Jewell E. Gray, Donor, Deceased and Estate of Jewell E. Gray, Deceased, Jewell Mae Detjen, Personal Representative, et al. - Page 20

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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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