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2056(b)(5), the surviving spouse must be entitled for life to all
the income from the interest, or a specific portion of the
interest).
For this and the other reasons set forth in more detail
below, we conclude that decedent made taxable gifts of her
investment income as asserted by respondent on brief, except to
the limited extent that income was spent on family farm expenses
properly attributable to decedent.
D. Petitioner's Primary Argument--Decedent's Transfer of
Investment Income Was a Bona Fide, Ordinary Business
Transaction
Petitioner's primary legal argument is that decedent
transferred her investment income in the ordinary course of
business, within the meaning of section 25.2512-8, Gift Tax Regs.
Petitioner therefore asserts that decedent did not make taxable
gifts of any of her investment income--regardless of the
shortfall in the consideration she received for it in money or
money's worth.
More particularly, petitioner claims that shortly after
Garry's death, decedent and the children formed a partnership to
operate the family farm. According to petitioner, under the
terms of the partnership agreement, decedent was entitled to 50
percent of the income or loss of this partnership; the children
were entitled to equal one-third shares of the other 50 percent.
Also according to petitioner, decedent and the children agreed to
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