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SFLP was not a taxable gift; and (4) decedent’s interests in SFLP
and Stranco should be valued using the discounts applied by
respondent’s expert.
After entry of decision, respondent appealed to the Court of
Appeals for the Fifth Circuit. The appellate court ruled as
follows:
We REVERSE the Tax Court’s denial of leave to
amend and REMAND with instructions that the court
either (1) set forth its reasons for adhering to its
denial of the Commissioner’s motion for leave to amend,
bearing in mind the mandate of the Federal Rule of
Civil Procedure 15(a), or (2) reverse its denial of the
Commissioner’s motion, permit the amendment, and
consider the Commissioner’s claim under sec. 2036. We
AFFIRM all other conclusions made by the tax court.
[Strangi II at 282.]
Over petitioner’s objection, leave was granted for respondent’s
amendment to answer and a second amendment to answer raising
section 2036.
OPINION
I. Inclusion in the Gross Estate--Section 2036
A. General Rules
As a general rule, the Internal Revenue Code imposes a
Federal tax “on the transfer of the taxable estate of every
decedent who is a citizen or resident of the United States.”
Sec. 2001(a). The taxable estate, in turn, is defined as “the
value of the gross estate”, less applicable deductions. Sec.
2051. Section 2031(a) specifies that the gross estate comprises
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