Court Opinion

ID: 4338916
Source: CourtListenerOpinion
Date Created: 2018-11-14 04:09:01.988878+00
Date Added: 2024-06-11T14:46:57.540716
License: Public Domain

ESTATE OF JANE H. GUDIE, DECEASED, MARY HELEN
                                               NORBERG, EXECUTOR, PETITIONER v. COMMISSIONER
                                                      OF INTERNAL REVENUE, RESPONDENT

                                                        Docket No. 4089–10.                 Filed November 30, 2011.

                                                  E was never appointed executrix over D’s estate by a State
                                                probate court, but she signed D’s estate’s Federal estate tax
                                                return as executor. R determined a deficiency in estate tax
                                                and a sec. 6662(a), I.R.C., accuracy-related penalty and issued
                                                a notice of deficiency listing E as executor. E filed a petition

                                                                                                                                     165

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                                      166                 137 UNITED STATES TAX COURT REPORTS                                       (165)

                                                with this Court for redetermination. E subsequently filed a
                                                motion to dismiss for lack of subject matter jurisdiction,
                                                arguing this Court lacked jurisdiction because she was never
                                                appointed executrix by a State probate court and accordingly
                                                the notice of deficiency had been sent to the wrong person. R
                                                objected, arguing that because E was in possession of property
                                                of D, she was a statutory executor within the purview of sec.
                                                2203, I.R.C., and the proper person to receive the notice of
                                                deficiency. Held: E is a statutory executor within the purview
                                                of sec. 2203, I.R.C. R properly issued E a notice of deficiency.
                                                E timely petitioned this Court, and therefore this Court has
                                                jurisdiction.

                                        Edward O.C. Ord and Robert P. Hess, for petitioner.
                                        R. Malone Camp, Jr., and Donna F. Herbert,                                                   for
                                      respondent.

                                                                                  OPINION

                                        WHERRY, Judge: The sole issue before this Court is
                                      whether we have subject matter jurisdiction. Petitioner
                                      argues we do not; respondent argues we do. We agree with
                                      respondent.

                                                                                Background
                                         The following recitation of facts is drawn primarily from
                                      Mary Helen Norberg’s (Ms. Norberg) motion to dismiss for
                                      lack of subject matter jurisdiction (motion to dismiss) and
                                      responses filed by both parties. We note that our recitation
                                      of ‘‘facts’’ is solely for the purpose of ruling on the motion to
                                      dismiss and is not a finding of facts.
                                         Jane H. Gudie (decedent), a resident of California, died on
                                      June 14, 2006. Decedent had no children but was survived by
                                      two nieces, Ms. Norberg and Patricia Ann Lane (Ms. Lane).
                                      Decedent’s will did not nominate either niece as her execu-
                                      trix.
                                         Part of decedent’s estate consisted of property held in the
                                      ‘‘Jane Henger Gudie Living Trust’’ (decedent’s trust), created
                                      July 17, 1991. The trust document originally named Ms. Nor-
                                      berg and Ms. Lane (the nieces) as the remainder bene-
                                      ficiaries. Decedent retained for her life the right to revoke or
                                      amend the trust in whole or in part.
                                         On April 1, 1995, the terms of decedent’s trust were
                                      amended to name the nieces as the primary beneficiaries. On

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                                      (165)                  ESTATE OF GUDIE v. COMMISSIONER                                        167

                                      January 19, 1999, the terms of decedent’s trust were
                                      amended to appoint Ms. Norberg cotrustee and the nieces as
                                      successor cotrustees upon decedent’s death.
                                         On February 9, 1999, decedent and the nieces entered into
                                      a transaction where, in form, the nieces each agreed to pay
                                      decedent an annuity of $937,483 per year, with the first pay-
                                      ment due in 4 years. In return, decedent, as trustee, issued
                                      a note to each niece, due in 4 years or upon decedent’s death,
                                      in the face amount of $3 million with 6 percent interest,
                                      secured by the assets of decedent’s trust. Neither note was
                                      recorded, and no payments were made. On February 9, 2003,
                                      the unpaid annuity amounts were rolled over into new annu-
                                      ities and the annuity commencement date and the due date
                                      of the notes deferred for another 4 years. Again, no payments
                                      were made.
                                         On or about March 14, 2007, a Form 706, United States
                                      Estate (and Generation-Skipping Transfer) Tax Return, was
                                      filed for decedent’s estate (estate tax return). At the time the
                                      estate tax return was filed, no one was formally appointed,
                                      qualified, or acting as executor or administrator of decedent’s
                                      estate. Ms. Norberg signed the estate tax return as executor
                                      but refuses to be formally appointed executrix of decedent’s
                                      estate under California law.
                                         The estate tax return reported a total gross estate less
                                      exclusion of zero and estate taxes owed of zero. Schedule G,
                                      Transfers During Decedent’s Life, attached to the estate tax
                                      return listed assets including real estate totaling $1,890,000,
                                      furniture and furnishings totaling $100,000, and securities
                                      and bank accounts totaling $5,080,515. The real estate, secu-
                                      rities, and bank accounts were titled in the name of
                                      decedent’s trust. The assets of decedent’s trust were listed
                                      subject to the outstanding debt owed to the nieces ($6 million
                                      principal plus $2,643,300 accrued interest). As a result, the
                                      estate tax return reported total assets transferred during
                                      decedent’s life of negative $1,572,785.
                                         As the sole beneficiaries of decedent’s trust, the nieces
                                      received equal shares of the trust property. According to cor-
                                      respondence between the nieces, Ms. Norberg’s husband, and
                                      Robert P. Hess (Mr. Hess), decedent’s estate planner, the
                                      nieces each received $3,404,343.63 upon decedent’s death.
                                         Respondent audited the estate tax return, determining (1)
                                      decedent had made $2,983,437 of adjusted taxable gifts in

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                                      168                 137 UNITED STATES TAX COURT REPORTS                                       (165)

                                      1992 that were not reflected on the estate tax return; (2)
                                      claimed gifts of $279,000 decedent made in 2005 and 2006
                                      were invalid for estate and gift tax purposes; and (3) the
                                      deduction of $8,643,300 claimed on Schedule G is not deduct-
                                      ible because it was not a bona fide loan and was not for full
                                      and adequate consideration.
                                        On January 11, 2010, respondent issued a notice of defi-
                                      ciency to ‘‘Estate of Jane H. Gudie, c/o Mary Helen Norberg,
                                      Executor’’, showing a deficiency in estate tax of $3,833,157.92
                                      and a section 6662(a) accuracy-related penalty of
                                      $766,631.58. 1 On February 17, 2010, a petition was filed
                                      with this Court by Mr. Hess, who is an attorney admitted to
                                      practice before this Court, on behalf of ‘‘Jane H. Gudie,
                                      Deceased; Mary Helen Norberg, Executor’’. At the time the
                                      petition was filed, Ms. Norberg resided in California. In the
                                      petition, Ms. Norberg alleged that respondent
                                      erred in determining that the decedent did not receive full and adequate
                                      consideration in money or money’s worth for promissory notes that rep-
                                      resented bona fide claims against decedent’s living trust dated September
                                      16, 1981. There was no evidence that gifts made in 2005 and 2006 were
                                      not valid for Estate and Gift Tax purposes.

                                         Respondent filed his answer on April 8, 2010. On January
                                      3, 2011, respondent’s motion for leave to file amendment to
                                      answer, filed December 23, 2010, was granted. In the motion
                                      respondent alleged that the gifts made in 1992 were made to
                                      ‘‘skip persons’’ under section 2613 and accordingly were sub-
                                      ject to the generation-skipping transfer tax under section
                                      2601. The motion asserted an increased deficiency in estate
                                      tax of $4,972,876.30 and an increased section 6662(a)
                                      accuracy-related penalty of $994,575.26.
                                         On June 9, 2011, Ms. Norberg filed a motion to dismiss.
                                      On June 17, 2011, respondent was ordered to file any
                                      response to the motion to dismiss on or before July 25, 2011.
                                      Respondent’s objection to the motion to dismiss was filed on
                                      July 22, 2011, with six exhibits, denominated A through F,
                                      attached. On August 26, 2011, Ms. Norberg filed two docu-
                                      ments: (1) A reply memorandum in support of objections to
                                      respondent’s objections to motion to dismiss and (2) Mary
                                        1 All section references are to the Internal Revenue Code of 1986, as amended and in effect

                                      for the date of decedent’s death. All Rule references are to the Tax Court Rules of Practice and
                                      Procedure.

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                                      (165)                      ESTATE OF GUDIE v. COMMISSIONER                                       169

                                      Helen Norberg’s evidentiary objections to respondent’s objec-
                                      tions to motion to dismiss.

                                                                                    Discussion
                                      I. Evidentiary Objections
                                         Ms. Norberg asserts that ‘‘In ruling on a motion for sum-
                                      mary adjudication, a trial court can only consider admissible
                                      evidence’’ and that because respondent’s ‘‘factual allegations
                                      and exhibits in support of * * * [respondent’s objection]’’ are
                                      inadmissible, they ‘‘must be stricken’’, citing rule 56(e) of the
                                      Federal Rules of Civil Procedure, Orr v. Bank of Am., 285
F.3d 764, 773 (9th Cir. 2002), and Beyene v. Coleman Sec.
                                      Servs., Inc., 854 F.2d 1179, 1181 (9th Cir. 1988), as her
                                      authorities.
                                         In Orr v. Bank of Am., supra at 773, the Court of Appeals
                                      for the Ninth Circuit, the court to which this case is appeal-
                                      able absent stipulation to the contrary, stated: ‘‘A trial court
                                      can only consider admissible evidence in ruling on a motion
                                      for summary judgment.’’ Beyene v. Coleman Sec. Servs., Inc.,
                                      supra at 1181, and rule 56(e) of the Federal Rules of Civil
                                      Procedure stand for the same proposition. But we are not
                                      ruling on a motion for summary judgment. We are ruling on
                                      a motion to dismiss for lack of subject matter jurisdiction. 2
                                      The U.S. Supreme Court has held where, as here, ‘‘there is
                                      no statutory direction for procedure upon an issue of jurisdic-
                                      tion, the mode of its determination is left to the trial court.’’
                                      Gibbs v. Buck, 307 U.S. 66, 71–72 (1939). When an issue of
                                      jurisdiction is raised, either by a party or on our own initia-
                                      tive, we ‘‘may inquire by affidavits or otherwise, into the
                                      facts as they exist.’’ Land v. Dollar, 330 U.S. 731, 735 n.4
                                      (1947), overruled by implication on other grounds by Larson
                                      v. Domestic & Foreign Commerce Corp., 337 U.S. 682 (1949);
                                      see also Stevens v. Redwing, 146 F.3d 538 (8th Cir. 1998).
                                           2 Ms.   Norberg, in her objection, states:
                                      This Court should treat this motion as a motion for summary judgment seeking an order ruling
                                      that this Court lacks subject matter jurisdiction, pursuant to Tax Court Rules 40 and 121. This
                                      is due to the fact that the motion to dismiss is supported by a declaration under penalty of per-
                                      jury under 28 U.S.C. 1746, which authorizes declarations in lieu of affidavits.
                                        We view Ms. Norberg’s position as an attempt to circumvent established precedent and bring
                                      evidentiary rules not applicable in jurisdictional questions into play. In deciding whether we
                                      have jurisdiction, we are not bound by evidentiary rules applicable in deciding motions for sum-
                                      mary judgment.

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                                      170                 137 UNITED STATES TAX COURT REPORTS                                       (165)

                                        None of respondent’s exhibits will be stricken, and the
                                      Court will examine all the facts before us in determining
                                      whether we have jurisdiction over this case.
                                      II. Subject Matter Jurisdiction
                                           A. Introduction
                                         The Tax Court is a court of limited jurisdiction and may
                                      exercise jurisdiction only to the extent authorized by Con-
                                      gress. Adkison v. Commissioner, 592 F.3d 1050, 1052 (9th
                                      Cir. 2010), affg. on other grounds 129 T.C. 97 (2007). Our
                                      jurisdiction to redetermine a deficiency depends upon the
                                      issuance of a valid notice of deficiency and a timely filed peti-
                                      tion. Rule 13(a), (c); Monge v. Commissioner, 93 T.C. 22, 27
                                      (1989).
                                         Section 6212(a) expressly authorizes the Commissioner,
                                      after determining a deficiency, to send a notice of deficiency
                                      to the taxpayer. In the instance of an estate tax deficiency,
                                      once the Commissioner is notified of the existence of a fidu-
                                      ciary relationship, the fiduciary steps into the shoes of the
                                      taxpayer for tax purposes, and the notice of deficiency is to
                                      be sent to the fiduciary. Sec. 6212(b)(3); Rule 60(a); Estate of
                                      McElroy v. Commissioner, 82 T.C. 509, 512 (1984); Estate of
                                      Kisling v. Commissioner, T.C. Memo. 1993–119; sec.
                                      301.6212–1(b)(3), Proced. & Admin. Regs. The taxpayer (or
                                      fiduciary) in turn has 90 days from the date the notice of
                                      deficiency is mailed (150 days if the notice is mailed to a tax-
                                      payer outside of the United States) to file a petition in this
                                      Court for a redetermination of the deficiency. Sec. 6213(a);
                                      Rule 60(a); Estate of Moffat v. Commissioner, 46 T.C. 499,
                                      501 (1966).
                                           B. Ms. Norberg’s Argument
                                        Ms. Norberg, relying on Hulburd v. Commissioner, 296
U.S. 300 (1935), argues that ‘‘the notice was issued and
                                      mailed to the wrong taxpayer’’. 3 Although unclear, we sur-
                                      mise Ms. Norberg’s argument is that she was not a fiduciary
                                      within the meaning of section 6212(b)(3). She states that she
                                        3 Hulburd v. Commissioner, 296 U.S. 300 (1935), did not involve the validity of a deficiency

                                      notice, but rather the personal liability of the executor and legatee of a shareholder in a dis-
                                      solved corporation. Thus, contrary to Ms. Norberg’s assertion, Hulburd has little, if any, rel-
                                      evance to the case at hand.

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                                      (165)                  ESTATE OF GUDIE v. COMMISSIONER                                        171

                                      was never appointed executrix of decedent’s estate by a Cali-
                                      fornia probate court and no action of any kind seeking her
                                      appointment as executrix will be taken. According to Ms.
                                      Norberg, the notice of deficiency should have been addressed
                                      to ‘‘Jane Henger Gudie Living Trust dated July 17, 1991,
                                      Mary Helen Norberg and Patricia Ann Lane successor co-
                                      trustees, or to Norberg as a transferee’’.
                                           C. Respondent’s Argument
                                        Respondent argues that Ms. Norberg was in actual or
                                      constructive receipt of property of decedent and thus ‘‘as
                                      statutory executor within the meaning of section 2203, was
                                      the proper person to whom to issue the notice of deficiency
                                      pursuant to section 6212(b)(3) and the proper party to bring
                                      the instant case pursuant to Tax Court Rule 60(a)’’.
                                           D. Analysis
                                         Our conclusion, explained below, is that Ms. Norberg,
                                      because she was in actual or constructive possession of prop-
                                      erty of decedent, was a statutory executor. As such, she had
                                      the responsibility and authority to file the estate tax return.
                                      By filing the estate tax return, she notified respondent of a
                                      fiduciary relationship and was the proper person to receive
                                      the notice of deficiency.
                                         Section 2203 defines ‘‘executor’’ for purposes of the Federal
                                      estate tax as ‘‘the executor or administrator of the decedent,
                                      or, if there is no executor or administrator appointed, quali-
                                      fied, and acting within the United States, then any person in
                                      actual or constructive possession of any property of the
                                      decedent.’’ In her objection, Ms. Norberg states she ‘‘was
                                      never in possession of any assets of the probate estate of
                                      Jane H. Gudie, or of other estates, with respect to any and
                                      all times relevant to our motion to dismiss.’’ Ms. Norberg
                                      attached to her objection the signed declaration of Mr. Hess,
                                      who also states that ‘‘Norberg was not ever in possession of
                                      any assets of the probate estate of Jane H. Gudie’’. Ms. Nor-
                                      berg and Mr. Hess carefully confine their statements to the
                                      ‘‘probate estate’’. The fact that the property Ms. Norberg
                                      received did not pass through probate is immaterial to this
                                      discussion. This Court has previously held in situations like
                                      this that ‘‘the fact that * * * property interests passed * * *

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                                      172                 137 UNITED STATES TAX COURT REPORTS                                       (165)

                                      directly rather than as part of decedent’s probate estate is
                                      immaterial.’’ Estate of Guida v. Commissioner, 69 T.C. 811,
                                      813 (1978); see also Estate of Wilson v. Commissioner, 2 T.C.
1059, 1083–1084 (1943) (stating that if taxpayers could
                                      distinguish between probate and nonprobate property to
                                      defeat the estate tax, ‘‘the law would soon be a nullity’’).
                                        On the facts before us, Ms. Norberg was in actual or
                                      constructive possession of decedent’s property at the time the
                                      estate tax return was filed. 4 At the time the estate tax
                                      return was filed, there was no one appointed, qualified, or
                                      acting as executor or administrator of decedent’s estate.
                                      Therefore Ms. Norberg qualified as a statutory executor of
                                      decedent’s estate for purposes of the Federal estate tax. 5 See
                                      sec. 2203; Huddleston v. Commissioner, 100 T.C. 17, 30–31
                                      (1993); Estate of Guida v. Commissioner, supra at 813; New
                                      York Trust Co. v. Commissioner, 26 T.C. 257, 261–262 (1956);
                                      Allen v. Commissioner, T.C. Memo. 1999–385.
                                        Section 6018(a)(1) directs the executor in cases where the
                                      decedent’s gross estate exceeds the applicable exclusion
                                      amount to file an estate tax return. See also sec. 20.6018–2,
                                      Estate Tax Regs. Therefore, as statutory executor, Ms. Nor-
                                      berg had the responsibility and authority to file the estate
                                      tax return.
                                        Section 6036 provides in part: ‘‘every executor (as defined
                                      in section 2203), shall give notice of his qualification as such
                                      to the Secretary in such manner and at such time as may be
                                      required by regulations of the Secretary.’’ Section 6903(a)
                                      provides:
                                        SEC. 6903(a). RIGHTS AND OBLIGATIONS OF FIDUCIARY.—Upon notice to
                                      the Secretary that any person is acting for another person in a fiduciary
                                      capacity, such fiduciary shall assume the powers, rights, duties, and privi-
                                      leges of such other person in respect of a tax imposed by this title (except
                                      as otherwise specifically provided and except that the tax shall be collected
                                         4 Decedent was considered the owner of the trust property pursuant to sec. 676(a), which pro-

                                      vides: ‘‘The grantor shall be treated as the owner of any portion of a trust, whether or not he
                                      is treated as such owner under any other provision of this part, where at any time the power
                                      to revest in the grantor title to such portion is exercisable by the grantor or a nonadverse party,
                                      or both.’’
                                         5 We are not appointing Ms. Norberg executor for purposes of State law or providing her the

                                      authority that comes with being appointed executor under State law. Nor are we concluding that
                                      Ms. Norberg is potentially liable for the entire deficiency. This Court has previously stated: ‘‘It
                                      is clear that a determination of deficiency against an estate, even though the executor or per-
                                      sonal representative is named as the person to receive the notice, is not a determination of defi-
                                      ciency against the executor or personal representative in his or her personal capacity.’’ Estate
                                      of Walker v. Commissioner, 90 T.C. 253, 257 (1988).

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                                      (165)                  ESTATE OF GUDIE v. COMMISSIONER                                          173

                                      from the estate of such other person), until notice is given that the fidu-
                                      ciary capacity has terminated.

                                         Ms. Norberg’s filing of the estate tax return gave
                                      respondent notice for purposes of sections 6036 and 6903
                                      that she was to be treated as the executor and fiduciary of
                                      decedent’s estate. Section 20.6036–2, Estate Tax Regs., pro-
                                      vides in relevant part: ‘‘The requirement of section 6036 for
                                      notification of qualification as executor of an estate shall be
                                      satisfied by the filing of the estate tax return required by
                                      section 6018’’. Section 301.6036–1(c), Proced. & Admin. Regs.,
                                      provides: ‘‘When a notice is required under § 301.6903–1 of
                                      a person acting in fiduciary capacity and is also required of
                                      such person under this section, notice given in accordance
                                      with the provisions of this section shall be considered as com-
                                      plying with both sections.’’ Hence, filing the estate tax return
                                      as executor was adequate notice for purposes of both sections
                                      6036 and 6903. 6
                                         Ms. Norberg never gave respondent a notice of termi-
                                      nation. Therefore she was never relieved of her powers,
                                      rights, duties, and privileges as a fiduciary of decedent’s
                                      estate for Federal estate tax purposes. She was the proper
                                      individual to receive the notice of deficiency under section
                                      6212 and had the capacity to contest the notice of deficiency
                                      upon which this case is based. See Rule 60(a)(1); Huddleston
                                      v. Commissioner, supra at 30–31; Estate of Sivyer v. Commis-
                                      sioner, 64 T.C. 581 (1975); Allen v. Commissioner, supra; see
                                      also Estate of Kisling v. Commissioner, T.C. Memo. 1993–119
                                      (stating that the fiduciary of the estate was required to look
                                      after its interests). Respondent properly mailed a notice of
                                      deficiency to ‘‘Estate of Jane H. Gudie, c/o Mary Helen Nor-
                                      berg, Executor’’, and Ms. Norberg’s timely petition gave this
                                      Court jurisdiction. See also Estate of Callahan v. Commis-
                                      sioner, T.C. Memo. 1981–357 (stating: ‘‘The function of a
                                         6 Ms. Norberg argues that ‘‘the filing of an estate tax return does not constitute notice for li-

                                      ability purposes’’ or apparently in Ms. Norberg’s views, to the Commissioner of a fiduciary rela-
                                      tionship entitling the filer of the estate tax return to act for the estate pursuant to sec. 6903(a).
                                      She argues Form 56, Notice Concerning Fiduciary Relationship, is necessary for adequate notice.
                                      We disagree.
                                         The instructions on Form 56 state: ‘‘You must notify the IRS of the creation or termination
                                      of a fiduciary relationship under section 6903 and give notice of qualification under section 6036.
                                      You may use Form 56 to provide this notice to the IRS’’. While filing a Form 56 provides ade-
                                      quate notice, as explained above, it is not the exclusive method by which a person can inform
                                      the IRS that he or she is acting in a fiduciary capacity. Sec. 301.6036–1(c), Proced. & Admin.
                                      Regs.; sec. 20.6036–2, Estate Tax Regs.

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                                      174                 137 UNITED STATES TAX COURT REPORTS                                       (165)

                                      statutory notice of deficiency is to afford * * * [the taxpayer]
                                      a full and fair opportunity to present its case in this Court.’’).
                                        In conclusion, the notice of deficiency was appropriately
                                      addressed to Ms. Norberg and she had the authority to file
                                      the petition in this case. Her timely petition in response to
                                      the valid notice of deficiency gives this Court jurisdiction.
                                      III. Statute of Limitations
                                        Although the argument is unclear, in her motion to dismiss
                                      Ms. Norberg appears to argue that the period of limitations
                                      on assessment has expired. In her objection to respondent’s
                                      objection, Ms. Norberg states she ‘‘did not and is not
                                      asserting in this motion any issue regarding statute of
                                      limitations’’ and asks us not to rule on this issue. We need
                                      not analyze this issue here but do note two things. First,
                                      pursuant to sections 6503(a)(1) and 6213(a), the period of
                                      limitations on assessment, if open when a notice of deficiency
                                      was sent, would generally be suspended if a timely petition
                                      was filed until such time as the Secretary is no longer
                                      prohibited from assessing the tax. Second, the statute of
                                      limitations is an affirmative defense, not a jurisdictional
                                      matter. See Rule 39; Freytag v. Commissioner, 110 T.C. 35,
                                      41 (1998).
                                        To reflect the foregoing,
                                                                     An appropriate order will be issued
                                                                   denying petitioner’s motion to dismiss for
                                                                   lack of subject matter jurisdiction.

                                                                               f

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