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each other donor's immediate family, the transfers, in reality,
gave the members of a donor's family all of the stock that donor
transferred. Therefore, we held that the number of annual
exclusions would be determined by the number of recipients in
each donor's immediate family.
Moreover, in Schultz v. United States, 493 F.2d 1225, 1226
(4th Cir. 1974), the taxpayer transferred stock in a closely held
corporation to each of his three children and to each of the
three children of his brother. On that same day, the taxpayer's
brother transferred the same number of shares to each of his
three children and to each child of the taxpayer. The court
held, without deciding whether United States v. Estate of Grace,
supra, would apply with equal force to indirect gifts, that a
reasonable jury could have concluded that the taxpayer intended
to benefit his children by the transfers, rather than those of
his brother. Accordingly, the court sustained the Commissioner's
disallowance of the annual exclusion for gifts the taxpayer
claimed for the transfers to his brother's children.
The facts of the instant case prove conclusively that the
transfers at issue were reciprocal; that is, decedent's transfers
to his brother's family were made in exchange for George's
transfers to decedent's family members.
The parties stipulated that the brothers' motivations in
making the transfers included the desire to separate ownership of
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