- 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.Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
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