Estate of Lewis A. Bailey, Deceased, Frances Jeanette Foster, Executrix - Page 25

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          C&L Bailey’s net assets for purposes of appraising the value of             
          decedent’s C&L Bailey stock, Smith reclassified this $145,000               
          liability item as paid-in capital (thereby increasing C&L                   
          Bailey’s indicated net assets).  Respondent’s determination                 
          reflects this adjustment.  Petitioner contends it is erroneous.             
               The only evidence that petitioner points to as                         
          substantiating the alleged $145,000 liability is an entry on                
          decedent’s Schedule C-–Mortgages, Notes, and Cash, of Form 706,             
          for “NOTE RECEIVABLE - C&L BAILEY, INC.”, in the amount of                  
          $140,000.   Petitioner alleges that $140,000 was the balance of             
          the liability as of December 31, 1995.  On brief petitioner                 
          states:  “If the loan is not a valid obligation as argued by Mr.            
          Smith, then it would be proper to adjust the Gross Estate as                
          shown of [sic] Form 706 * * * to remove this asset[.]  Removal              
          from the gross estate would provide a greater benefit to the                
          Petitioner but it would not be correct.”                                    
               Because the record does not reliably substantiate the                  
          alleged $145,000 liability, we sustain respondent’s determination           
          that it should be excluded from the calculation of C&L Bailey’s             
          net assets.  We also conclude that the $140,000 note receivable             
          from C&L Bailey should be excluded from decedent’s gross estate.            
          As petitioner observes, the net result is to petitioner’s                   

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