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Petitioners argue that there is sufficient evidence showing
that they first funded the partnerships and then transferred the
partnership interests to the children and direct our attention to
the letters that they faxed to their accountant after they had
funded the partnerships. Those faxes, however, establish only
that petitioners had funded the partnerships. They do not show
what the partnership ownership interests were immediately before
the funding or how the stock was allocated among the partners’
capital accounts at the time of the funding. Moreover, the fax
seeking advice with respect to the SFLP II partnership interests
was dated 2 days after petitioners had allegedly transferred the
partnership interests to the children.
On this record, we conclude that the value of the children’s
partnership interests was enhanced upon petitioners’
contributions of stock to the partnerships. Accordingly, we hold
that petitioners’ transfers of stock to SFLP I and SFLP II on
December 28, 1998, and December 20, 1999, respectively, were
indirect gifts of the stock to the children for purposes of
sections 2501 and 2511. Respondent has conceded that the
January 31, 2000, gifts were gifts of partnership interests and
not gifts of stock. The gift tax thus shall be determined on the
value of the stock rather than on the value of the partnership
interests transferred.
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