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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have been “withdrawn”.
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