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meaning of section 483, no portion of the sales price would be
recharacterized as interest under that section; and (2) if the
deferred payment arrangement were a “debt instrument given in
consideration for the sale or exchange of property” within the
meaning of section 1274, no portion of the sales price would be
treated as original issue discount (OID) under that section.
Third and finally, petitioners argue that even if the
deferred payment arrangement was a “below-market loan” to which
section 7872 could apply, it was not a “gift loan” actually
subject to that section, because allowing short delays in the
payment of sales proceeds, without charging interest, is a normal
commercial practice satisfying the ordinary business transaction
exception set forth in section 25.2512-8, Gift Tax Regs.
We consider these arguments seriatim. We conclude that: (1)
The sales of Jean True’s interests were completed for tax
purposes on June 30, 1994, and July 1, 1994 (i.e., on the notice
dates, which are also the effective dates defined by the buy-sell
agreements); (2) sections 483 and 1274 do not prevent the
application of section 7872 to the deferred payment arrangement;
and (3) the deferred payment arrangement is a below-market gift
loan subject to section 7872, rather than an ordinary business
transaction.
II. Jean True’s Sales Were Completed on Notice Dates
The “Further Assurances” provisions of the partnership buy-
sell agreements stated:
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