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proportionate interests in the corporation.” Sec. 25.2511-
1(h)(1), Gift Tax Regs.
Application of this general rule is well established in case
law. For instance, in Kincaid v. United States, 682 F.2d at
1225, the taxpayer transferred her ranch to a newly formed
corporation in which she and her two sons owned all the voting
stock. In exchange for the ranch, the taxpayer received
additional shares of the corporation’s stock. The stock was
determined to be less valuable than the ranch. The court
concluded that the difference between what she gave and what she
got represented a gift to the shareholders. Noting that the
taxpayer could not make a gift to herself, the court held that
she made a gift to each of her sons of one-third of the total
gift amount. See also Heringer v. Commissioner, 235 F.2d 149,
151 (9th Cir. 1956) (transfers of farm lands to a family
corporation of which donors were 40-percent owners represented
gifts to other shareholders of 60 percent of the fair market
value of the farm lands), modifying and remanding 21 T.C. 607
(1954); CTUW Georgia Ketteman Hollingsworth v. Commissioner, 86
T.C. 91 (1986) (mother’s transfer to closely held corporation of
property in exchange for note of lesser value represented gifts
to the other five shareholders of five-sixths the difference in
values of the property transferred and the note the mother
received); Estate of Hitchon v. Commissioner, 45 T.C. 96 (1965)
(father’s transfer of stock to a family corporation for no
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