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December 30, 1995, the GRAT’s transferred demand notes to
petitioners as required under the assignments described above. The
original principal amounts due on the December 30, 1995, GRAT’s
demand notes held by petitioners Baine P. Kerr and Mildred C. Kerr
were $795,148.76 and $795,716.99, respectively.
On December 29, 1994, petitioners (in their individual
capacities and as GRAT’s trustees) executed documents entitled
“Security Agreement-Assignment of Partnership Interest” under which
the GRAT’s assigned to petitioners, as security for the GRAT’s
demand notes, the GRAT’s class B limited partnership interests in
KFLP.
During 1995, petitioners received interest payments on the
GRAT’s demand notes totaling $18,792.47. The GRAT’s were
terminated on December 30, 1995, and the remaining assets and
liabilities of the GRAT’s were transferred to the Kerr Issue GST
Trusts.
By separate agreements dated February 28, 1998, petitioners
agreed that the remaining principal and interest payments due on
the December 30, 1995, GRAT’s demand notes--then the liabilities of
the various Kerr Issue GST Trusts--would be forgiven subject to the
condition that the trustees agree to pay any Federal and State
gift, estate, inheritance, transfer, succession, and generation-
skipping transfer tax associated with the transfer.
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