C.C.A. 201330033 (Feb. 24, 2012)

(taxpayer transferred closely-held stock to grantor trust (GRAT) in exchange for SCINs in five sets of transfers; transferor died in year after transfers; SCINs to pay interest only during term of notes and entire principal to be repaid at maturity; third set of transfers involved face amount of notes approximately double appraised stock value to reflect possibility that transferor might die before expiration of note's term; fourth set face amount equal to appraised stock value but had higher interest rate; decedent never received any payments under notes before death; decedent diagnosed with terminal illness after transfers; executor valued notes on Form 709 using I.R.C. Sec. 7520 tables with result that there were no taxable gifts; IRS concluded that (1) if FMV of notes was less than FMV of stock, difference was a gift; (2) Section 7520 tables not appropriate for valuing notes, but willing buyer/willing seller test is; (3) no estate tax consequence associated with cancellation of notes due to self-cancelling feature in accordance with Estate of Moss v. Comr., 74 T.C. 1239 (1980) and Estate of Musgrove v. United States, 33 Fed. Cl. 657 (1995)).