- 288 -
Issue 3. Did Jean True Make Gift Loans When She Transferred
Interests in True Companies to Sons in Exchange for Interest-Free
Payments Received Approximately 90 Days After Effective Date of
Transfers?
On June 30, 1994, and July 1, 1994 (hereinafter sometimes
referred to as the notice dates), Jean True gave notice to her
sons that she wanted to sell her interests in 22 True companies.
The buy-sell agreements governing transfers of interests in the
companies provided that, upon giving this notice, Jean True
became required to sell, and the sons became required to buy, her
interests.
The buy-sell agreements also provided that the “effective
date[s]” of the resulting sales were the notice dates. From and
after June 30, 1994, the True companies treated the income and
expenses associated with the interests sold as belonging to the
sons, not to Jean True. Moreover, the sales prices for Jean
True’s interests were not adjusted for any income or loss of,
distributions made by, or changes in the value of the True
companies, after June 30, 1994.
Notwithstanding the foregoing, the buy-sell agreements gave
the sons 6 months from the notice dates to “consummate” the
sales. Jean True did not receive payment for her interests until
September 30, 1994, 3 months after the notice dates. The total
amount she received, $13,298,978, did not include any interest to
compensate her for this 3-month delay.
Page: Previous 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 NextLast modified: May 25, 2011