Larry L. Sather, Donor, et al. - Page 11




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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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