contributed to MIL closely held business
interests, oil and gas interests, real estate, stocks, bonds, and
other securities. The parties have stipulated that the value of
petitioners’ contributions in exchange for their class B limited
partnership interests was $12,294,384 ($6,147,192 apiece). On
January 12, 1996, petitioners assigned (as gifts) their
partnership interests in MIL (the gifted interest). On that
date, approximately 65 percent of the partnership’s assets
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