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section 2512(b). Section 2512(b) specifies a formula for
determining when a transfer will be deemed a gift and for
determining the amount of the gift for gift tax purposes. In
explaining the broad reach of the predecessor of section 2512(b),
the Supreme Court in Commissioner v. Wemyss, 324 U.S. 303 (1945),
explained that Congress was applying the gift tax to transfers
that were beyond the common meaning of the term gift.
Had Congress taxed “gifts” simpliciter, it would be
appropriate to assume that the term was used in its
colloquial sense, and a search for “donative intent”
would be indicated. But Congress intended to use the
term “gifts” in its broadest and most comprehensive
sense. * * * [Id. at 306.]
Thus, for purposes of the gift tax, a transfer that is deemed to
be a “gift” is statutorily defined in section 2512(b) in broad
and comprehensive terms and is not limited to the common meaning
of that term.
Reliance on cases based on blockage discounts is also
misplaced in the context of section 2512(b). The gift tax
regulations permit an exception to the traditional definition of
fair market value for gifts of large blocks of publicly traded
stock. Under the regulations, a blockage discount can be allowed
“If the donor can show that the block of stock to be valued, with
reference to each separate gift, is so large in relation to the
actual sales on the existing market that it could not be
liquidated in a reasonable time without depressing the market.”
Sec. 25.2512-2(e), Gift Tax Regs. (Emphasis added.) The cases
dealing with blockage discounts are distinguishable because they
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