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income tax returns the real property taxes relating to the House.
Moreover, Hilda did not file a gift tax return for 1986. Yet
petitioner now contends that James and Hilda gave David and
Billie Jean $72,000 in exchange for no consideration. In
addition, Hilda reported the 1990 transfer of the House to David
and Billie Jean as a $130,000 gift for Federal tax purposes.
Second, Hilda’s tax reporting and actions did not show an
honest and consistent respect for what petitioner now contends
was the substance of the transaction. The inconsistent tax
reporting is described above. In addition, Hilda recorded the
1986 transaction as a transfer of the House for $72,000 and
recorded the 1990 transaction as a transfer of the House for no
consideration. Both of these actions are consistent with the
making of a gift in 1990 and inconsistent with the making of a
gift in 1986.
Third, petitioner did not attempt to challenge the tax
treatment of the 1986 and 1990 transactions until respondent
discovered that petitioner had failed to include previously
reported gifts on the estate tax return.
Because Hilda treated the 1986 transaction as a sale and the
1990 transaction as a gift for both Federal tax and State law
purposes prior to respondent’s audit, we hold that petitioner may
not now challenge Hilda’s characterization of the 1986 and 1990
transactions.
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Last modified: May 25, 2011