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I generally agree with what others have said, but would add a couple of points.

1. It looks like the total payments will actually be $360,000, and if that's the current market value, then after discounting the payments to present value, there will be a gift element but it won't be horrible.

2. This scheme won't reduce the taxable estate by $360,000. It will replace land, with a value of $300,000, for a land contract or installment note worth something close to that, or maybe less, depending on its terms. And the new asset isn't any more liquid than the land.

3. Since the payments will continue after the death of A, and be payable to C and D, let's just call it an installment sale. IRS recently adopted new regulations that basically eliminate the private annuity approach.

4. B's basis in the land won't be zero, even at the sham transaction of $1. It will be A's basis. And legally it will be what he pays for it.

5. The payments to C and D after A's death will be taxable to them as capital gains from an installment sale as "income in respect of a decedent." (IRD).

6. A is said to be in good health. He could live to be 95 and his estate will include the money from the sale. A sale like this is often called an "estate freeze" as it moves future appreciation from A to B. It might well be worth doing. And it can be done honestly, without a lot of pain involved.

There are too many parties involved to play games, for the amount of money involved, especially at LT capital gains rates.

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