W. August Hillenbrand and Nancy K. Hillenbrand - Page 4




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               On November 23, 1998, petitioners and respondent agreed upon           
          certain audit adjustments regarding petitioners’ 1993, 1994,                
          1995, and 1996 Federal gift tax years, except for the issue of              
          whether the spousal interests provided for in the GRATs were                
          qualified interests within the meaning of section 2702 for                  
          petitioners’ 1993, 1994, and 1995 Federal gift tax years (the               
          GRAT issues).                                                               
               On December 4, 1998, respondent made assessments against               
          petitioners relating to the November 23, 1998, agreement covering           
          the adjustments other than those relating to the GRAT issues.               
          Respondent assessed $411,682.46 in Federal gift taxes against               
          petitioner W. August Hillenbrand’s $621,041 deposit, and, on                
          January 4, 1999, sent him an unsolicited refund of $209,358.54.             
          Respondent assessed $387,078.19 in Federal gift taxes against               
          petitioner Nancy K. Hillenbrand’s deposit of $621,041, and, on              
          January 4, 1999, sent her an unsolicited refund of $233,358.54              
          (the foregoing two checks are collectively hereinafter sometimes            
          referred to as the January 4, 1999, refunds).  The January 4,               
          1999, refunds were not related to the GRAT issues.                          
               Respondent and petitioners continued to disagree, however,             
          about the amount of Federal gift taxes due regarding the GRAT               
          issues.  On December 30, 1998, respondent mailed six notices of             
          deficiency to petitioners covering the GRAT issues.  On February            
          12, 1999, in response to the six notices of deficiency,                     






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