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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
advantage.
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