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a decedent makes an inter vivos transfer of property, other than
a bona fide sale for adequate and full consideration in money or
money’s worth, and retains certain enumerated rights or interests
in the property which are not relinquished until death, the full
value of the transferred property will be included in the
decedent’s gross estate. Section 2036(a) is applicable when
three conditions are met: (1) The decedent made an inter vivos
transfer of property; (2) the decedent retained an interest or
right enumerated in section 2036(a)(1) or (2) or (b)6 in the
transferred property which he did not relinquish before his
death; and (3) the decedent’s transfer was not a bona fide sale
for adequate and full consideration in money or money’s worth.
The parties do not dispute that Austin and Edna made an inter
vivos transfer of property when they contributed the assets to
KPLP. Therefore, we conclude that this requirement is met.
A. Retention of Rights in Transferred Property
Section 2036 requires the inclusion of the value of
transferred property with respect to which a decedent retained,
by express or implied agreement, possession, enjoyment, or the
right to income. Respondent argues that Austin and Edna
retained, by express and implied agreement, until they died, the
6Sec. 2036(b) provides that the retention of the right to
vote shares of a controlled corporation that were transferred by
a decedent is the retention of the enjoyment of the transferred
property.
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