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were, in substance, transfers to each of their own children in
trust.3 Respondent determined Kathy, Sandra, and Diane were each
entitled to three exemptions under section 2503(b), and
respondent disallowed the six exemptions claimed regarding
transfers to the nieces and nephews. Consequently, respondent
determined that the Larry Trust, the John Trust, and the Duane
Trust were, as the recipients of the transferred property, liable
as transferees for the unpaid gift tax liability of Kathy,
Sandra, and Diane.
OPINION
We must peel away the veil of cross-transfers to seek out
the economic substance of the foregoing series of transfers.
Petitioners bear the burden of disproving respondent's
determination as to the tax deficiencies and accuracy-related
penalties. See Rule 142(a); Welch v. Helvering, 290 U.S. 111,
115 (1933). Respondent bears the burden of proving the elements
for transferee liability. See sec. 6902(a).
Section 2501(a) imposes a tax “on the transfer of property
by gift”, and section 2511(a) provides that “the tax imposed by
section 2501 shall apply * * * whether the gift is direct or
indirect”. Section 2503(b) excludes from the definition of
“taxable gifts” the first $10,000 of gifts to any person during
3As to the underlying liability, respondent has never issued
a notice of deficiency to any of the related donors; namely,
Kathy, Sandra, and Diane.
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