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undivided one-percent interest in the 1054.415-acre parcel of the
Cedar Mountain property.
Around the middle of September 1998, Mr. Stone’s estate
filed on behalf of the deceased Mr. Stone Form 709, United States
Gift (& Generation-Skipping Transfer) Tax Return, for the taxable
year 1997 (1997 gift tax return), in which the above-described
gifts, as well as certain other gifts including those discussed
below, were reported.
In April 1997, the partners of ES3LP made bona fide, arm’s-
length transfers to that partnership, as follows. On April 9,
1997, Mr. Stone transferred to ES3LP the interest that he owned
in the Cherrydale residence and certain other property in ex-
change for both general and limited partnership interests, and
the children transferred to ES3LP the respective interests that
they owned in the Cherrydale residence in exchange for general
partnership interests.27 At a time not disclosed by the record
in April 1997, Ms. Stone transferred certain property that she
owned to ES3LP in exchange for a limited partnership interest.
When the partners of ES3LP formed and funded that partnership,
they contemplated and intended that ES3LP operate as a joint
enterprise for profit for the management of its assets and that
the children contribute their services in providing such manage-
27Although not altogether clear from the record, it appears
that each of the children also transferred certain other property
to ES3LP in exchange for a general partnership interest.
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