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held by KPLP were includable in the gross estate under sections
2036 and 2038. Respondent also determined that the value of the
property held by the living trust was includable in the gross
estate under sections 2036 and 2038, rather than as jointly owned
property. Respondent reduced the estate’s adjusted taxable gifts
from $600,030 to $121,798, reflecting in part respondent’s
exclusion of the 1995 gifts of KPLP interests.4 The deficiency
in estate tax totaled $1,104,635. Respondent next determined
that the estate was liable for an addition to tax under section
6651(a)(1) of $276,159 because the estate tax return was not
filed timely.
OPINION
Respondent argues that the value of the property transferred
by Austin and Edna to KPLP is includable in Austin’s and Edna’s
gross estates under sections 2036(a)(1) and (2) and/or
2038(a)(1). The estate argues that sections 2036 and 2038 do not
apply to the assets the Korbys transferred to KPLP because Austin
and Edna retained no right to income from, corpus of, or power of
appointment over them, KPLP received the assets in a bona fide
sale for adequate and full consideration in money or money’s
worth, and Austin and Edna did not retain ownership or control
4The estate does not challenge respondent’s inclusion of the
living trust property under secs. 2036 and 2038 or his adjustment
to the adjusted taxable gifts. We therefore accept these
adjustments.
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