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2512(b) provides that, where property is transferred for less
than an adequate and full consideration in money or money's
worth, the excess of the value of the property over the value of
the consideration shall be deemed a gift. The purpose of this
provision is to protect the estate tax, by treating as taxable
gifts transfers of property that deplete what otherwise would
have been included in the donor's estate at death. See
Commissioner v. Wemyss, supra at 307-308.
Read literally, section 2512(b) would seem to provide that
every transfer of property for inadequate consideration is in
part a gift--including a business transaction, in which one party
simply got the better of the deal. Notwithstanding the language
of section 2512(b), however, it is clear that the gift tax does
not apply to ordinary business transactions. Section 25.2512-8,
Gift Tax Regs., provides: “a sale, exchange, or other transfer
of property made in the ordinary course of business (a
transaction which is bona fide, at arm's length, and free from
any donative intent), will be considered as made for an adequate
and full consideration in money or money's worth.” Because a
business transaction meeting this standard is deemed to be made
for adequate consideration, it is not a gift for gift tax
purposes--even if the consideration received by one of the
parties turns out to be inadequate. See Estate of Anderson v.
Commissioner, 8 T.C. 706, 720-721 (1947).
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