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significantly more Federal estate taxes than the estate reported
on its return and paid. Petitioners contend that an audit was
nearly certain because the gross estate was large (almost $23
million) and respondent could dispute the fair market value of
Ripplestone. Petitioners contend that Trust B needed to keep
Ripplestone because it had only $220,822 in assets other than
Ripplestone after the estate filed its estate tax return, and
that $220,822 was not an adequate reserve for its potential tax
liability.
Respondent points out that Trust B would have had more than
$220,833 in assets other than Ripplestone if Trust B had not
distributed some of its interest and dividend income to Trust C.
Respondent contends that Trust B was not required to distribute
income to Trust C or to keep Ripplestone as a reserve against
potential tax liability.
D. Whether It Was Necessary for Trust B to Hold Ripplestone
After March 16, 1990, and Sell It To Ensure That It Could
Pay Petitioner's Estate Tax Liability
1. Whether the Trust Agreement Required Trust B To
Distribute Interest and Dividend Income to Trust C
Under the trust agreement, Trust B's interest and dividend
income, Ripplestone, and all of the other Trust B assets which
decedent did not appoint to Trust A were treated the same.6 The
6 The trust agreement provided that when decedent dies, the
(continued...)
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