Estate of Lewis A. Bailey, Deceased, Frances Jeanette Foster, Executrix - Page 3

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          corporation.  Initially, they each owned one half of the 300                
          outstanding shares of C&L Bailey stock.                                     
               In 1989, Ethel died.  Her 150 shares of C&L Bailey stock               
          passed to the Ethel C. Bailey Trust (the trust).  Pursuant to               
          section 2056(b)(7), her estate elected to treat 50 of these                 
          shares as QTIP property, giving decedent the right for life to              
          all income from the 50 shares.  Under the trust, each of                    
          decedent’s and Ethel’s six children received a one-sixth residual           
          interest in the 50 shares of QTIP election property and also in             
          the other 100 shares of C&L Bailey stock held in the trust.                 
               Between 1985 and 1993, decedent gave some of his C&L Bailey            
          stock to relatives.  The gifts included two shares each to his              
          son Roger Bailey (Roger), his daughter Frances Jeanette Foster              
          (Frances), and his daughter-in-law Lillian Bailey (Lillian).                
          Between 1989 and 1993, C&L Bailey redeemed 100 shares of its                
          stock at $5,000 per share.  These redemptions included all the              
          stock that decedent had given to relatives and all but 50 of                
          decedent’s shares of C&L Bailey stock.  Consequently, at                    
          decedent’s death, there were outstanding 200 shares of C&L Bailey           
          stock, 50 shares (25 percent) of which decedent owned outright              
          and 150 shares (75 percent) of which were held in the trust.                
               At decedent’s death, C&L Bailey’s principal assets were two            
          motels that it owned and operated (the motels):  (1) An Econo               
          Lodge Motel in Hot Springs, Arkansas (the Arkansas motel); and              

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