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the transfer of the 1,004 shares was a taxable gift which had a
total value of $595,090.88.
Irrevocable trust #3 transferred 134 shares of Beth W. Corp.
stock to Beth W. Corp. on March 19, 1988, and 108 shares on July
31, 1989. Irrevocable trust #3 treated the transfers as a
redemption and reported the amount received in exchange as
taxable dividends on its income tax returns.
Petitioner and the trusts recorded the dividends and
redemptions on their books and records. Petitioner recorded the
redemptions on duly executed stock certificates. Petitioner
reported the dividends and redemptions on its income tax returns.
D. Land Sale
Beth W. Corp. sold 55.91 acres of unimproved, non-income
producing land to irrevocable trusts #2 and #3 on March 19, 1987,
for $2,265,000. The parties obtained two appraisals before the
sale. The average value of the two appraisals was $1,882,000.
The trusts paid for the 55.91 acres with a promissory note
for $2,265,000 secured by the 55.91 acres and a $500,000
mortgage. The note required the trustees to pay interest at a
rate of 6.15 percent per year. The principal was due on March
19, 1990. The mortgage provided that Beth W. Corp. could
foreclose on the trusts in the event of default.
Beth W. Corp. reported the sale of the 55.91 acres on its
Federal income tax return for its taxable year ending July 31,
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