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On July 30, 1997, Mr. Doster died. On that date, Mr.
Doster’s interest in the partnership, which passed to his estate,
consisted primarily of the right to receive half of each of the
19 remaining Lotto installments. Texas law prohibited the sale
or assignment of such installments.
I. Request for Extension of Time To Pay Estate Taxes
On April 29, 1998, the estate filed Form 706, United States
Estate Tax Return, reporting estate tax liability of $1,730,845.
The Form 706 stated that the gross estate’s value was $5,110,517,
which included Mr. Doster’s share of the partnership, valued at
$4,428,616. The Form 706 also stated that the estate was
entitled to deductions for funeral expenses, debts of decedent,
and interests passing to the surviving spouse of $55,019, $4,507,
and $243,850, respectively.
Accompanying the return was a payment of $346,169 and Form
4768, Application for Extension of Time to File a Return and/or
Pay U.S. Estate Taxes (extension request), in which the estate
sought permission to pay the $1,419,430 balance over 10 years.
The estate contended it had reasonable cause for an extension
because it could not “borrow * * * except at a rate of interest
higher than that generally available”, or sell its interest in
the Lotto installments. The estate further contended that
liquidation of the partnership interest would not yield a
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