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the $62,016 reported, so that for purposes of computing the
tentative estate tax, an additional $85,584 in adjusted taxable
gifts should have been added to the taxable estate;7 and (ii) on
August 24, 1981, when Maude exchanged her 24 shares of FIC's
common stock for 3,000 shares of FIC's preferred stock, the fair
market value of the common stock was $540,540 ($22,522 per share)
and the fair market value of the preferred stock, $300,000
($100,000 per share). Consequently, the Estate Tax Notice
determined that there was a taxable gift in the amount of
$237,540 ($240,540 less $3,000 annual exclusion), thereby
increasing the adjusted taxable gifts that are added to the
reported taxable estate for purposes of computing the tentative
estate tax.
H. Discounts and Premiums
1. Minority Interests
On both February 2, 1980, and August 24, 1981, each decedent
was a minority shareholder.
Neither decedent had the power to compel FIC to purchase key
person insurance.
2. Absence of Swing Vote
On February 2, 1980, no FIC shareholder could obtain voting
7 Any increase found in the fair market value of the 1980
Gifts will trigger an increase in taxable gifts of like amount,
because decedents' 1980 gift tax return has already taken into
account the annual exclusion provided by sec. 2503(b). Decedents
reported additional taxable gifts to Robert on their respective
gift tax returns for the first quarter of 1980 that are not at
issue in this case.
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