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of the partnership) would be taken into account by a willing
buyer; thus the substance and form of the transaction are not at
odds for gift tax valuation purposes. Respondent agrees that
petitioners created and operated a partnership as required under
Texas law and gave interests in that partnership to their
children’s trusts. Those rights are apparently enforceable under
Texas law.
C. Whether the Value of Petitioners’ Four Gifts Is Limited to
$300,000 Each
The transfer document through which petitioners made the
gifts at issue states that each petitioner transferred to each of
their children’s trusts the number of limited partnership units
which equals $300,000 in value.4 Petitioners contend that this
bars respondent from asserting that the value of each partnership
interest exceeds $300,000.
Respondent contends that the transfer document makes a
formula gift that is void as against public policy. Respondent
relies on Commissioner v. Procter, 142 F.2d 824 (4th Cir. 1944),
and Ward v. Commissioner, 87 T.C. 78, 109-116 (1986). In
Procter, the transfer document provided that, if a court decided
4 The transfer document identifies petitioners as
transferors and states:
Transferor irrevocably transfers and assigns to each
Transferee above identified, as a gift, that number of
limited partnership units in Herbert D. Knight Limited
Partnership which is equal in value, on the effective
date of this transfer, to $600,000.
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