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partnership interest in Christiansen Investments had a fair
market value of $1,330,700.
The estate’s tax return used these values to report a total
gross estate value of slightly more than $6.5 million. When read
in conjunction with the disclaimer’s reservation to Hamilton of
$6.35 million worth of property, this meant that only $40,555.80
would pass to the Foundation and $121,667.20 to the Trust. The
estate deducted the entire amount passing to the Foundation, and
the part passing to the Trust that was equal to the present value
of 7 percent of $121,667.20 per annum for 20 years. The total
came to about $140,000. It is important to note that the estate
did not deduct the value of Hamilton’s contingent-remainder
interest in the Trust’s corpus. See sec. 20.2055-2(b)(1), Estate
Tax Regs.
The Commissioner determined that the fair market values of
Christiansen’s 99 percent FLP interests should be increased and
that Hamilton’s disclaimer did not “qualify”--a term we discuss
later--to make any part of the estate’s property passing to
either the Trust or the Foundation generate a charitable
deduction. The estate timely filed a petition, and trial was
held in St. Paul, Minnesota.
The parties settled the valuation question before trial by
stipulating that the fair market value of the Christiansen’s
interest in Christiansen Investments was $1,828,718.10, an
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