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whether the transfers constitute gifts of a present interest for
purposes of the statute. In this connection, the parties have
also stipulated that the Grandchildren’s Trust satisfies the
requirements of section 2503(c) such that the annual exclusion
will be applicable for gifts thereto provided that the gifts are
otherwise determined to be of a present interest.
Additionally, to further clarify the issues, the parties
have stipulated that if the aforesaid question is decided in
petitioners’ favor, then in computing gift tax liability for
1996, the amounts of prior period taxable gifts reported on
petitioners’ 1996 returns shall be accepted as filed.
Conversely, if the above question is decided in favor of
respondent, the amounts of prior period taxable gifts reported on
petitioners’ 1996 returns shall be increased to reflect the
annual exclusions claimed by petitioners for gifts of Treeco
units in 1995.
II. Statutory and Regulatory Law
Section 2501 imposes a tax for each calendar year “on the
transfer of property by gift” by any taxpayer, and section
2511(a) further clarifies that such tax “shall apply whether the
transfer is in trust or otherwise, whether the gift is direct or
indirect, and whether the property is real or personal, tangible
or intangible”. The tax is computed based upon the statutorily
defined “taxable gifts”, which term is explicated in section
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