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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
gifts.
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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