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the gift notwithstanding the decision of the Tax Court.
It is manifest that a condition which involves this
sort of trifling with the judicial process cannot be
sustained. [Id. at 827. * * *]
The court also noted that the adjustment clause was contrary to
public policy because: (1) Public officials would be discouraged
from attempting to collect the tax since the only effect would be
to defeat the gift; (2) the adjustment provision would tend to
obstruct the administration of justice by requiring the court to
address a moot case; and (3) the provisions should not be
permitted to defeat a judgment rendered by the court. Id.
We followed Procter in Ward v. Commissioner, supra. In
Ward, the taxpayers, husband and wife, each transferred 25 shares
of stock to each of their three sons. At the time of the gifts,
the taxpayers and their sons executed a “gift adjustment
agreement” that was intended to ensure that the taxpayers’ gift
tax liability for the stock transfers would not exceed the
unified credit against gift tax that the taxpayers were entitled
to at that time. Id. at 87-88. The agreement stated that, if it
should be finally determined for Federal gift tax purposes that
the fair market value of the transferred stock either was less
than or greater than $2,000 per share, an adjustment would be
made to the number of shares conveyed so that each donor would
have transferred $50,000 worth of stock to each donee. Id. We
concluded that the fair market value of the stock exceeded $2,000
per share for each of the relevant years. Id. at 109.
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