- 8 -
gift. According to petitioner, the Pattersons gifted $10,000 of
the $50,000 during 1989, and agreed to gift the remaining $40,000
over a 4-year period commencing in 1990 by canceling $10,000 of
her indebtedness to the corporation each year until the loan was
paid in full. Petitioner claims that by yearend 1993 the
Pattersons had gifted the total $50,000 to her by forgiving all
of her indebtedness to the corporation.
A payment constitutes a gift if it is given in a spirit of
“‘detached and disinterested generosity,’ * * * ‘out of
affection, respect, admiration, charity or like impulses.’”
Commissioner v. Duberstein, 363 U.S. 278, 285 (1960). The intent
of the transferor determines whether a payment constitutes a gift
or something else; e.g., a loan or compensation for services.
See id. at 285-286; see also Goodwin v. United States, 67 F.3d
149, 151-152 (8th Cir. 1995); Estate of Cronheim v. Commissioner,
323 F.2d 706, 707 (8th Cir. 1963), affg. T.C. Memo. 1961-232.
For tax purposes, a valid debt requires the existence of an
unconditional obligation to repay. See Milenbach v.
Commissioner, supra at 197; Midkiff v. Commissioner, 96 T.C. 724,
734-735 (1991), affd. sub nom. Noguchi v. Commissioner, 992 F.2d
226 (9th Cir. 1993); Howlett v. Commissioner, 56 T.C. 951, 960
(1971). Thus, an essential element for a payment to constitute a
loan is the existence of a debtor-creditor relationship; i.e.,
there must be an intent on the part of the recipient of the funds
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011