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Under section 2503(b), a donor shall exclude the first
$10,000 of gifts made to each of her donees from the total amount
of gifts for a calendar year made to each donee. Sec. 2503(b).
However, a parenthetical provision in the section forecloses any
exclusion for gifts of future interests in property. Id. A
future interest is one that is "limited to commence in use,
possession, or enjoyment at some future date or time." Sec.
25.2503-3(a), Gift Tax Regs. The Supreme Court stated in Fondren
v. Commissioner, 324 U.S. 18, 20 (1945):
it is not enough to bring the exclusion into force that the
donee has vested rights. In addition he must have the right
presently to use, possess or enjoy the property. These
terms are not words of art, like 'fee' in the law of seizin
* * * , but connote the right to substantial present
economic benefit. The question is of time, not when title
vests, but when enjoyment begins. * * *
Petitioner cites Foley v. Allen, 170 F.2d 434 (5th Cir.
1948),11 as support for its argument that the transfers by
decedent were completed gifts. In Foley, a mother gave her son a
gift of 200 shares of stock that she had pledged to First
National Bank of Atlanta as security for loans the bank had
earlier made to her. The Commissioner contended that the mother
retained dominion and control over the property as it remained
pledged to the bank for her indebtedness at the time of transfer.
Therefore, according to the Commissioner, there was no completed
11 In Bonner v. City of Prichard, 661 F.2d 1206, 1209
(11th Cir. 1981) (en banc), the Court of Appeals for the Eleventh
Circuit adopted as binding precedent all of the decisions of the
former Court of Appeals for the Fifth Circuit handed down prior
to the close of business on Sept. 30, 1981.
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