                                 T.C. Memo. 2014-100



                           UNITED STATES TAX COURT



   ESTATE OF HAZEL F. HICKS SANDERS, DECEASED, MICHAEL W.
 SANDERS AND SALLIE S. WILLIAMSON, CO-EXECUTORS, Petitioners v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 14489-12.                            Filed May 27, 2014.



      Harris H. Barnes, III, for petitioners.

      Thomas A. Friday and John F. Driscoll, for respondent.



                             MEMORANDUM OPINION


      KROUPA, Judge: This matter is before the Court on the Estate of Hazel

Hicks Sanders’ (estate’s) motion for partial summary judgment. See Rule 121.1


      1
          All Rule references are to the Tax Court Rules of Practice and Procedure,
                                                                         (continued...)
                                        -2-

[*2]                                Background

Decedent

       Hazel Hicks Sanders (decedent) died on April 5, 2008. She was survived by

her children, Michael W. Sanders and Sallie S. Williamson, coexecutors of her

estate (coexecutors). Decedent was the widow of the late James M. Sanders,

founder of Jimmy Sanders, Inc. (JSI). Decedent owned 41,073 shares of JSI

common stock when she died.2

       In 1953 the late Mr. Sanders founded the company that ultimately became

JSI. He had decided to form his own farm supply company after having returned

from World War II. Through hard work and dedication, the late Mr. Sanders and

his family grew JSI from a fledgling startup into one of the largest agricultural

input supply and distribution businesses in the Midsouth, with locations in eight

States, including Mississippi, Arkansas, Louisiana, Tennessee, Alabama, Georgia,

Kentucky and Texas.



       1
        (...continued)
and all section references are to the Internal Revenue Code in effect at all relevant
times, unless otherwise indicated.
       2
        Decedent resided in Mississippi when she died. Her last will and testament
was probated in Mississippi. Michael W. Sanders resided in Mississippi when the
petition was filed. Sallie S. Williamson resided in Alabama when the petition was
filed.
                                          -3-

[*3] Giving Program

       Decedent made gifts of JSI stock to her family members each year from

1999 through 2008 (years at issue). Decedent timely filed Forms 709, United

States Gift (and Generation-Skipping Transfer) Tax Return, reporting the gifts for

the years at issue (gift tax returns).3

       Respondent examined the gift tax returns and in 2012 issued deficiency

notices for Federal gift tax for 9 of the 10 years at issue (gift tax notices).4 The

gift tax notices were sent to the coexecutors’ last known addresses. The estate did

not challenge the gift tax notices.

Estate Tax Return

       The estate reported the fair market value of the JSI shares to be $3,696,570,

or $90 per share, on its Form 706, United States Estate (and Generation Skipping

Transfer) Tax Return. Respondent increased the value of the adjusted taxable gifts

the estate reported on the Form 706 by $3,248,613 to reflect the determinations in

the gift tax notices.




       3
      The gift tax returns for 2005 and 2006 were filed within their respective 6-
month extensions.
       4
      Respondent did not issue a deficiency notice for 2004 because decedent did
not owe additional gift tax for 2004.
                                         -4-

[*4] Respondent issued a deficiency notice for Federal estate tax to the estate.

The estate filed the petition to challenge respondent’s increasing the value of the

adjusted taxable gifts the estate reported on the gift tax returns.

                                      Discussion

      This matter concerns when the periods of limitation applicable to Federal

gift tax assessments begin to run. We start with our summary judgment standard.

We then turn to the relevant periods of limitation. We finish by deciding whether

a genuine dispute exists concerning whether the relevant periods of limitation had

run before respondent issued the gift tax notices.

I. Summary Judgment

      We begin with our summary judgment standard. Summary judgment is

intended to expedite litigation and avoid unnecessary and expensive trials. See,

e.g., FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). We will

grant a motion for summary judgment or partial summary judgment only if it is

shown that there is no genuine dispute as to any material fact and that we may

render a decision as a matter of law. See Rule 121(b); Elec. Arts, Inc. v.

Commissioner, 118 T.C. 226, 238 (2002). The moving party bears the burden of

proving that there is no genuine dispute as to any material fact, and we view all
                                          -5-

[*5] factual materials and inferences in the light most favorable to the nonmoving

party. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985).

II. Periods of Limitation on Assessment

      We now turn to the relevant periods of limitation for assessing Federal gift

tax. An individual who in any calendar year makes any transfer by gift, subject to

exceptions not relevant here, must file a return for that year with respect to the gift

tax imposed on that transfer. Sec. 6019. A gift tax return must be filed on a Form

709. Sec. 25.6019-1(a), Gift Tax Regs. The Commissioner is generally required

to assess gift tax within three years after a Form 709 is filed. See sec. 6501(a).

The period of limitation will commence once a taxpayer discloses a gift on a Form

709, or on a statement attached to a Form 709, in a manner that is adequate to

apprise the Secretary of the nature of the gift. See sec. 6501(c)(9).

      Before Congress enacted section 2001(f) through the Taxpayer Relief Act of

1997, Pub. L. No. 105-34, sec. 506(a), 111 Stat. at 855, the Commissioner could

redetermine the value of prior taxable gifts for purposes of Federal estate tax. See

Estate of Smith v. Commissioner, 94 T.C. 872, 878 (1990). The effect was not to

tax the prior gifts, but to tax the assets passing in the gross estate at the highest

applicable marginal rate. Id. at 879-880. Now, the value of a prior taxable gift

will be treated as finally determined if the gift is shown on a Form 709 and the
                                        -6-

[*6] Commissioner does not contest the value of the gift before the period of

limitations on assessment has run. Sec. 2001(f)(2)(A). The value of a gift will be

treated as being shown on a Form 709 if the gift is disclosed on Form 709, or in a

statement attached to Form 709, in a manner that is adequate to apprise the

Secretary of the nature of the gift. Sec. 2001(f)(2) (flush language).

      Whether decedent’s giving program had triggered the periods of limitation

on assessment, therefore, depends on whether decedent adequately disclosed the

nature of the gifts in the gift tax returns. The Secretary has promulgated

regulations that describe when such a transfer is adequately disclosed. See sec.

301.6501(c)-1(f)(2), Proced. & Admin. Regs.

      We now look to what adequate disclosure means under the regulations. In

general, a transfer reported on a Form 709 or on a statement attached to a Form

709 will be considered adequately disclosed if the taxpayer provides, among other

things, a detailed description of the method used to determine the fair market value

of the property transferred, including any financial data (for example, balance

sheets, etc., with explanations of any adjustments) that were used in determining

the value of the property. Id. sec. 301.6501(c)-1(f)(2)(iv).
                                         -7-

[*7] III. Genuine Dispute of Material Fact

      Whether a statement attached to a gift tax return adequately discloses a gift

is a question of fact. Cf. Quick Trust v. Commissioner, 54 T.C. 1336, 1346 (1970)

(applying the adequate disclosure requirement of section 6501(e)(1)(A)(ii)), aff’d

per curiam, 444 F.2d 90 (8th Cir. 1971). The estate maintains that the statements

decedent attached to the gift tax returns meet the adequate disclosure requirements

so as to have triggered the running of the periods of limitation on assessment.

Thus, the estate argues, the gift tax notices were issued after the relevant periods

of limitation on assessment had run for the years at issue.5 Respondent points to

the statements that the estate attached to the gift tax returns and argues that they

did not adequately disclose the nature of the JSI stock or the basis of the value so

reported and therefore did not trigger the running of the periods of limitation on

assessment. Respondent contends JSI owned but did not disclose its ownership of

another closely held entity--something the regulations require if that information is

relevant and material in determining the value of the JSI stock. See sec.

301.6501(c)-1(f)(2)(iv), Proced. & Admin. Regs.




      5
       We note that even under the estate’s argument, the gift tax notice relating
to 2008 appears to have been issued within the relevant period of limitation.
                                         -8-

[*8] The estate has failed to show there is no genuine dispute as to whether the

statements decedent attached to the gift tax returns adequately disclosed the nature

of the JSI stock or the basis of the value so reported so as to trigger the running of

the periods of limitation on assessment. Accordingly, we will deny the estate’s

motion for partial summary judgment. See Rule 121(b); Elec. Arts, Inc. v.

Commissioner, 118 T.C. at 238 (2002).

IV. Conclusion

      We will deny the estate’s motion for partial summary judgment, and we will

schedule a trial in due course to determine the material facts in dispute.

      To reflect the foregoing,


                                               An appropriate order will be issued.
