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of his gratuitous transfer to the trust by (1) multiplying the
number of partnership units transferred (916.677) by their
designated “per unit” value of $1,000, and (2) applying a
combined discount of 40 percent (for lack of control and lack of
marketability) to the resulting figure.
The Notice of Deficiency
By the notice of deficiency, respondent determined a
deficiency in Federal gift tax with respect to petitioner in the
amount of $328,317, based primarily on an increase in 1997
taxable gifts in the amount of $797,843.2 Specifically,
respondent (1) increased the value of petitioner’s gratuitous
transfer to the trust from $550,000 to $916,667, and (2)
determined an additional gift in the amount of $431,176,
representing the amount by which, according to respondent, the
value of the additional 1,077.9409 partnership units transferred
by petitioner to the trust exceeded the consideration received
therefor.3
Respondent based his determination on four alternative
theories: (1) that the partnership lacks economic substance and
2 Respondent also determined that, in preparing the Form
709, petitioner failed to account for $70,500 of taxable gifts
made in prior years. Petitioner does not dispute that
determination and has paid the portion of the asserted deficiency
(plus interest) attributable thereto.
3 Respondent did not adjust the value of petitioner’s
gratuitous transfer of 9.0788 partnership units to his son.
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Last modified: May 25, 2011