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this matter where it has seemingly been conceded, even if sub
silentio, and we accept the parties’ gift characterization for
purposes of this proceeding.
The regulations which address indirect gifts in the context
of largess to business entities provide:
Gift to corporation or other business entity. If a
taxpayer makes a gift to a corporation or other
business entity intended for the eventual personal use
or benefit of an individual who is an employee,
stockholder, or other owner of the corporation or
business entity, the gift generally will be considered
as made indirectly to such individual. Thus, if a
taxpayer provides theater tickets to a closely held
corporation for eventual use by any one of the
stockholders of the corporation, and if such tickets
are gifts, the gifts will be considered as made
indirectly to the individual who eventually uses such
ticket. On the other hand, a gift to a business
organization of property to be used in connection with
the business of the organization (for example, a
technical manual) will not be considered as a gift to
an individual, even though, in practice, the book will
be used principally by a readily identifiable
individual employee. A gift for the eventual personal
use or benefit of some undesignated member of a large
group of individuals generally will not be considered
as made indirectly to the individual who eventually
uses, or benefits from, such gifts unless, under the
circumstances of the case, it is reasonably practicable
for the taxpayer to ascertain the ultimate recipient of
the gift. Thus, if a taxpayer provides several
baseball tickets to a corporation for the eventual use
by any one of a large number of employees or customers
of the corporation, and if such tickets are gifts, the
gifts generally will not be treated as made indirectly
to the individuals who use such tickets. [Sec. 1.274-
3(e)(2), Income Tax Regs.]
In addition, this Court has previously summarized the
standard set by the foregoing regulation as follows:
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Last modified: May 25, 2011