Edna Bennett Hirst v. Commissioner of Internal Revenue

cannot fault Finally, the district court findings failing make extensive

ed for pre-trial at a inquiry to a mere

response by either facts

hearing, unaccompanied Costa, v. States

argument. See United 1969), denied, (2d cert. Cir.

F.2d 26 L.Ed.2d 272 argu reject also Goldsmith’s

We charge with the district court’s

ment his the voluntariness of state

regard to charge was vir improper.

ments language stat tually identical to Butzner, Judges, Winter and 3501(a). Compare United ute. U.S.C. of the court en banc dissented from decision (2d 1975). Barry, F.2d 342 Cir. States Thomsen, opinion by for reasons stated Judge, prepared majori- Senior District Conclusion ty panel. entering conviction of judgment case is remanded is reversed and her Reed trial; judg- for a new court

to the district of Goldsmith is af- of conviction

ment

firmed. HIRST, Appellee,

Edna Bennett INTERNAL OF

COMMISSIONER

REVENUE, Appellant.

No. 75-1543. Appeals,

United States Circuit.

Fourth

Argued Nov. Jan.

Decided

HAYNSWORTH, Judge: Circuit issue primary in this is case whether parent a for liable of income taxes as the result of in transactions gave son, she to her his wife and their children three tracts of land upon the son’s agreement applicable any state and federal taxes. We affirm the decision Division, Cohen, Atty., Tax Jonathan S. Court, of Tax Hirst, Edna Bennett (Scott Dept, Justice, Washington, D.C. P. of (1974), that, T.C. 307 and hold under the Gen., E. An- Atty. Gilbert Crampton, Asst. gifts, circumstances of these Hirst did not drews, Bradbury, Attys., Tax Divi- A. Louis realize taxable income. Justice, D.C., sion, Washington, on Dept, accurately The facts are adequately brief), appellant. for Judge opinion stated Thomsen’s [see Mulroney, Washington, D.C. Michael page infra]. Lee, Kent, Lipscomb, Toomey (John P. & Any analysis of Mrs. Hirst’s income tax D.C., brief), appellee. on Washington, liability as a result of these transactions cases, must focus on two Turner Commis HAYNSWORTH, Judge, Before Chief Interna] Revenue, sioner of 49 T.C. 356 BRYAN, Judge, Circuit and WIN Senior curiam, (1968), per aff'd (6th 410 F.2d 752 TER, BUTZNER, CRAVEN,* .RUSSELL, 1969); R., Cir. Johnson C. I. 495 F.2d HALL, Judges, WIDENER and Circuit sit (6th 1974) Cir. (1973); aff’d 59 T.C. ting en banc. cert. den. 419 L.Ed.2d 317. Basically, government ar PER CURIAM: gues that Johnson is controlling, while the court, hearing panel After a a of this contends Turner is still viable Thomsen, Judge Roszel C. United States precedent. view, In our Johnson is distin Judge Maryland, District for the District of guishable. Turner is the basis our deci sitting opinion by designation, prepared an sion, as it was basis of decision in the panel a majority reaching a con- Tax Court. judgment clusion that the of the Tax Court Turner, In the donor separate made nine Judge should be reversed. Senior Albert V. securities, of low basis three to her Bryan prepared dissenting opinion. a After children outright, and six to trusts for the opinions these had been circulated but be- grandchildren. benefit her Each of these filed, they majority fore had been transfers was made condition that judgеs regular active service voted for recipient gift tax lia- en rehearing banc. bility. The three individual donees contrib- For dissenting the reasons stated in the uted respective their shares of the tax- Judge opinion Bryan prepared of Senior es either from available cash or the sale of panel [see, infra, supple- 431], as p. some of the donated securities. The six mented an opinion prepared by Chief trust donees respective contributed their Judge Haynsworth majority for a en primarily shares from the sale of some court, Judge Haynsworth, banc Chief Sen- securities, the donated supplemented in two Judge Bryan, ior Circuit Judges and Circuit loans, cases by comparatively and in four Russell, join Widener and Hall in an affirm- small amounts current income. Aside ance of the decision of the Tax Court. from these small amounts of current in- Judges come, Winter and Butzner dis- there apparently was no basis for sent for the reasons in the opinion invoking stated Internal Revenue Code sections Judge Thomsen. 671 and 677 only which deal with

* Judge participated prepаred. hearing opinion Craven was of this case but died before the transactions, As a result of these the do- contended The Commissioner from trusts.1 cash, $200,000 part sale nors had and the trust transfer that each $500,000 the excess of gift and that owned stock worth more than $200,000 the securi over the basis of donee note. The next each encumbered constituted to such donee $150,000 transferred paid approximately ties Johnson year, to the donor. capital gain chargeable taxes. Court, again the appeal on to Tax the The Tax Court in Johnson found the Circuit, conceded the Commissioner Sixth part of plan were a of the transactions not in trust were sales. the transfers that gift the to the trust and make to donor to by Thus, problem confronted principal the portion a substantial of attempt to realize transfers to the was whether the the courts of stock for the value the appreciated the part classified individuals could be three liability. It found that donor without sales, realization gifts, part of the full amount the retained the donor by presented issue gain, the same capital proceeds used the him and by loan obtained in The Tax Court litigation.2 the Hirst The Court personal purposes. own for his as a “net the transaction regarded Turner gift, part part were held the transfers that the in the amount gift”3 sale, fair market excess of the that the tax, which gift a transaction less the shares the over amount value of the stock tax conse no income court held had the taxes, subject to gift gift that loan was a T.C. at 363. The quences to the donor. subject to the loan was a sale on portion 410 F.2d affirmed. Sixth capital gain realized a which the securi Johnson4 owned taxpayer in The the loan exceeded his basis in to the extent which exceed value of the fair market ties the stock. $10,812.50. $500,000. only His basis was ed distinguish- The Court’s reasons for Tax of an his establishment days prior to Two that the included the fact trans- ing Turner benefit, children’s trust for his irrevocable conditioned in was not the fer Johnson $200,000 a from a bank on obtained Johnson taxes, gift the payment of the do- donee’s liability.” personal “without note thirty-day corpus, trust no interest the nor reserved When by was stock. The note secured significantly ex- amount of the loans the trust, to he transferred created the Johnson paid, and Johnson’s gift the ceeded Apparent interest in the stock. all of his part gift. were sale transactions later, replaced trustees ly month the one judgment, but not its The Tax own,5 Court’s with their secured Johnson’s note Cir- affirmed the Sixth reasoning, was stock. the same shares of determining Judge the value of the Court held that 3 of 1. The cases discussed in Footnote gifts gross gifts subject opinion tax the value of the a to held that when there is Thomsen’s gift the subject the amount of gift to that the should be reduced in trust a condition trust, applicable gift reduction was the tax. The stated reason this taxes be the obligation pay the to that the donee incurred realizes taxable income under sections donor gift; pays a the the did to the tax as condition of donor the extent that the trust anything gift accruing a make other than net intend to the taxes out accumulated gift. Implicitly income. those cases hold that no donor derives taxable income to extent party taxpayer’s a wife was included as 4. The pays the trust taxes out of other assets. litigation. case two also involved taxpayers taxpayer’s and their wives transfer- other who instant case the son and daughter-in-law agreed pay, pay, red similar securities similar transactions. and did applicable all taxes executed, precisely, land. discharge aby L.Ed. 918 third “[t]he predominant The circumstance here an is person obligation equivalent of to him is taxpayer that this did not intend to sell here, receipt by the taxed” so that person to anything; she only give intended to her the do effectively, payment the donee’s of property to progeny. her did She not re tax income to the donor. gift nor’s was herself; ceive anything there no was Thirdly, under of Crane any her, economic of kind accruing to Internal except release from the normal burden (1947), donor 91 L.Ed. the shed his of an real owner of estate.9 $200,000 debt, and realized income that amount, particularly because Johnson re case, present Unlike Turner or the John- any liability repay ceived cash without son involved pre-transfer draw down aof the his ment of notes from own assets. portion appreciated of the value of the asset transferred, by the rejected merely borrowing

The as donor’s Sixth Circuit con- against it immediately clusory appellation “part part prior the sale and to its transfer to the gift” employed gift the donees. The by Tax Court. Also trust was rejected by subject were the then made to paying features which the the trust’s the Turner, distinguished Tax Court because note. While the donor himself actually paid tax, gift $200,000 those lost their to the force the extent the loan none of the he bor- gift A6. lien for the tax is created Code nomic burden from the annual accrual of real due, 6324(b). “If the tax is not when the estate taxes. She could have borrowed funds any gift personally donee of liable for shall be security pro- on the of the lands and used the such tax to the extent of the value of such ceeds to both the taxes and interest. Had gift.” so, she done she would have retained for her- any subsequent appreciation self value R., Cir., 7. See I. Johnson v. C. 6th 495 F.2d the lands but would have reduced the amount 1079, 1082. hoped ultimately of the estate she to transmit But The son aggregate cf. id. 1082-83 n.6. Sixth Circuit to her and his children the put said “we Johnson would be hard to loans the she obtained to cover the justify” finding part gift, Tax Court’s of a taxes and the interest on the loans. Had she Instead, sale the facts of that case. it that, done no one would have contended that intent, determined to not to look actual as had any liability, she incurred income tax but Turner, the Tax Court T.C. at but ultimate effect would have been a transferral of simply see to whether received payment the burden of of the real estate taxes something of as a result of the transfer. son, daughter-in-law grandchil- to her her 495 F.2d at 1083. Hence, gifts dren. the fact that after the she case, present In the whether we consider longer responsible payment was no for the transfer, making widow’s intent in what accruing real estate taxes is not such an eco- may she fer, have received as a result of the trans- accruing advantage imposi- nomic that her same; our conclusion is the the transaction tion of income taxes her should be war- entails no income tax. ranted. 9. Mrs. Hirst could have retained these undevel- oped suffering tracts of land without eco- unimproved only provided The land not of the was committed rowed subjected her her no income but to annual borrowing, of his Thus as a result tax. her loan, $200,- real estate taxes. Because available repayment of the donee’s too resources were small to meet these cash pocket. Al- put was donor’s burdens, thought she it best distribute agree we with the though result among whom natu- her those she Johnson, not case. Before the is e., it rally eventually desired to have her transaction, Hirst owed Mrs. noth- present —i. son, daughter-in-law grandchildren. transactions she virtue ing, Inasmuch this would far entail taxes nothing. was not better off She received means, her she beyond agreed, and her son transfer, with the donee undertak- after before the he perfected, tax; she the burden ing all assessable taxes. not off. simply worse $68,277.00 Federal came and the argument that the donee’s As to the $17,192.55, $85,- State tax to a total of discharge was a 469.55. debt, producing in effect donor’s satisfied, were fully taxes her, generally doubt true is no Commissioner, nevertheless now sus- obligation pro discharge another’s majority, complicated tained has income, but that is universal ductive transaction assessing income taxes depends upon relation the case. It ly donor, Hirst, against Mrs. on the total parties existence between ship of gift paid by amount her son. example, where a For obligations. other said, justification contrary it is to the find- his fa from a bank and has borrowed son Court, ing of the the family Tax ar- loan without dis pays off the son’s ther rangement consisting be viewed as of must son, obligation pay to the the charging any parts: (1) two a to the extent the of son, to the but a income is not taxable ment (2) value of the deeded real estate and the of transaction The circumstances gift. to Hirst income Mrs. to the extent of the pre The consequences. the determine of her amounts the taxes assessable to dispel the no here circumstances dominant on her behalf her son. accruing to Mrs. Hirst. any of tion respective As all masters in their fields of af- of Tax Court is judgment the The a preference prob- endeavor do relish firmed. of rather than those em- complexity lems bodying only components, run-of-the-mill BRYAN, V. Senior ALBERT co-pa- and appellant my the the the decision of dissenting Judge, [from folksy, homespun transac- nelists turn this panel]: enigma. into abstruse an income sincerity, plain of Despite question narrative majority’s faithful their Upon the Court, up facts, calling starkly pointed here is the Tax answer I would affirm facts, just When plain so recount- and it is this: wholly the circumstances conveyed dissent Hirst her son and his conveyance, Hirst’s I Mrs. to of Mrs. ed upon income sole majority’s family of all of her real estate assessment from (now understanding that her son used against her. taxes including wife) his all widow, Hirst, old was 81-year an Edna transfer, Hirst’s assessable on the did Mrs. in- was only money cash land-poor. Her a in the circumstances constitute act approx- savings totalling accounts vested rise to exсlusively giving or a transaction home $25,000.00. owned her imately She to her? income undivided absolutely, also a one-half unalterably a For me these facts demon- building and office interest in a six-room was a in three tracts strate that transfer one-half undivided interest more; income. land, outstanding nothing it did not result in undeveloped with of this ef- Tax to estate. The Court’s determination in her husband’s interests vested me, policies allowed tion of the tax feet, Congress.” should be to it seems (Accent added.) partition agreement into stand. The income-producing transaction a This resolve Tax Court is a in the circumstances. justified not was finding of fact to finality entitled and to Hirst realized income under That Mrs. acceptance by the Court of Appeals without is conception a vio- attendant circumstances modification, since it supported by is ade lently background the factual refuted indisputable quate, The reports evidence. preposterous Equally the transfer. teem with decisions to the point. Again as upon Mrs. Hirst imposition result: authority foremost is Commissioner of $16,000.00 in income taxes. more than Internal Holding Revenue Court Compa supra, ny,

I. 708, 89 L.Ed. avouching the proposition in these words: Tax Court has found and concluded that Mrs. Hirst made no sale of kind to “There was support evidence to findings Court, family; her that the transaction was entire- the Tax ‍​​‌‌​​​​​​​​‌​​​​‌‌‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​‌​‌​​‌​‍and its find- ings accepted by must therefore be ly gift; finally there was no (Accent added.) courts.” acceptable foundation which to attri- bute income to Mrs. Hirst. Edna Bennett It enlists Commissioner of Internal Revenue Hirst, 63 T.C. 307 Co., Scottish American Ltd., Investment 119, 123-124, 323 U.S. For this determination the Court looked L.Ed. wherein the command was agreement substance and did laid down with even severer insistence: theorize, Commissioner, as does the “The Tax Court has the primary function descry chargeable to Mrs. finding disputes, facts inspi- Hirst. sensitive evidence, weighing the and choosing from purposes agreement, ration and giv- among conflicting factual inferences and ing weight to the ambience of its execution. conclusions those which it considers most non-commercial, The fact this was a reasonable. The Appeal Circuit Courts of family transaction which the donor re- power change have no or add to those ceived no funds with which to findings reweigh of fact or to the evi- or income tax assessed to her was of obvi- dence. And when the Tax Court’s factu- significance. It ous is an incident com- al inferences and are conclusions determi- pelled to weighed be within the measure- compliance native of with statutory re- ment of the case. quirements, appellate the courts are lim- As was said in In ited to a determination whether they Holding ternal Revenue v. Court Company, have substantial basis the evi- 331, 334, 707, 708, 89 L.Ed. judicial dence. The eye must not in the (1945): first instance rove searching about depends “The incidence of taxation evidence to support conflicting other in- the substance aof transaction. The tax ferences and judges conclusions which the consequences gains which arise from or litigants the may consider more rea- finally a sale of are from sonable It desirable. must be cast solely by be determined the means em- directly and the primarily upon evidence Rather, ployed legal to transfer title. in support of those made the Tax whole, transaction be must viewed a Court. If a lacking substantial basis is step, and each from the commencement appellate may indulge court then negotiations to the consummation of making its own inferences and conclu- sale, is relevant. ... To permit sions or it may remand the case to the true nature of a transaction be Tax Court appropriate pro- for further formalisms, disguised by mere which ex- ceedings. ifBut such a present basis is liabilities, solely ist to alter tax process judicial review is at an impair the seriously (Accent effective administra- end.” added.) Nonetheless, “In Turner the donor made nine separate here. no baselessness There is securities, gifts overlooks the of low basis disregards or three to majority goes outright, be- named individuals language compulsion Each transfer was on condition scope of review. the limited yond recipient pay the resulting tax liabili- resolution be if the Tax Court’s But even ty. The three individual donees contrib- finding not a of law and a conclusion hailed uted their respective shares of the gift way fact, impregnable. By it is still taxes either from available cash or the point, on this a safe a discussion prelude to sale of some of the donated securities. from Dobson v. Com- quoted guide may The Commissioner 320 U.S. of Internal missioner argued that each transfer was part-gift 501-502, 88 L.Ed. 248 part-sale and that the excess of the (1943): paid by each donee over the basis the Tax Court “Congress has invested of the securities transferred to such do- authority redetermining primary with capital gain nee constituted chargeable to deficiencies, greater which constitutes Thus, the donor. . . . the principal it to requires This litigation. part of issue dealt with Court was wheth- and facts. both law consider er the to the three individuals could separate the ele- the court cannot [W]hen part-sales, be classified as resulting in the identify so as to a decision ments of capital gain realization of issue iden- —an law, the decision of mistake of clear-cut tical with the one present before us in the In viеw of must stand. the Tax Court case. the Tax functions between division of “In deciding against Government, reviewing courts it is of course Court Court reviewed the earlier [Tax] distinguish the Tax Court to duty cases and concluded that their ‘rationales it finds as fact clarity what with between * * * totally are inconsistent with a it reaches on the what conclusion finding part sale, that the transfer was a questions law courts deciding law. gift’. p. T.C. 362. To the weight to the deci- attach properly contrary, regarded transac- administrative points of law sion of gift’ ‘net tion as a amount of the th,e to deal having special competence body value of the shares less the tax —a The Tax Court subject matter. with having income tax transaction no conse- kept cur- by experience is informed quences p. to the donor. 49 T.C. at by the evolution and needs rent with tax was affirmed decision Sixth While variety of its work. volume and per opinion. curiam 410 F.2d binding prece- may not be its decisions dealing with similar for courts dents any meaningful administration would “We cannot see differ- problems, uniform present them casе and Turn- conforming to ences between promoted by added.) er, (Accent require later us to and unless decisions possible.” where here we

reach a different result think we (Accents must follow it.” added but II. omitted.) footnotes 63 T.C. put present Decision in the case was Turner, Court, Later, by the Tax the Tax Court followed Turner Richard H. Krause, again affirmed in Victor W. 56 T.C. 1242 (1968), which had been 49 T.C. 356 31, 1971) curiam, (1969), (August judgment and its was not by F.2d 752 per in the courts. More The Tax Court here accu thereafter disturbed Circuit. Sixth over, Davis, 71, ¶ Estate of Kenneth W. the facts and stated rately summed (December 30,1971), P-H (as they relate to the Memo TC conclusions of Turner Turner therein) precisely depict Tax Court adhered to and was af donees individual firmed, time the Fifth (the present) as Circuit in Turner and Hirst ing Estate of Kenneth W. Davis v. Commission- matching each other: Revenue, complete disregard Supreme F.2d Court’s er of Internal an overthrow directive the Tax never been for treatment of has Court There law, decisions both on the facts and on the Turner. especially when “uniform administration the ma- However, the Commissioner promoted by confоrming would be to them Turner as disavowed assail opinion jority possible”. where Dobson v. Commissioner Jr., Johnson, Joseph W. its Circuit own Internal supra, 320 U.S. at as Johnson (1973), affirmed T.C. 791 Revenue, 495 Internal Commissioner 1974). contrary, On the (6 Cir. F.2d For the urged dissent, reasons in this I Appeals in the Court of study of Johnson case. present affirm the such for the any claim dispel utterly will of Johnson. effect BUTZNER, WINTER Circuit Judges, dissenting the decision of the court [from the same Notably, it was decided en court Turner, refus- banc]: as rendered distinguish it on the law. ed to overrule initially This case was heard a panel law, gave not Johnson If was Turner consisting Judge Bryan, Judge Butzner, say opportunity to wide-open Sixth Judge Judge Thomsen *. Thomsen Circuit, so; any other nor neither an opinion Judge wrote in which Butzner has renounced Turner. court, repeat, Judge Bryan concurred. wrote dissent. presume not to hold we Certainly, opinions After these were circulated among in Johnson say intended the Sixth Circuit court, they filed, were but before overridden, for the Sixth was that Turner Judge case reheard en banc. Hayns say so. advisedly declined to explicitly and present opinion worth’s is the result of that had “no True, said that Turner Johnson rehearing. its fact beyond peculiar precedential We dissent for the reasons stated reaf- actually declaration situation” but this Judge opinion which Thomsen’s follows: Since, as Turner on its own facts. firms noted, us previously the facts now before THOMSEN, Judge. District Senior Turner’s, with Johnson does not correspond of Internal Revenue Turner, depart espe- from authorize us to" Court, appeals a decision of the Tax from just cially light subsequent listed Hirst, Edna Bennett 63 T.C. 307 adoptions of Turner. The same is true of (Raum, J.), transaction, which held that a disciples the cases that are Johnson. (taxpayer’s which two transferees son and They are on Johnson facts which the John- daughter-in-law) paid taxpayer’s state and empha- son court —the Sixth Circuit —has federal from three peculiarly are Johnson’s Turn- sized and not transfers realty by taxpayer them and er’s. children, their did result realiza- Thus we have the Tax Court and the her of taxable income. The Appeals following Courts of Turner its payments by daughter-in-law son cases; thus, fаcts in an unbroken line of we pursuant pre-transfer made to a see, too, even the case on which the Com- agreement son, between and her and the now rely missioner —Johnson set out fully more below. depart from —refusing to Turner. It indeed, to me strange, seems for us to be A declaring especially alone it was untenable — that the appears when it Johnson court has essential facts are not disputed. Alexandria, only Taxpayer, to have with the Virgin- been the court dealt a resident of ia, to problem. 81-year Also seems me to be a old widow. In 1967 she * Thomsen, Maryland, Judge sat Judge District for the District of States Roszel C. Senior United by designation. child, son only living had one her Omer Taxpayer computed gift liability her tax Hirst, three was married and had chil- who resulting from these transfers a “net Hirst, dren, Nager basis; M. Deborah H. Thomson gift” reduced the total value of she Hirst. At that time tax- and Edna Robin the properties transferred sum by the lived, the she house in which payer owned gift the state and federal taxes her being in a six-room house one-half interest “agreed to as a son and his wife condi building and one-half in- used as an office making tion to the gift”, donor showed undeveloped tracts of $359,118.95.1 terest in three land. “total net Omer gifts” remaining interests in the “office build- the federal tax Hirst and his wife three in her ing” $68,277, and the tracts were hus- in the amount of check dated Taxpayer 8, 1968, band’s estate. did have to the Internal April payable Reve assets, except $25,- about other substantial nue Service. savings in deposit

000 on accounts. The Virginia gift paid by tax was three income, produced The three tracts no checks, 22, 1968, April one dated $15,- for taxpayer to real tax subjected estate liabili- 440, 15, July $253, one dated for To year. ties each eliminate burden on one dated $1,499.55, June all liquid to her limited assets and benefit the drawn Omer Hirst. The checks were she objects bounty, natural of her decided mailed on or respective about their dates give to her interest the three tracts to each instance shortly received there- family. gifts her son and his Because such Virginia after by the Department of Taxa- require substantial tion, payee. A computational еrror in taxes, taxpayer’s liquid far excess of first check made the assets, agreed her orally she and son before second necessary; check the third check were made that he would pay transfers was sent taxpayer when and her son decid- April taxes. On ed not to contest the refusal of Virginia taxpayer transferred her interest in one agree authorities to that the value of the Ann, tract to and his wife Omer and her gifts should be reduced the amount of interest tract two of another the gift paid by donees. The first grandchildren and to her son as trustee for two checks not presented by the payee grandchild, July the third a minor. On until some time in February, 1967, she transferred her interest 1969,at which time the drawee bank refus- grandchildren third tract to two of the and ed to honor them because of their stale grandchild. trust for minor All dates, although sufficient funds were avail- subject of the transfers were to the condi- able. After learning that the checks had tion that and Ann Hirst Omer dishonored, been Omer Hirst instructed the applicable gift taxes. None of the tracts bank to honor when prеsented again. them subject any mortgage, lien or other Soon thereafter the presented checks were encumbrance. and paid. April, taxpayer filed a United On her federal return return listing par- States three Hirst, taxpayer, Mrs. a cash basis made no adjusted appraised cels with basis and payments reference to the made donees for each as follows: obligations. of her satisfaction taxpayer deficiency notice Donor’s In his Adjusted Basis Value that: determined Tract 1 $4,654 $291,832.50 your the result of the one- “[A]s Tract 2 3,723 119,404.50 three real estate half interest in tracts of Tract 3 -0- 33,351.50 Recognizing subsequently adopted the net amount same as the formula dependent mutually 71-232, are tax itself varia- use in such situations Rev.Rul. bles, computed gift tax in accord- 1971-1 C.B. 275. substantially with a formula that was ance 436 $444,588.50, (the year market value of in 1967 transfers)

with a fair of the or 1968 (the year when the recipi- gift that tax subject to the condition returns were filed and the taxes shown thereon the Federal and pay ents would both paid).2 tax, received gift you have taxable State as shown below: The relevant statutes regulatiоns are set out in a statutory supplement at the end $68,277.00 gift Federal tax opinion. of this

Virginia gift 17.192.55 tax The Tax prefaced analysis its 85,469.55 gift paid Total noting correctly: adjusted Less in basis of interest % “ * * * there can be no reasonable 8.377.00 real estate dispute that liability gift for the tax is 77,092.55 Realized placed by primarily statute upon the do- 38,546.28 Recognized gain —50% nor, 2502(d) section Code, of the 1954 payment of the tax by the donee The Commissioner also made adjust- other must regarded as discharging that lia- ments which taxpayer concedes are correct bility Moreover, of the donor. the dis- except to the they extent that reflect auto- charge of a solvent taxpayer’s liability is changes matic attributable to the inclusion ordinarily regarded conferring as a bene- $38,546.28 of the long-term capital gain in fit him furnish the basis her taxable income for the year calendar taking it into account in computa- 1968. tion of taxable income”. 63 T.C. at 310. Colony Old Trust Co. v. Commissioner of B Revenue, 716, 729, Internal 279 ‍​​‌‌​​​​​​​​‌​​​​‌‌‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​‌​‌​​‌​‍U.S. 49 principal 499, The issue for decision (1929); in this S.Ct. 73 L.Ed. 918 Helvering v. Bruun, case is whether 309 631, realized income U.S. 60 S.Ct. 84 (1940); L.Ed. because the 864 States, transferees of one of the three Wall v. United 164 462, (4 F.2d properties 1947); agreed pay Reg. 1.61-14(a). Cir. paid the feder- Douglas Willcuts, Cf. 1, gift al and state from the S.Ct. 59, 80 L.Ed. 3 three transfers. If that issue is decided Commissioner, favor of the question The Tax Court then discussed a number of cases capital gain involving whether the was realized arises in trust.3 Those above, applied As noted additional trustees received as trust income and $1,499.55, tax, assessed Commonwealth of [donors] 1969, Virginia paid in 1969. reality received, constructively and on that the must be [donors] taxed.” 313 F.2d at 743. Staley v. Commissioner of Internal Reve proceeding involving A second the Sheaffer nue, (1942), (5 47 B.T.A. aff’d 136 F.2d 368 trusts, Sheaffer, Craig Estate of R. 25 TCM 646 denied, Cir.), 196, cert. 320 U.S. 64 S.Ct. (1966), repayment dealt with the of the loan (1943), conveyed L.Ed. 473 the donor stock year, out of trust income of a later and also children, trust for the benefit of some of his deficiency with the of a tax out reserving specified to himself a amount of trust during of trust income received a still later income which he intended to use and used year. repayment It was held that pay taxes. Both courts held that the in give loan out of trust income did not rise to the reserved the donor was him come taxable to realization of taxable income under § 677 but ordinary income. pay use of current income to In Sheaffer’s Estate Commissioner of In deficiency was taxable to the donor in ac- (1961), ternal 37 T.C. 99 aff’d 313 cord with the first Sheaffer case. denied, (8 Cir.), F.2d 738 cert. 375 U.S. In Commissioner of Internal Revenue v. Mor (1963), 11 L.Ed.2d 53 the donors trans Estate, gan’s (1962), 37 T.C. 981 aff’d 316 F.2d ferred stock to trusts for the their benefit of (6 Cir.), denied, cert. 375 U.S. children, gave the trustees discretion to use (1963), 11 L.Ed.2d 58 the trust instrument trust income to the donor’s tax liabili provided the trustees should the do ty. tax was current liability. nor’s trusts, The trustees had the part by income of the and in borrowed discretion, in order to obtain the funds neces- Eighth “What funds. Circuit stated:

437 Thus, by IRC 671 and 410 F.2d at 753. the principal were controlled issue §§ cases applied with trust dealt with the courts was whether which deal present- transfers to the three grantor, individuals could be for the benefit sales, part gifts, part are somewhat different classified as problems ed by the instant case. presented capital gain, those realization of an issue from present therein are not inconsistent similar to the one before us in the The decisions regarded in this case.4 The Tax Court the decision we have reached the transac with tion as a gift” “net in the amount of the case. tax, value of the shares less the principal reliance placed The Tax Court transaction which it deemed to have no of Internal Revenue v. upon Commissioner income tax consequences to the donor. 49 curiam, (1968), Turner, per aff d 49 T.C. 356 T.C. at 363. The decision was affirmed Turner, 1969). (6 In 410 F.2d 752 Cir. per the Sixth Circuit in a short curiam separate gifts of low basis made nine donor opinion. 410 F.2d 752. securities, three to named individuals out- The issues in this case are similar to those and six to trusts for the benefit of right, However, in Turner. we are satisfied that Each transfer was made on condi- minors. wrong. the decision in Turner was Charac- recipient pay resulting gift that the terizing a gift” transaction as a “net liability. The three individual donees purposes preclude treating does respective their shares of the contributed the transaction as a taxable event giving taxes either from available cash or rise to purposes. income for income tax of the donated securi- from the sale of some Indeed, case, under the facts of the instant contributed their ties. The six trust donees requires such treatment. respective primarily from the sale of shares securities, supplement- of the donated some The Sixth Circuit itself declined to follow loans, ed in two instances four Turner in Johnson v. Commissioner of In amount comparatively instances small (6 Cir.), ternal 495 F.2d 1079 cert. these small Except of current income. denied, 95 42 U.S. income, appears there amounts of current Johnson, L.Ed.2d 317 the donors invoking to have been no basis for §§ transferred low basis stock to several trusts Code, which, above, as noted and 677 of the stock, having against after borrowed trusts. In his only with income from deal using part pay funds to borrowed notice, statutory deficiency the Commis- gift taxes which resulted from the transfers that each transfer position sioner took the and retaining the rest themselves. The part gift sale and trustees exonerated the donors from paid by eaсh donee obligation excess of repay to the loans substitut ing over the basis of the securities transferred notes of the trusts for notes of capital held, to such donee constituted donors. The Tax Court T.C. chargeable (1973), to the donor. See 49 T.C. at in question the transfers However, the reality part part gifts, Commissioner conceded sales and in the Tax that the transfers in trust were taxable to the donors as such. The appeal were not Id. at 362. On judgment sales. Sixth Circuit affirmed the but Circuit, Court, again reasoning not the the Tax and in Sixth paid by that the amounts the trus- opinion conceded its stated: “The substance of a to the donor were not taxable to her. ulti- tees transaction rather than its form must tax, sary corpus year either to sell or to ceived in the in which the taxes were using corpus security. They paid. borrow chose the latter method and the tax in case, agreed In our five donees two of the repaid 1956. The loan was from the income of pay all the taxes in and did in fact years. It was the trusts later held that such question, presented issue has been to us no tаxable to the income was not decedent in 1957 anything in this make turn case that would Apparently no effort had and 1958. been made See, however, footnote be- this fact. to tax the donor for the cash benefit she re- low. tax liabilities of indi- Whatever be said of pattern mately determine viduals,” Gregory Helvering, citing decisions, prior it is our responsibility (1935); Commis- apply appropri- to the facts of this case the Holding v. Court of Internal Revenue sioner statutes, regulations legal ate princi- 334, 707, Co., 331, 89 L.Ed. 324 U.S. ples. gift We must consider both the tax also stated: “The (1945). The court effect and the income tax effect of the legal obliga- gift liability is the donor’s transaction, taxpayer so that the is neither Code, 2502(d) of the tion under section improperly improperly escapes taxed nor person discharge by a third ‘[t]he taxation. obligation equivalent receipt to him is to The taxpayer’s essential facts are that 1082, taxed’.” 495 F.2d at person the half-interest in the three tracts of unim- discussed (emphasis original). in The court proved only yielded land not her no income length, at and concluded: “Turner Turner but were a drain on her liquid assets. To beyond pecu- its precedential has no burden, eliminate this she and her son situation, liar fact in view of the Commis- agreed in advance that she would transfer in in sioner’s concessions that case both the her interest in the three tracts to her son appeal Tax Court and on to this Court.” family, and his on he condition that and his 495 F.2d 1086. taxes, pay gift wife would resulting the review, the us for the In case now before they taxpay- which knew would far exceed Tax said: liquid Taxpayer er’s assets. transferred the recognize “We there is much force that properties paid and her son the and his wife position. gift the to Government’s taxes, gift which in the returns filed were imposed only upon is the ‘net tax itself computed gift on the net in the manner e., upon gross the amount of the gift’, i. 1, in described note above. property gift transferred minus the substance, paid by por- the In a donee. By using computing that method of property equal tion of the transferred tax, gift agree which both sides in this case gift value to the amount of the tax is not gift proper,5 taxpayer avoided tax lia was having gift. treated as been of the bility portion on that of the value of the surely portion But that did vanish not represented by transfers the amount of air, strong argument into thin and a can And, gift although taxpayer taxes. was that it be advanced for conclusion payment primarily responsible for exchanged the donee’s for taxes, they paid by were in fact gift those gift gift’, transac- of the tax on the ‘net a pursuant agree of the donees to the two may tion that result in the realization of the transfers. ment made before depending upon the donor’s loss ** * taxpayer’s lia- discharge of a solvent However, property. basis in the conferring bility ordinarily regarded as overruling clear-cut in the absence of to the benefit which result income appeals, law a court of we are prior taxpayer. Colony Old Trust v. Commis- Co. to reexamine an prepared at this time sioner of Internal 279 U.S. of deci- pattern and consistent intricate (1929). The 73 L.Ed. 918 years that has evolved over sion effect of what was done in this case is the field, notwithstanding that there though money same as son had much to be said favor of may it directly taxpayer-and she had used approach problem.” more ‘realistic’ discharge her at 315. liabilities. 63 T.C. gift, subject that characterized as a taxes. Where a is made on condition 5. Commissioner, taxes, only resulting gift that Harrison 1355- the donee T.C. (1952); Commissioner, Lingo property portion of the value of the transferred 13 TCM 71-232, 1971-1, exceeds the amount of the taxes due Rev.Rul. C.B. the transfer is considered to have been intent, with donative and therefore transferred checks for the of the federal and received the substance, adjustment (except taxes for an exchange state gift taxes ‍​​‌‌​​​​​​​​‌​​​​‌‌‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​‌​‌​​‌​‍of the amount $1,499.55, ex To the of state taxes in the amount of properties.6 the transfer 1969) paid by donees which a check was sent in taxes tent properties appropriate basis in the and to the taxpayer’s delivered to IRS exceeded subject to transferred, agency she realized state in 1968. The Commissioner that the To the extent position taxes. thе income to tax- capital gain takes trans properties (ex- market value from the transaction payer fair the amount $1,499.55) exceeded should be cept ferred treated as I.R.C. gift.7 was a there paid, having Taxpayer been realized 1.1001-l(e). 2512(b); Reg. event, if argues any, taxable oc- curred in 1967 when the transfers by only required This result is not promised were made and her son taxpay law, is fair both to the applicable resulting gift taxes. of the part No government. to the er and has been transferred property of the agree We with the Commissioner that twice, escaped proper no has and taxed applicable law and the facts of under opinion as to the We intimate no taxation.8 case, Hirst, this the taxable to Mrs. a transfer un consequences of income taxpayer, cash basis was realized when the in the instant from those facts different der paid. promise taxes were A case. represent money year a future does not promise when the is made or re income C by taxpayer unless the amount ceived obligation is ascertainable in the accrued to that income Having found question year promise readily of the taxable and the can be donor, now address the we ordinary into cash in the course income should be taxed. converted which the year in then in of business.10 It follows that all but controlling provisions Under $1,499.55 of the taxes were taxable as a resulting from the effect,9 taxes 1968, capital gain from the and that were due property 1967 transfers $1,499.55 15, was taxable in 1969.11 April 1968. on or before donor I.R.C., 6019(a), 6075(b), 6161(a), Taxpayer’s argument 9. Sections be- that the of the 6. supported by in 1970. to her is not fore its amendment taxes was a back by parties stipulated and testified the facts by States, 950, 954, the son. 10. Edelman v. United 329 F.2d (1964); Rio 165 Ct.Cl. 91 Denver & Grande States, F.Supp. 106 Malone v. United 326 7. See States, 922, R. v. 318 F.2d Western Co. United curiam, (N.D.Miss.1971), per 455 F.2d 502 aff’d 926, (1963); 1 162 Ct.Cl. Cowden v. Commis- 1972). (5 Cir. Revenue, (5 sioner of Internal 289 F.2d 20 Cir. 1961); Perry v. Commissioner Internal Reve- necessary us to decide in this It is not 8. nue, 183, (8 1945); F.2d 152 187-188 Cir. Bedell basis in the whether the increase in the case Revenue, v. 30 Internal F.2d by represented pay hands of the donees 622, (2 1929); 624 Cir. Warren Jones Co. v. entirely gift tax be allocated ment of the should Commissioner, (1973); Ennis v. T.C. and transferred to the son Commissioner, (1951). 17 T.C. 465 See also apportioned daughter-in-law, or should 404, 550, Logan, Burnet v. 51 S.Ct. among properties Nor is it all the transferred. (1931); v. L.Ed. 1143 United States Boston & necessary basis of for us to decide whether the Co., 505, 49 S.Ct. M. R. 279 U.S. properties in the or more or none of one Commissioner, (1929); Hughes L.Ed. 929 (1) will include both of the donees hands (1935). B.T.A. 1248 Cf. Crane v. Commissioner by basis increase in the donees’ usual 331 U.S. of Internal 1015(d), § tax under I.R.C. amount 91 L.Ed. 1301 (meas (2) the amount of the consideration taxes) the son and ured Taxpayer properties. Reg. daughter-in-law an alternative contention makes Commissioner, represented 4(a). that she received the income 1.1015- See Johnson Virginia gift See also I.R.C. 495 F.2d 1085-86. paid, 1.1015-5(a)(1)(i), 1011(a), 1015(a); Reg. checks rather than in when the §§ (except 6(a). delivered when checks were 1.1016- the Tax Court is reversed disbursements method in the computa- The decision of income, tion of taxable all items to it for calculation which con- the case remanded (whether gross stitute income income form the amount of additional cash, servicеs) or property, are to be payable by Mrs. Hirst. year included for the taxable in which actu- Reversed and Remanded. ally constructively or received. Expendi- tures are to be deducted for the taxable STATUTORY SUPPLEMENT year in actually which made. For rules 1954, as of the I.R.C. amended Sections relating receipt, to constructive see 1.451- § thereunder, Regulations before expenditure 2. For treatment of attrib- directly analogy bear on the utable to more one year, than taxable see herein or in discussed herein. issues cases 461(a) section paragraph (a)(1) defined 1.461-1. § Code Gross income (a) Except Reg. receipt as other- 1.451-2 Constructive General of income definition. — subtitle, provided gross wise (a) General although rule. Income not all income whatever source de- means from actually a taxpayer’s possession reduced to rived, (but to) including limited is constructively received him in the following items: year during taxable which it is credited í(¡ ¡}S $ account, him,

ífc Sk his apart Sfc set or otherwise made available he may so that draw dealings Gains рrop- derived from any time, or he so that could have drawn erty; upon it during year the taxable if of notice ** intention given. to withdraw had been (12) discharge Income from of indebted- ness; income, deductions, Code 671. Trust § % ¡}C !}! Jfc Sfc ^ credits grantors attributable Reg. 1.61-14(a) items Miscellaneous of others as substantial owners gross income specified Where it is in this subpart In addition to the items enumerated in grantor person or another shall be 61(a), many there other section are kinds of treated as any portion the owner of aof * * * gross example income. For An- trust, there shall be then included in com- person’s payment other of the taxpayer’s puting the taxable income and of credits gross income taxes constitutes the grantor person or the other those items * * taxpayer unless law. excluded income, deductions, of and credits against

tax of the trust are attributable Reg. 1.446-l(c) portion Permissible of trust to the extent that methods — general. such items be taken into account under this chapter computing taxable Subject to the of provisions paragraphs against income or credits tax of an section, (a) (b) of this * * * individual. compute any his taxable income under of following of accounting: methods Code 677. grantor Income benefit of § (i) (a) Gash receipts grantor disbursements General rule. —The shall be Generally, under the cash receipts any portion method. treated as the owner of aof $1,499.55, adjustment Bradley the check for the of Estate of re- v. Commissioner of Internal above, 49, 1969). (1930), ferred to delivered in which was 19 B.T.A. aff’d 56 F.2d purposes, payment by (6 1932). For tax check while is 729 Cir. The Commissioner con- conditional of the check ceded below that small amount of addition- presented, Virginia gift when of the check al re- taxes on the transfer which is lates back and the debt considered to have a check delivered in June 1969 discharged delivery. been of on the date Estate were income to the donor not in 1968. Spiegel, (1949). of T.C. See also trust, owner verse without may be— grantor bution (1) distributed (2) held or ^[******] whether party under or a non-ad approval is, or, accumulated grantor; section or not verse or he is or grаntor; consent discretion party, or treated as such whose income future distri- of any both, ad- Example fair market value of $30,000, the son for of realized, He $90,000, amount Code § A has an has made a ^[******] $60,000. realized, 1002. the fair market over the adjusted excess of A transfers Recognition Such $60,000. adjusted of basis of $90,000). property $30,000, $60,000, value, property basis, $30,000. $30,000 (and the excess gain the amount A’s over the gain or loss to his hands Determination 1001. Code § Except provided as otherwise in this sub- or loss gain recognition title, exchange property on the sale or or loss.—The gain (a) Computation loss, gain the entire amount of the or deter- disposition of or other the sale gain from section shall be recog- mined under of the amount the excess shall be property nized. adjusted basis over therefrom

realized Adjusted for determin- Code basis § determining 1011 for in section provided gain or ing loss * * * gain, adjusted determining the basis for real- amount (b) Amount realized. —The disposi- from the sale or other gain or loss disposition of or other the sale ized from ‍​​‌‌​​​​​​​​‌​​​​‌‌‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​‌​‌​​‌​‍acquired, whenever shall property, tion of money the sum of shall property (determined under section be the basis value of fair market plus the received subchap- applicable sections of or other * * money) than received. (other property in sec- *), adjusted provided ter ^[******]

purposes ease under extent under Reg. (c) Recognition and in of a sale ^[******] 1.1001-l(e) Transfers in section this section to which of this subtitle part a exchange gift. shall be gain shall be determined or or loss determined recognized property, loss.—In the Code part a sale such Reg. 1.1012-2 Transfers acquired § The basis of 1.1011-2(b), and For rules in property, in part 1012. Basis of part in a transfer which a relating gift a * * * sale, § 1.1015-4. to basis of see § property shall in part is in be the cost of l.-170A-4(c), —Cost part a sale and property a gift is in property of (1) Where a transfer acquired by property 1015. Basis of Code § the transferor part gift, a a sale and part in trust gifts and transfers has realized tained on in the realized is the hands of For property a determination the allocation property. by him in the case less than such a the еxtent exceeds his see transferee, However, no loss is sus- transfer of basis. of a adjusted adjusted bargain if the amount of adjusted basis the amount property § basis. 1.1015^4. sale to a basis For of December it was not same as would donor (a) Gifts after December (d) property ^[******] Increased basis for or the last acquired by gift, preceding be in the hands of acquired by gift after the basis shall gift owner * * * SI, 1920.—If tax paid.— be the whom (1) general. see 1.1011-2. organization, § charitable —If— on or (A) acquired by gift is property subpara- provision (2) Examples. of the enactment after the date by the follow- (1) may be illustrated graph 1958, the Act of Technical Amendments examples: ing gift. (b) under paragraph the basis determined See of this basis shall be section for (but determining not above the rules for (a), gift increased amount of subsection property paid respect property at the tax value of the transferred market fair time of paid with respect gift) by such gift, ' * * * tax by gift. ^[*] H« sfc ^{[*] [*] [*]} part Transfers in Reg. 1.1015-4 Adjustments Code to basis § part a sale Genera] (a) Proper adjustment rule.— (a) rule. Where a transfer of respect General property shall in all cases be part gift, is in a sale and property made— unadjusted property basis of (1) losses, expenditures, receipts, the transferee is the sum of— hands of items, properly other chargeable capital * * * account, following is the (1) Whichever of the

greater: ^{[*] [*] [*] [*] [*] [*]} paid by the transferee for The amount Reg. adjustments 1.1016-5 Miscellaneous property, or to basis

(ii) The transferor’s adjusted basis for ^{[*] [*] [*] [*] [*] [*]} transfer, property at the time of the (p) paid Gift tax property on certain ac- quired by gift. adjusted Basis shall be basis authorized Reg. (2) The amount of paid (see paid. s(: 1.1015-5 Increased basis for j}: § 1.1015-5). jfc section increase, s}s 1015(d) sfc if any, in % such section Reg. property acquired amount of the ^[*] property. 1.1016-6 Other 1015(d), sfc is an increase in the basis of ^[*] applicable by gift tax ^[*] paid which, :}c rules in respect jjc under (a) Adjustments must always be made to (a) (l)(i) Subject rule. to the General eliminate double deductions or equiva- their provided conditions and limitations in sec- * * * lent. 1015(d), the Technical added (as 2502(d) Code provides Tax, Amendments Act of the basis de- § Gift 1015(a) imposed by para- paid termined under section “shall be § by the donor”. (a) 1.1015-1) graph property ac- § ket plies cal Amendments Act of basis under section er than the amount or otherwise If section acquired by gift September quired such such increase in gift regardless property 1015(d)(1)(B), exceeds the basis of such property. (the date of enactment by gift property 1015(d)(1)(A) 2,1958, tax. is increased as of the date of disposed is increased with Under section property on or after * * * basis such increase in basis acquired by gift and not 1015(d) of the date of respect of before such date. which the fair mar- applies, applies 1958). can be no sold, Any the time the amount of Code 2512 Valuation September 1015(d)(1)(A), the Techni- exchanged, increase in Under sec- payment basis of before great- ap- by which the deemed a ed the value of the consideration shall be than an the calendar computing the amount of gifts made during 2503(b) are not to be included in the total money money’s subtitle B. return with by Code 6019 Gift tax returns any (a) (b) Where property is transferred for less calendar ^[*] (except § adequate general. Any gift, ^[*] respect year. value of the yеar those which under and shall be included in — ^[*] and full consideration in worth, makes such ^[*] individual who in year) then the amount any property shall make a transfers ^[*] tax imposed exceed- section ^[*] the hands of the donor at the time of the filing estate and Time for

Code § SATTERFIELD, Wayne Appellant, Jessie gift tax ‍​​‌‌​​​​​​​​‌​​​​‌‌‌​‌​‌‌‌​​​​‌‌​​​‌​​‌‌​‌​‌​​‌​‍returns der shall be April (b) Gift tax section 6019 ^[******] following the close filed on or before returns —Returns (relating to of the calendar the 15th made un- day taxes) Robert F. ent of the Penitentiary, Appellee. ZAHRADNICK, Superintend- No. 76-2447. Virginia State Appeals, United States Court of year. Fourth Circuit. paying place Time and Code § Argued June 1977. on returns tax shown Decided Jan. 1978. Except as otherwise (a) General rule.-— section, return of when a in this provided May Certiorari Denied regula- this title or under required tax is See 98 tions, to make such person required shall, or notice without assessment

return Secretary or his dele- from the

and demand internal principal pay such tax to

gate, revenue for the internal

revenue officer required to be which the return

district in

filed, tax at the time and and shall such (deter- filing the return fixed for

place extension of regard any

mined without return). filing

time for

[******]

(c) of tax.—In Date fixed required to be in which a tax is

any case date, or within a a certain

paid on or before in this title to period, any reference

certain payment of such tax shall

the date fixed for day a reference to the last fixed

be deemed (determined without re-

for such paying of time for

gard extension tax). is similar to 58-223

Va.Ann.Code §§ 2502(d) is similar to 58-221

I.R.C. § 2512(b).

I.R.C. §

Winter, Judge, specially filed concurring opinion. notes one 5. More two were donees. $200,000 principal for the and the other Commissioner, represented $750 which the interest 3. Turner cited Harrison Commissioner, (1952) Lingo When these on the donor’s note. two notes T.C. 1350 executed, liability” Johnson’s “direct in both of which cases were account, 13 T.C.M. created, had was to a trust on which the bank cred- donor had transferred $200,750, leaving ited with a zero balance in condition that the donee Tax In both cases the account. resultant taxes. proceeds ultimately the substance the transac used to pay cuit. It found $500,000 stock worth appellate opinion tions to be tax. The in Johnson $200,000, $150,000 exchange for stated that Turner no precedential has val- donor. was used beyond peculiar ue its fact situation. court said its result could reached quarrel We do not with the oft-stated First, if viewed un of several routes. proposition that the substance aof transac $200,000 was der section of the Code its rather than form controls an indi derived;” “income from whatever source Indeed, tax liability.7 vidual’s we believe $150,000 of that amount the use to which premise. we adhere to that In the Secondly, put was of no moment. un case, present the Tax Court found 2502(d) the donor’s der § gift was Surely finding made.8 is not obligation6 Colony and under Old primary clearly erroneous the familial and non v. Commissioner of Internal Reve Trust Co. commercial context of the transfer of this nue, 499, 504, 73 279 U.S.

Case Details

Case Name: Edna Bennett Hirst v. Commissioner of Internal Revenue

Court Name: Court of Appeals for the Fourth Circuit

Date Published: Jan 4, 1978

Citation: 572 F.2d 427

Docket Number: 75-1543

Court Abbreviation: 4th Cir.