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IV. Deferred Payment Arrangements Are Below-Market Gift Loans
Subject to Section 7872
Section 7872(c)(1)(A) provides (subject to certain
exceptions not relevant to the case at hand) that section 7872
applies to “Any below-market loan which is a gift loan.”
Therefore, section 7872 applies to the deferred payment
arrangement if that arrangement is: (1) A “loan”, (2) a “below-
market loan”, and (3) a “gift loan”.
A. Loan
Section 7872 does not define the term “loan”. However, the
legislative history indicates that “loan” should be interpreted
broadly to include any extension of credit. See Frazee v.
Commissioner, 98 T.C. at 589 (citing conference report). We
concluded in Frazee v. Commissioner, supra at 588-589, that
section 7872 does not apply solely to loans of money; it also
applies to seller-provided financing for the sale of property.
In our view, the fact that the deferred payment arrangement in
the case at hand was contained in the buy-sell agreements, rather
than in a separate note as in Frazee, does not require a
different result.
90(...continued)
as affirmed by the Court of Appeals for the Eighth Circuit in
Krabbenhoft, that sec. 483 is not relevant for gift tax valuation
purposes. See Schusterman v. United States, 63 F.3d 986 (10th
Cir. 1995).
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