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Decedent renewed the notes each year, until she paid them on
June 9, 1988, following the sale of 28.75 acres of Weinstock
property. Until decedent paid off the loans, Jack purchased new
CD's each year to replace the ones that matured.
First National continued to hold the CD's after decedent
paid her indebtedness to the bank. As the CD's matured, the
proceeds were deposited into the Holland-Agent account, and then
distributed to the donees. After the distribution of the
proceeds, some of the Weinstock Trusts purchased new CD's from
First National, and some made other investments.
Respondent determined that the donees never had dominion and
control over any of the CD's pledged as security for decedent's
agent's guarantee of the unsecured notes, and therefore that the
transfers were incomplete gifts of future interests.
Furthermore, respondent determined that the $10,000 gifts that
decedent made each year in 1985, 1986, 1987, and 1988, were
completed in 1988 when decedent paid off the bank loans and the
CD's were no longer pledged to secure Jack's guarantee.
Respondent added the value of all of these transfers to the
taxable estate as adjusted taxable gifts for purposes of
determining the tentative estate tax. Accordingly, respondent
increased the value of the taxable estate by $480,000.
Petitioner asserts that the annual gifts were gifts of present
interests that decedent properly excluded from her taxable gifts
under section 2503(b).
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