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to her grandchildren substantially exceeded the $1,360,724 value
of the annuity.
Petitioner, nevertheless, asserts that decedent's transfer
of the land is not subject to gift tax, because the transaction
qualifies as a sale in the ordinary course of business under
section 25.2512-8, Gift Tax Regs. We disagree.
Transactions between family members are subject to special
scrutiny. Harwood v. Commissioner, 82 T.C. at 258. Also, one of
the major purposes of the gift tax is to prevent an avoidance of
estate tax by an inter vivos transfer of property. See Carson v.
Commissioner, 641 F.2d at 866 n.6.
The record reflects that no arm's-length bargaining took
place between decedent and her grandchildren. Indeed, the
private annuity transaction was structured by decedent's attorney
and accountant and was devised as a substitute for decedent's
earlier planned testamentary disposition of her land to certain
of her grandchildren.
We hold that the private annuity transaction between
decedent and her grandchildren is not a transaction in the
ordinary course of business within the meaning of section
25.2512-8, Gift Tax Regs. See Harwood v. Commissioner, supra at
257-258.
In conclusion, decedent's August 1989 sale of her farmland
to her grandchildren is subject to gift tax, as the value of the
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