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resulted in a $14,465,475.01 shortfall in annuity payments to the
grantor and left no property to be delivered to the remainder
beneficiary.
Petitioner timely filed a United States Gift (and
Generation-Skipping Transfer) Tax Return, Form 709, for the
taxable year 1993. Therein, petitioner valued at zero the gifts
to her daughters of remainder interests in the GRAT’s.
Petitioner represented that the value of her retained interests
in the GRAT’s equaled 100 percent of the value of the Wal-Mart
stock on the date of the transfer, thus eliminating any taxable
gift to the remaindermen. Respondent subsequently issued a
notice of deficiency determining that petitioner had understated
the value of the gifts resulting from her establishment of the
two GRAT’s. Petitioner now concedes on brief that the gift
occasioned by each GRAT should be valued at $6,195.10, while
respondent asserts that the taxable value of each gift by
petitioner is $3,821,522.12.
Discussion
I. General Rules
Section 2501 imposes a tax for each calendar year on the
transfer of property by gift by any taxpayer. Pursuant to
section 2512, the value of the transferred property as of the
date of the gift “shall be considered the amount of the gift”.
Generally, where property is transferred in trust but the donor
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