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promissory notes dated June 30, 1988, each in the amount of
$225,371, one payable by Betty and the other payable by Walter.7
Decedent’s Federal estate tax return reported the value of
the QTIP trust’s undivided interests in the North Property and
the South Property, excluding any interest in the timber and
pecan trees, as $519,000--predicated on an appraisal indicating
that the fair market value of the entire 5,354 acres, taken as a
whole, in fee simple and without regard to any valuation
discounts, and without including timber or pecan trees, was
$1,746,795, and that the value of the undivided interests should
reflect a 30-percent fractional interest discount.
In the notice of deficiency, respondent determined that the
QTIP trust’s undivided interests in the subject property included
beneficial interests in the timber and pecan trees, that the
5,354 acres had a fair market value of $7,045,800 at the date of
decedent’s death, and that the value of the QTIP trust’s
undivided interests in the property was $2,990,942. The notice
of deficiency reduced the value of the QTIP trust’s undivided
interests by $450,742, reflecting the value of the two notes from
Walter and Betty held by the QTIP trustee as consideration of the
7 Pursuant to the termination of Malatchie Land Co., L.P.
(the limited partnership) and Malatchie Farms (the general
partnership), the promissory note from the general partnership to
the QTIP trust was canceled and rewritten as two separate notes,
each in the amount of $225,371, one from Betty and the other from
Walter, each to the QTIP trust.
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