4
Edward died on June 19, 1989, less than 3 years after the
transfer on October 31, 1986. The estate tax return for his
estate reported adjusted taxable gifts of $51,372.50, which is
$71,372.50 less two $10,000 exclusions pursuant to section
2503(b), representing the life estates created in Edward F. and
Frederick.
Petitioner did not include the gift of real property made by
decedent on October 31, 1986, as an adjusted taxable gift on
decedent's estate tax return. In the notice of deficiency,
respondent determined that the estate must include $51,372.50 as
adjusted taxable gifts, and that there were no further exclusions
available for the grandchildren, as those interests were merely
future interests.
A tax is imposed upon the transfer of the taxable estate of
a decedent who is a citizen or resident of the United States.
Sec. 2001(a). The tax is computed first by determining a
tentative tax on the sum of the taxable estate and the adjusted
taxable gifts, and then reducing that tentative tax by the amount
of gift tax that would have been payable on those gifts, using
the rates in effect at the decedent's death. Sec. 2001(b). The
term "adjusted taxable gifts" for purposes of this subsection
means all taxable gifts made by decedent after December 31, 1976,
other than gifts that are includable in the gross estate of
decedent. Taxable gifts are the total amount of gifts made
during the calendar year, less any available deductions or
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