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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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