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children in performance of his October 31, 1951,8 agreement with
Joseph.
On May 25, 1971, Cyril created three trusts, one for each of
his three children. He transferred, inter alia, the proceeds of
the JM stock that had been sold in a 1969 buyout of all JM stock
by Amfac, Inc. Under the terms of each trust, Cyril retained an
income interest for his life, and upon Cyril's death, the trust
was to terminate, and the principal and undistributed income were
to be distributed to the beneficiary.
For the calendar quarter ending June 30, 1971, Cyril filed a
gift tax return. In an attachment entitled "Statement Describing
Incomplete Gifts", Cyril reported the creation of the three
trusts, stating that they were created "pursuant to pre-existing
agreements between * * * [himself] and his father" and explaining
that the transfers were not completed gifts. The IRS accepted
the gift tax return as filed.
Facts Related to Value of JM and Specialty
JM originally operated one location in downtown San
Francisco. In 1928, a second store was opened in Palo Alto,
California, and three other stores were opened between 1943 and
1950--one in San Mateo and two in Sacramento, California. JM did
8We note that the actual language in both Cyril's 1955 and
1965 wills referred to an Oct. 5, 1951, agreement. However,
respondent conceded, and we agree, that Cyril meant to refer to
the Oct. 31, 1951, agreement.
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