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September 1982 note. Stephen did not make an offer of repayment
or an actual repayment of the September 1982 note on or after
September 14, 1985, the date on which it was in all events pay-
able. Even though Stephen failed to pay off the September 1982
note on its due date, petitioner never instituted legal proceed-
ings or took other steps to enforce repayment.
Rather than requesting Stephen to pay off the September
1982 note, at or near the various dates set forth below, peti-
tioner wrote and delivered a letter (forgiveness letter) to him
in which she stated that, as of the date of the letter, she was
"reducing the principal balance" of the September 1982 note by
the amount stated in the letter. The date of each forgiveness
letter to Stephen and the reduction of the "principal balance"
(amount forgiven) stated in each such letter was as follows:
Amount
Date of Letter Forgiven
Dec. 20, 1982 $5,000
Aug. 5, 1983 5,000
Jan. 22, 1984 15,000
Mar. 31, 1985 15,000
Jan. 3, 1986 15,000
Feb. 9, 1987 5,000
Jan. 6, 1988 20,000
Jan. 3, 1990 5,000
Total 85,000
Petitioner determined the amount forgiven that was stated in
each of the forgiveness letters to Stephen by reference to the
total amount that petitioner and her husband were permitted to
give him in a particular year without the imposition of Federal
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