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280 (1933); Schwarzenbach v. Commissioner, 4 T.C. 179 (1944);
sec. 25.2511–2(c), Gift Tax Regs. In light of our holding, we
decline to address petitioner’s alternative arguments regarding
joint or community ownership of the mineral leases.
Gifts to Trusts
Petitioner concedes that he made completed gifts of over-
riding royalties to trusts for the benefit of his children. The
parties disagree, however, on the value of those gifts.7 See
sec. 2512 (“If the gift is made in property, the value thereof at
the date of the gift shall be considered the amount of the
gift.”). Although an arbitration panel fixed the unencumbered
fair market value of these interests at $50,412, disagreement
continues over whether the amount of the gifts should be reduced
to reflect encumbrances on the underlying leases or petitioner’s
involvement in the Danzig case.
Petitioner claims that the overrides had little or no value
when he transferred them to the trusts because he conveyed less
than a good and marketable title. Respondent maintains that
petitioner made a gift of their gross value, or $50,412, with no
discount on account of the Danzig case or any judgment liens or
7Generally, the standard of valuation for Federal gift tax
purposes is fair market value; i.e., the price at which property
would change hands between a willing buyer and a willing seller,
both having reasonable knowledge of relevant facts and neither
being compelled to trade. See United States v. Cartwright, 411
U.S. 546, 550 (1973); sec. 25.2512–1, Gift Tax Regs.
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