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If the deferred payment arrangement were considered to be a
6-month term loan, then section 7872 would deem Jean True to have
made a gift, on the notice dates, of approximately 6 months’
worth of interest on the $13,298,978 aggregate purchase price.
Although Jean True actually received payment only 3 months after
the notice dates, section 7872 does not appear to provide
explicitly for any adjustment to be made to the amount of the
gift if a gift term loan is prepaid.
Respondent’s determination appears to be a reaction to the
possible harshness of such a result. In the statutory notice,
respondent asserted that the amount of Jean True’s gift arising
from the deferred payment arrangement was $192,307. The notice
stated that this amount represented 91 days of interest on the
$13,298,978 sales price. Although respondent now maintains that
the consequences of the deferred payment arrangement should be
determined under section 7872, respondent has not increased the
amount of the asserted gift.
Respondent’s calculation of the amount of the gift is
consistent with the treatment that would obtain under section
7872, if the deferred payment arrangement were treated as a
demand gift loan rather than a term gift loan.92 Although
92The provisions requiring payment “within six months” after
the notice dates, the fact that payment was in fact made only 3
months after those dates, and the possible harshness of imputing,
under these circumstances, a gift in an amount equal to the value
(continued...)
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