Estate of Eugene E. Stone, III, Deceased, C. Rivers Stone, E.E. Stone, IV, Mary Stone Fraser & Rosalie Stone Morris, Co-Personal Representatives - Page 111

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         estate tax of $861,972, a prior payment of $875,000, and an                  
         overpayment of $13,028.                                                      
              Respondent commenced examinations of Mr. Stone’s estate tax             
         return and Ms. Stone’s estate tax return after July 22, 1998.                
         Mr. Stone’s estate and Ms. Stone’s estate cooperated with reason-            
         able requests by respondent for witnesses, information, docu-                
         ments, meetings, and interviews.                                             
              On September 7, 2001, respondent issued a notice of defi-               
         ciency (notice) to Mr. Stone’s estate.  In that notice, respon-              
         dent determined, inter alia, to increase by $8,491,090 the value             
         attributable to Mr. Stone’s respective partnership interests in              
         ES3LP, ES4LP, CRSLP, RSMLP, and MSFLP reported in SCHEDULE F,                
         Other Miscellaneous Property Not Reportable Under Any Other                  
         Schedule (Schedule F), of Mr. Stone’s estate tax return.  In                 
         support of that determination, respondent relied on seven alter-             
         native grounds, including the substance over form doctrine, the              
         economic substance doctrine, section 2036(a)(1) which was respon-            





              64(...continued)                                                        
                                              Total                                   
                          Partnership      Liabilities                                
                             ES4LP             $0                                     
                             CRSLP         2,428,389                                  
                             RSMLP             0                                      
                             MSFLP             0                                      






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