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However, respondent now argues that the reason for this is that
the deferred payment arrangement was a “below-market loan”
subject to section 7872. Sec. 7872(c)(1)(A). Notwithstanding
this new argument, respondent does not explain why the True
family’s 5.9-percent intrafamily interest rate used to calculate
the value of Jean True’s gift in the statutory notice should
apply, rather than the “applicable Federal rate” expressly
referenced by section 7872(e), (f)(1), and (f)(2).
Petitioners make three arguments why the deferred payment
arrangement was not a gift loan. First, petitioners argue that
the sales of Jean True’s interests were completed for tax
purposes on September 20, 1994, instead of on June 30, 1994, as
asserted by respondent. According to petitioners, Jean True was
not entitled to receive the sales proceeds–-and therefore could
not have lent them to her sons–-until the sales were complete.84
Second, petitioners argue that the deferred payment
arrangement cannot be a below-market loan subject to section 7872
because: (1) If the deferred payment arrangement were a
“contract for the sale or exchange of any property” within the
84Petitioners do not explain why Sept. 20, 1994, is the
relevant date. However, we note that Jean True’s acquisition
(from Dave True) of some of the stock she ultimately sold to her
sons appears to have been closed on that date.
Petitioners also do not explain why, if Sept. 20, 1994, was
the sale completion date, Jean True could not have made a below-
market gift loan from that date to the payment date on Sept. 30,
1994.
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