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Issue 4. Are Petitioners Liable for Valuation Understatement
Penalties Under Sections 6662(a), (g), and (h)?
FINDINGS OF FACT
On an attachment to his 1993 gift tax return, Dave True
disclosed the sale to his wife and sons of 30-percent interests
in the True partnerships listed in Appendix schedule 1. The
attachment listed the partnerships whose interests were sold and
indicated, in general terms, that the sales price was book value,
without providing actual numbers. The 1993 gift tax return
reported zero as the value of gifts attributable to these
transactions. Petitioners did not engage a professional
appraiser to value the transferred interests in the True
partnerships for gift tax reporting purposes.
The estate tax return did not list individually the
interests in True companies that Dave True owned at death.
Instead, it showed on Schedule F, Other Miscellaneous Property
Not Reportable Under any Other Schedule, the value of Dave True’s
living trust, which owned his interests in the True companies at
death. Another schedule attached to the estate tax return
provided a breakdown of the assets owned by the living trust as
of June 4, 1994, which included cash of $39,349,150, investments,
notes receivable from some of the True companies, and
miscellaneous assets. Total book value of all the True companies
owned by Dave True at his death was $37,894,797, see Appendix
schedule 2. The living trust document, which was attached to the
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