Elizabeth B. Miller - Page 8

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          gift tax, after taking account of the annual exclusion provided             
          by section 2503(b) and the gift-splitting provisions of section             
          2513(a)(1).                                                                 
               In an undated letter that petitioner wrote to Stephen, and             
          that Stephen signed on February 6, 1987 (February 1987 letter to            
          Stephen), petitioner summarized the amounts that she considered             
          paid as of January 3, 1986, with respect to the $50,000 check               
          that she had issued to him on June 18, 1982, as follows:9                   
                         Aug.  5, 1983       $2,500                                   
                         Jan. 22, 1984            7,500                               
                         Mar. 31, 1985            7,500                               
                         Jan.  3, 1986            7,500                               
          Petitioner made no reference in the February 1987 letter to                 
          Stephen to the $50,000 check that she had issued to him on                  
          September 9, 1982.  Petitioner omitted from that letter the                 
          $5,000 amount forgiven that was stated in her forgiveness letter            
          dated December 20, 1982.  Nor did that letter refer to any                  
          portion of the $15,000 payment that Stephen had made to her on              
          November 29, 1982.  Stephen reviewed that letter prior to signing           
          it.  However, he did not notice, or question the reasons for,               
          those omissions.                                                            
               PKF recorded a $15,000 credit and a $10,000 credit to the              
          "Notes Receivable--S. Miller" account in petitioner's general               

          9  In determining the amounts petitioner considered paid by                 
          Stephen as of Jan. 3, 1986, she applied one-half of each amount             
          forgiven that was stated in each of the forgiveness letters for             
          the years 1983, 1984, 1985, and 1986 to the $50,000 check that              
          she had issued to him on June 18, 1982.                                     



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