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petitioners pursuant to section 2513. Petitioners also treated
the gifts as qualifying for the annual exclusion of section
2053(b). Respondent did not issue notices of deficiency to
petitioners for 1995.
On January 18, 1996, Treeco purchased a third property in
Flager County, Florida (Flager County Farm), using $5,750,436 of
the LLC’s cash and securities. The Flager County Farm consisted
of 8,382 acres and contained merchantable timber valued at
$23,638 at the time of sale.
Thereafter, on March 5, 1996, petitioners continued their
program of gifting Treeco units with the gifts that are at issue
in this litigation. Petitioners once again each gave 500 voting
and 750 nonvoting units in Treeco to each of their eight children
and to the spouses of such children. Also on that date, A.J.
Hackl created the Albert James Hackl Irrevocable Trust
(Grandchildren’s Trust), for the benefit of petitioners’ minor
grandchildren. At that time, petitioners each transferred 31,250
nonvoting units in Treeco to the Grandchildren’s Trust,
representing 1,250 units for each of their 25 minor
grandchildren. Three of petitioners’ children were named as
trustees of the Grandchildren’s Trust and in that capacity
executed an acceptance of the Treeco Operating Agreement.
Petitioners reported the gifts made in 1996 on timely filed gift
tax returns and elected on those returns to treat the gifts as
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