- 16 -
Commissioner v. Wemyss, supra at 306-307, the Supreme Court
interpreted section 2512 as dispensing with the test of "donative
intent" in favor of a "much more workable external test" that
"where 'property is transferred for less than an adequate and
full consideration'", then the excess "'shall, for * * * [the
purpose of gift tax] be deemed a gift'". Thus, the Federal gift
tax provisions reach further than the common law concept of gifts
and embrace sales and other exchanges of property where the value
of the property transferred exceeds the value of the
consideration received. Sec. 25.2512-8, Gift Tax Regs. As a
result, in determining whether the private annuity transaction in
the instant case is subject to gift tax, we must determine the
value of decedent's land and the value of the private annuity
(i.e., the consideration decedent received).3
Transfers of property in the ordinary course of business,
however, are not subject to gift tax. Sec. 25.2512-8, Gift Tax
Regs. To qualify, the transaction must be bona fide, at arm's
length, and free from donative intent. Id.; see Harwood v.
Commissioner, 82 T.C. 239, 257-258 (1984), affd. without
3 Respondent no longer contends (as was originally
determined in the Mar. 13, 1996, notice of deficiency) that no
private annuity, in fact, was payable to decedent. On its estate
tax return, petitioner included in decedent's gross estate the
two outstanding annuity payments owed to decedent by her
grandchildren. The parties have now further stipulated that the
gross estate is to be increased by an additional $46,072 to
reflect the accrued interest owed on these annuity payments.
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