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the objective evidence present here: decedent's failure to repay
the transfers and Beth W. Corp.'s lack of effort to collect, even
though most of the notes were past due; the absence of a
repayment schedule, adequate collateral, or a loan agreement; and
the lack of objective evidence that decedent intended to repay
the amounts transferred. We conclude that the transfers were not
loans. Petitioner may not deduct the transfers as a claim
against the estate under section 2053(a), and the transferred
amounts are not an asset of Beth W. Corp.
B. Discount for Tax Liability on Built-In Capital Gain7
Beth W. Corp. will be liable for income tax on a built-in
capital gain of $2,220,143 if and when the trusts pay the agreed
amount for the 55.91 acres. Sec. 453(a). Petitioner contends
that the stock of Beth W. Corp. should be discounted to take into
account this tax liability.8
7The parties agree that the value of Beth W. Corp. stock
before discounts (assuming that the transfers are not loans,
decided above) equals the net market value of its assets. That
amount is $1,254,307.
8Courts have not allowed a discount for built-in capital
gain tax for an asset owned by the corporation if the corporation
was not likely to pay tax on the capital gain. See, e.g., Estate
of Piper v. Commissioner, 72 T.C. 1062, 1087 (1979); Estate of
Huntington v. Commissioner, 36 B.T.A. 698, 706 (1937).
Conversely, courts have allowed a discount for built-in capital
gains if, among other factors, payment of tax on a capital gain
is likely. See, e.g., Clark v. United States, 36 AFTR 2d 75-
6417, at 75-6419, 75-6420, 75-1 USTC par. 13,076 at 87,486,
87,489 (E.D. N.C. 1975); Obermer v. United States, 238 F. Supp.
29, 34, 36 (D. Hawaii 1964).
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