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the year. The simultaneous, circuitous transfers of identical
property to the various nieces and nephews constitute gifts by
the transferors to their own children. See, e.g., Furst v.
Commissioner, T.C. Memo. 1962-221. Petitioners' attempt to
manufacture exclusions under a taxing statute that reaches both
direct and indirect gifts is unavailing.
We are led to the inescapable conclusion that the form in
which the transfers were cast, i.e., gifts to the nieces and
nephews, had no purpose aside from the tax benefits petitioners
sought by way of inflating their exclusion amounts. The
substance and purpose of the series of transfers was for each
married couple to give to their own children their Sathers stock.
After the transfers, each child was left in the same economic
position as he or she would have been in had the parents given
the stock directly to him or her. Each niece and nephew received
an identical amount of stock from his or her aunts and uncles and
was left in the same economic position in relation to the others.
This was not a coincidence but rather was the result of a plan
among the donors to give gifts to their own children in a form
that would avoid taxes. We hold the number of exclusions under
section 2503 is limited by the number of children in each
petitioner's family.
Our conclusion is supported by the doctrine of economic
substance as embodied in the reciprocal trust doctrine. In
United States v. Estate of Grace, 395 U.S. 316 (1969), the
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