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subsequent transfer of a portion of CFT’s MIL interest to the
sons and the trusts, were parts of a plan by petitioners to avoid
the gift tax. CFT’s retention of a much smaller interest (i.e.,
3.62376573 percent) than petitioners transferred, pursuant to the
assignment agreement, has no effect on the value of the
transferred property on January 12, 1996, the date the gift
became complete.
III. Formula Clause Does Not Violate Public Policy
Relying primarily on Commissioner v. Procter, 142 F.2d 824
(4th Cir. 1944), respondent contended that petitioners’ formula
clause was against public policy, and therefore void, because
such clause “is a ‘poison pill’ created to discourage audit of
the gifts and to fabricate phantom charitable gift and income tax
deductions.”
In Commissioner v. Procter, supra, the court considered a
clause causing a gift to revert to the donor if a court
determined that the gift was taxable. The court held that such a
clause “is clearly a condition subsequent and void because
contrary to public policy.” Id. at 827. The court reasoned that
the clause would discourage the collection of tax because
attempted collection would defeat the gift, the clause would
“obstruct the administration of justice by requiring the courts
to pass upon a moot case”, and the clause, if allowed to stand,
would defeat the judgment of a court. Id. Likewise, in Ward v.
Commissioner, 87 T.C. 78 (1986), a clause allowed the taxpayer to
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