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freely transfer the units or to compel distributions from the
entity prevented them from receiving any such benefit on account
of the transfers. Thus, in respondent’s view, the gifts
postponed any economic benefit and therefore were of future
interests.
V. Analysis
A. Applicable Standards
As framed by the parties’ contentions, a threshold issue we
must address is the extent to which the standards expressed in
the decided cases interpreting section 2503(b) are pertinent
here. As petitioners correctly note, the property with which we
are concerned in this matter is an ownership interest in an
entity itself, rather than an indirect gift in property
contributed to the entity. Treeco was duly organized and
operating as an LLC, units of which under Indiana law are
personal property separate and distinct from the LLC’s assets.
See Ind. Code Ann. secs. 23-18-1-10, 23-18-6-2 (West 1994).
Nonetheless, while State law defines property rights, it is
Federal law which determines the appropriate tax treatment of
those rights. United States v. Natl. Bank of Commerce, 472 U.S.
713, 722 (1985); Knight v. Commissioner, 115 T.C. 506, 513
(2000). It thus is Federal law which controls whether the
property rights granted to the donees as LLC owners under State
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