- 67 -
Petitioners computed the mortality-adjusted present values of the
above described obligations as being $149,813 and $139,348 with
respect to Mr. and Mrs. McCord, respectively.
Respondent does not take issue with petitioners’ treatment
of the gift tax amounts as sale proceeds. However, he disputes
petitioners’ treatment of the mortality-adjusted present values
as sale proceeds, primarily on the grounds that those amounts are
too speculative to be taken into account. Respondent cites
Armstrong Trust v. United States, 132 F. Supp. 2d 421 (W.D. Va.
2001), affd. sub nom. Estate of Armstrong v. United States, 277
F.3d 490 (4th Cir. 2002). In Armstrong Trust, supra, a gift was
made and, because of (current) section 2035(b), the donees were
subject to a potential liability, as transferees, for estate
taxes. See sec. 6324(a)(2). Plaintiffs argued that liens or
encumbrances were created on the gift by reason of the potential
estate tax liability assumed by the donees, thereby reducing the
value of the gift. Id., 132 F. Supp. 2d at 430. The District
Court found that the possibility of future estate tax liability
was too speculative to reduce the value of the gift.
Relying on an opinion of the United States Court of Claims,
Murray v. United States, 231 Ct. Cl. 481, 687 F.2d 386 (1982),
the Court of Appeals for the Fourth Circuit affirmed the District
Court’s decision in Armstrong Trust, also on the basis that the
donees’ potential liability for the donor’s estate tax was too
Page: Previous 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 NextLast modified: May 25, 2011