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consequences. L, J, D, and their wives each made
transfers of S-co stock to their own children and gifts
to each of their nieces and nephews, on the same date
and in equal amounts. The transfers to the nieces and
nephews were just under the $10,000 annual exclusion
per donee of sec. 2503(b), I.R.C., and each donor
claimed nine annual exclusions (three for their
children and six for the nieces and nephews). After
the transfers, each niece and nephew was left with the
same amount of S-co stock from his and her aunts and
uncles. On the same date, R also made gifts of S-co
stock in equal amounts to L, J, D, their wives, and his
9 nieces and nephews.
Held: Under the reciprocal trust doctrine, L and
J (and their wives K and S) are treated as the donors
of the stock that each of his or her children
ultimately received from his or her aunts and uncles,
and each donor is entitled to three annual exclusions
under sec. 2503(b), I.R.C. R's unilateral gifts have
no effect on the reciprocal nature of the gifts by the
other donors. Held, further, the accuracy-related
penalty under sec. 6662(a), I.R.C., is not sustained as
to L and J and is sustained as to K and S.
Richard M. Colombik and Mark E. Menacker, for petitioners.
Donna C. Hansberry, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
LARO, Judge: These cases are before the Court consolidated
for trial, briefing, and opinion. Respondent determined the
following deficiencies in gift tax and accuracy-related
penalties:
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