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unified credit amount in effect for the year of death, was to be
transferred to the marital deduction trust. The remaining assets
were to be transferred to the family trust.
IV. The Estate Tax Return
The estate mailed Form 706, U.S. Estate (and Generation-
Skipping Transfer) Tax Return, on September 1, 1999, and it was
received by the IRS on September 5, 1999. The estate tax return
listed as jointly owned property the residence, the vacant lot,
and a checking account, including half their total value as part
of the gross estate. It listed as miscellaneous property half
the Korbys’ general partnership interests in Crane Properties and
KPLP, and personal property. The total gross estate value was
listed as $73,398. The estate claimed a deduction for funeral
expenses and claimed the marital deduction in an amount
approximately equal to the value of the jointly owned property in
the gross estate. The estate also reported adjusted taxable
gifts of $600,030 for the 1995 gifts of KPLP and Crane Properties
interests, gross estate tax of $202,050 subject to the unified
credit against estate tax, and zero tax due.
On August 29, 2002, respondent issued a notice of deficiency
addressed to the estate and the living trust. On the same day,
respondent issued a notice of deficiency to the living trust as
transferee of the estate’s liabilities (the notices). In the
notices, respondent determined that the full values of the assets
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