Frank Armstrong, III, Transferee, et al. - Page 12




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          provision, and therefore the value of decedent's gifts is not               
          included in the gross estate for purposes of determining whether            
          petitioners are personally liable as transferees.                           
          Petitioners further contend that the legislative history of                 
          section 2035(d)(3)(C) supports their position.  Section 2035(d)             
          was enacted by section 424 of the Economic Recovery Tax Act of              
          1981, Pub. L. 97-34, 95 Stat. 172, 317.  Petitioners rely on H.             
          Rept. 97-201, at 187 (1981), 1981-2 C.B. 352, 390, which explains           
          the addition of section 2035(d)(3)(C) as follows:  "[A]ll                   
          transfers within 3 years of death (other than gifts eligible for            
          the annual gift tax exclusion) will be included [in the gross               
          estate] * * * for purposes of determining property subject to the           
          estate tax liens (under subchapter C of Chapter 64)".                       
               Based upon our review of the plain language of section                 
          2035(d)(3)(C), and the background of section 6324(a)(2), we agree           
          with respondent that petitioners are liable as transferees in               
          these cases.  The legislative history cited by petitioners does             
          not persuade us otherwise.                                                  
               Initially, we reject petitioners' contention that the                  
          parenthetical language "(relating to lien for taxes)" contained             
          in section 2035(d)(3)(C) limits the application of the provision            
          to what petitioners consider to be traditional lien provisions.             









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