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a. Undervaluation of Assets
Respondent argues that the estate intentionally undervalued
the decedent's gold coins and Sterling preferred stock, and that
this undervaluation evidences fraud. We agree. When we view the
record as a whole, we conclude, clearly and convincingly, that
the estate intentionally undervalued the decedent's taxable
estate, and that the estate did so with the specific intent of
evading tax.
Numerous facts evidence that the estate filed the decedent's
Federal estate tax return intending to evade Federal estate tax
by undervaluing assets and overvaluing deductions. First, the
estate's undervaluation of decedent's Sterling preferred stock
was significant. The estate reported that the applicable value
was $15,335, and we have determined that the applicable value was
approximately $2,708,536. The difference between these two
values is $2,693,201, or, in other words, the reported value was
less than 1 percent of our determined value. Although the estate
attempts to place the blame for the undervalued Sterling
preferred stock on Ms. Bates, the fact of the matter is that
Ms. Gonzalez obviously knew that Ms. Bates' valuation of $15,335
was wrong and reported Ms. Bates' $15,335 value aiming solely to
evade tax. Ms. Gonzalez knew of a prior valuation of the
Sterling preferred stock in excess of $3 million, and she knew
that Ms. Bates arbitrarily chose the $15,335 figure reported on
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