- 40 -
as he called it, was to have the corporation distribute dividends
so that its shareholders would be regarded as independently
investing the after-tax proceeds in the CGF and Lincoln Partner-
ships.
The court in Kornfeld v. Commissioner, 137 F.3d 1231 (10th
Cir. 1998), addressed this very point. In that case, where the
remaindermen had no legal obligation to use the funds provided by
the taxpayer to acquire their interests,18 the court did not
regard Gordon v. Commissioner, 85 T.C. 309 (1985), as distin-
guishable. The court noted that Mr. Kornfeld's intention in
making the gifts was to enable the donees to purchase the
remainder interests. And as the Court of Appeals for the Tenth
Circuit pointed out: "there is no reason these remaindermen
would question making the investments when taxpayer was giving
them the funds to make their purchases." Kornfeld v. Commis-
sioner, supra at 1236. Similarly, in Gordon v. Commissioner,
supra, the Court emphasized the parties' actual intent when it
addressed this argument in a footnote:
We reject petitioners' argument that the fact that
the trust was free to refuse to participate in any or
all of the joint purchase transactions indicates that
the trust's role as purchaser had substance. For
purposes of this question, the power to refuse is a
fact to consider * * * but is of minimal significance
18In Kornfeld v. Commissioner, 137 F.3d 1231 (10th Cir.
1998), gift tax returns were filed in respect of all the funds
provided by Mr. Kornfeld to his daughters and secretary, whereas
in Gordon v. Commissioner, 85 T.C. 309 (1985), most of the
transfers of funds by Dr. Gordon to the family trust (holder of
the remainder interests) were not reflected in any gift tax
returns.
Page: Previous 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 NextLast modified: May 25, 2011