Tracy P. Streber, F.K.A. Tracy C. Parker, et al. - Page 18

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          received.  In either case, the Parkers argue, the daughters owned           
          the $2 million notes when they were paid.  The daughters, on the            
          other hand, argue that Parker owned the $2 million notes at all             
          times and made no gifts to them until after he received the                 
          proceeds therefrom.                                                         
               B.  State Law Controls                                                 
               With respect to income realized upon the payment of notes,             
          as with respect to other income, Federal income tax liability               
          follows ownership.  See United State v. Mitchell, 403 U.S. 190,             
          197 (1971) ("with respect to community income, as with respect to           
          other income, federal income tax liability follows ownership.").            
          "In the determination of ownership, state law controls.  The                
          state law creates legal interests but the federal statute                   
          determines when and how they shall be taxed."  Id. (internal                
          quotation marks and citations omitted).  We examine Texas law to            
          determine who owned the $2 million notes when they were paid.               
          That requires that we determine the nature and timing of Parker's           
               C.  Elements of a Gift                                                 
                    Three elements are necessary to establish the                     
               existence of a gift:  (1) intent to make a gift;                       
               (2) delivery of the property; and (3) acceptance of the                
               property.  * * *  The intent of the donor, however, is                 
               the principal issue in determining whether a gift has                  
               been made.  * * *                                                      
          In re Estate of Hamill, 866 S.W.2d 339, 344 (Tex. Ct. App. 1993).           

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