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interests in the True companies made by Dave and Jean True in
1993 and 1994, respectively.
A. Framework for Analyzing Gift Tax Valuation Issues
Federal gift tax is imposed on transfers of property by gift
by any individual during a calendar year. See sec. 2501(a)(1).
The gift is measured by the value of property passing from the
donor and not by the resulting enrichment of the donee. See sec.
25.2511-2(a), Gift Tax Regs. The value of property transferred
at the date of gift is considered to be the amount of the gift.
See sec. 2512(a); sec. 25.2512-1, Gift Tax Regs.
The value of property for gift tax purposes is determined in
the same manner as for estate tax purposes, see supra p. 60, by
applying the hypothetical willing buyer and seller standard. See
Estate of Reynolds v. Commissioner, 55 T.C. at 187-188
(explaining that the estate and gift tax regulations provide
identical definitions of value); compare sec. 25.2512-1, Gift Tax
Regs., with sec. 20.2031-1(b), Estate Tax Regs. Identical
factors are used for gift and estate tax purposes to determine
fair market value of a closely held business for which there is
no public market or recent arm’s-length sale. See Ward v.
Commissioner, 87 T.C. 78, 101 (1986); secs. 25.2512-2(a),
25.2512-2(f), 25.2512-3, Gift Tax Regs.
Transfers that are subject to Federal gift tax include
sales, exchanges, and other dispositions of property for
consideration. See sec. 2512(b). If property is transferred for
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