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cash bequests totaling $30,565,000 in May 1998. GIC borrowed
$30,565,000, which the estate borrowed from GIC to pay the cash
bequests. GIC and the estate were illiquid at that time.
Several months after decedent died in 1998, Bergreen
arranged for a $90 million line of credit so GIC could
consolidate loans to help sell the GIC businesses. GIC and the
estate were still illiquid in October 1998. On October 3, 1998,
GIC borrowed $6 million, which it gave to the estate to pay some
of its Federal and State estate taxes.
2. Transfer of GIC Stock, Assets, and Liabilities to HG
and HG Subsidiaries
Late in 1998, Bergreen received tax advice that, by
transferring stock, assets, liabilities, and businesses of GIC
and its subsidiaries from the estate to a newly organized limited
liability company and its subsidiaries through a series of
mergers tax free under section 368 (the restructuring), the
estate could save $160 million in capital gains tax that would
result if the estate sold GIC’s assets and businesses. To
accomplish those tax savings, (1) the restructuring had to be
completed before January 28, 1999, see sec. 1.337(d)-4(e), Income
Tax Regs.; and (2) Gilman Building Products could not be sold for
5 years because of the continuity of business requirement, see
sec. 1.368-1(d), Income Tax Regs.
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