Audrey J. Walton - Page 5

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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               
               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.                                                
          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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