Estate of Paul C. Gribauskas - Page 5




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          decedent and his wife were divorced.  In conjunction with the               
          ensuing settlement and division of the property rights of the               
          couple, each spouse was to receive one-half of the remaining                
          lottery installment payments.  Accordingly, $395,182.67, less               
          applicable Federal and State withholding taxes, was remitted to             
          each on December 3, 1993.  Thereafter, on June 4, 1994, decedent            
          died unexpectedly while still entitled to 18 further annual                 
          payments of $395,182.67 each.  Since obtaining an appropriate               
          court order as required by the Connecticut LOTTO regulations,               
          these installments have been remitted yearly to the estate.                 
          The Estate Tax Return                                                       
               A United States Estate (and Generation-Skipping Transfer)              
          Tax Return, Form 706, was timely filed with respect to decedent’s           
          estate on September 11, 1995.  Therein, the estate elected to               
          report the value of assets as of the December 3, 1994, alternate            
          valuation date.  Decedent’s interest in the lottery installments            
          was characterized on the return as an “Unsecured debt obligation            
          due from the State of Connecticut arising from winning the                  
          Connecticut Lottery” and was included in the gross estate at the            
          alleged present value of $2,603,661.02.  Respondent subsequently            
          determined that the present value of the payments should have               
          been reported as $3,528,058.22 in accordance with the annuity               
          tables prescribed under section 7520, resulting in the $403,167             
          deficiency in estate tax that is the subject of this proceeding.            






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