- 13 -
realized net income of $4.17 million as compared with budgeted
net income of $5.38 million. As of November 15, 1995, the first
quarter financial results for fiscal year 1996 were available.
HII’s business plan for fiscal year 1996 called for approximately
$77 million in revenue, building upon the record year in 1995.
HII actually realized only $3 million in revenues for the first
quarter. Further, although HII had forecast an annual net profit
of approximately $7 million for fiscal year 1996, it actually had
a net loss of $700,000 for the first quarter.
On November 15, 1995, Mr. Hess gave 10 shares of HII stock
to an irrevocable trust for the benefit of his daughter. Under
section 2513, petitioners elected to treat Mrs. Hess as the donor
of one-half of the gift of stock that Mr. Hess had made.10
Petitioners filed Forms 709, U.S. Gift (and Generation-Skipping
Transfer) Tax Return, for their taxable year 1995. The gift tax
returns that petitioners filed reported the fair market value of
the HII stock to be $120,000 per share at the time of the gift.
Respondent issued gift tax statutory notices of deficiency
to Mr. Hess and Mrs. Hess for their taxable year 1995.
Respondent determined that the value of the HII stock on November
15, 1995, was $253,000 per share.
10Immediately before the gift, 100 shares of HII stock were
outstanding of which Mr. Hess owned 80 shares and Mrs. Hess owned
20 shares.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011