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property he transferred,2 section 2512(b) should be applied.
Pursuant to that section the excess of the value of the property
decedent transferred to the partnership over the value of the
consideration he received is “deemed a gift” subject to the gift
tax. By failing to apply section 2512(b) in this case, the
majority thwarts the purpose of section 2512(b) which the Supreme
Court described as “the evident desire of Congress to hit all the
protean arrangements which the wit of man can devise that are not
business transactions”. Commissioner v. Wemyss, supra at 306.
PARR, BEGHE, GALE, and MARVEL, JJ., agree with this
dissenting opinion.
2The majority’s allowance of a 31-percent discount is in
stark contrast to its rejection of respondent’s gift argument on
the ground that decedent did not give up control of the assets
when he transferred them to the partnership. See majority op. p.
21. While the basis for finding that decedent did not give up
control of the assets is not fully explained, it appears not to
be based on the literal terms of the partnership agreement which
gave control to Stranco, the corporate general partner. Decedent
owned only 47 percent of the Stranco stock. Since the majority
also rejects respondent’s economic substance argument, the only
other conceivable basis for concluding that decedent retained
control over the assets that he contributed to the partnership is
that the partnership arrangement was a factual sham. If that
were the case, the partnership arrangement itself would be “mere
window dressing” masking the true facts and the terms of the
partnership arrangement should be disregarded. In an analogous
situation the Court of Appeals for the Tenth Circuit disregarded
the written terms of a transfer document as fraudulent. See
Heyen v. United States, 945 F.2d 359 (10th Cir. 1991).
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