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1987. Beth W. Corp. realized a taxable capital gain of
$2,220,143, but did not recognize it (built-in capital gain)
because it elected installment sale treatment.5
The trustees wanted to have the 55.91 acres rezoned so they
could sell it for a profit and repay the promissory note. They
retained counsel, who arranged to have the zoning of the 55.91
acres changed to commercial.
The trustees listed the 55.91 acres for sale with a realtor.
Despite the realtor's efforts and a price reduction (of an amount
not specified in the record), the trusts had not sold the 55.91
acres by the time of trial. Several other comparable
developments already underway in the same area were not doing
well.
Beck resigned as a trustee early in 1989. First Union
succeeded Beck as a trustee. Smith, the trust administrator for
First Union, was responsible for irrevocable trusts #2 and #3.
The trusts paid the interest that was due on the note in
1988 and 1989, but did not pay the principal when it was due in
March 1990. Beth W. Corp. paid Federal income tax on the
interest it received on the note. Beth W. Corp. had not
foreclosed on the mortgage as of the date of trial.
The fair market value of the 55.91 acres was $2,265,000 when
decedent died.
5The parties stipulated that the real estate transfer was
not a taxable gift or generation skipping transfer.
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