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Petitioners further reported that 95 percent of the fair market
value of the KFLP class B limited partnership interests that they
transferred to the GRAT’s trustees was attributable to their
retained annuities, while the remaining 5 percent (or $38,050
(rounded)) represented the amount of their taxable gifts to the
remainder beneficiaries of the GRAT’s.
Petitioners computed the fair market value of the KILP class
B limited partnership interests that they transferred to their
children in 1994 and 1995 by applying a 25-percent discount for
lack of liquidity or marketability.
Respondent's Determinations
Respondent issued a notice of deficiency to petitioner Baine
P. Kerr determining deficiencies of $698,401 and $10,024 in his
Federal gift taxes for 1994 and 1995, respectively. Respondent
issued a notice of deficiency to petitioner Mildred C. Kerr
determining deficiencies of $698,401 and $10,024 in her Federal
gift taxes for 1994 and 1995, respectively. Respondent determined,
among other things, that petitioners had understated the values of
both the KFLP interests that they had transferred to the GRAT’s
trustees in 1994 and the values of the KILP interests that they had
transferred to their children in 1994 and 1995, as follows:
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