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C. Stock Transfers to Petitioner’s Children
1. 1999 Stock Transfers From Petitioner to His Sons
On a date not stated in the record, Rosenberg advised
petitioner to transfer stock of DGA to trusts established for the
benefit of his sons in exchange for cash and notes signed by his
sons as trustees of the trusts for their benefit promising to pay
for the stock. Petitioner wanted the notes to be deemed paid in
full if he died before all payments were made.4
Rosenberg and Holt chose Empire to appraise DGA’s series B
stock to determine the price for a sale of the stock by
petitioner to the trusts. Petitioner and his sons agreed that
the trusts would buy the stock at the price set by Empire.
Empire prepared a report dated November 15, 1999, and sent
it to Felowitz. Empire concluded that the fair market value of
the series B shares was $620 as of September 30, 1999. Empire
used the same methodology that it had used to appraise the DGA
shares held by Fay’s estate. See par. B-4, above.
On November 29, 1999, petitioner transferred 4,000 shares of
series B stock to the trust established for the benefit of Robert
and 4,000 shares to the trust established for the benefit of
David. In return, each trust transferred to petitioner $248,000
in cash and a promissory note for $2,232,000 (collectively the
4 If the notes were deemed prepaid when petitioner died,
the value of the notes would not be included in his estate.
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