Clarissa W. Lappo - Page 6

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          February 6, 1998, petitioner filed an amended Federal gift tax              
          return, reporting her July 2, 1996, gift to Clarajane of a                  
          29.218462-percent limited partnership interest which had been               
          omitted from her original 1996 gift tax return.  Petitioner                 
          valued the July 2, 1996, gift at $423,871 and remitted an                   
          additional $177,265 of gift taxes.                                          
          E.  Notice of Deficiency                                                    
               In the notice of deficiency, issued June 19, 2001,                     
          respondent determined that petitioner’s 1996 gifts of partnership           
          interests should be increased from the originally reported                  
          $1,040,000 to $3,137,287, resulting in a $998,508 gift tax                  
          deficiency as determined by reference to petitioner’s originally            
          filed gift tax return.2  Respondent credited the additional                 
          $177,265 that petitioner had paid with her amended gift tax                 
          return as an advance payment of the gift tax deficiency so                  
          determined.                                                                 
                                       OPINION                                        
          A.  The Parties’ Positions                                                  
               The only issue remaining in dispute is the fair market                 

               2 In addition to the valuation issue, the notice of                    
          deficiency also raised these alternative contentions:  (1) There            
          was no economic substance to the partnership’s formation and                
          operation; (2) the partnership interests should be valued without           
          regard to any restriction on the right to use or sell the                   
          property within the meaning of sec. 2703(a)(2); and (3)                     
          petitioner made a taxable gift upon the partnership’s formation.            
          The parties have stipulated that all such alternative contentions           
          have been “withdrawn”.                                                      





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