Estate of Gordon B. McLendon, Deceased, Gordon R. McLendon, Jr., Independent Executor - Page 2

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                           SUPPLEMENTAL MEMORANDUM OPINION                            
               HAMBLEN, Judge:  This matter is before the Court on remand             
          from the U.S. Court of Appeals for the Fifth Circuit.  Estate of            
          McLendon v. Commissioner, 77 F.3d 477 (5th Cir. 1995), revg. in             
          part and remanding without published opinion T.C. Memo. 1993-459.           
          All relevant findings of fact set forth in our prior Memorandum             
          Opinion in this case are incorporated herein by this reference.             
          (Unless otherwise indicated, all section references are to the              
          Internal Revenue Code in effect on the date of Gordon B.                    
          McLendon's death.  Rule references are to the Tax Court Rules of            
          Practice and Procedure.)                                                    
               Respondent determined that the Estate of Gordon B. McLendon            
          is liable for deficiencies in Federal gift and estate taxes                 
          arising from a private annuity agreement that Gordon B. McLendon            
          (decedent) entered into on March 5, 1986, approximately 6 months            
          prior to his death from esophageal cancer.  The disputed private            
          annuity agreement was based on decedent's promise to transfer a             
          remainder interest in certain of his assets to his son and a                
          trust created for the benefit of his three daughters (the                   
          obligors) in consideration for the obligors' promise to pay                 
          decedent $250,000 at the time of the execution of the agreement             
          along with an additional amount to be paid to the decedent in the           
          form of an annuity.  The details of the private annuity agreement           

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