- 65 -
account annual exclusions, see sections 2503(b) and 2524, each
petitioner is entitled to a charitable contribution deduction
under section 2522 of $207,510 resulting from the transfer to
CFT.48
VII. Effect of Children’s Agreement To Pay Estate Tax Liability
A. Introduction
Recently, in Ripley v. Commissioner, 105 T.C. 358, 369
(1995), revd. on another issue 103 F.3d 332 (4th Cir. 1996), we
described the nature of a net gift as follows:
Where a “net gift” is made, the donor and donee agree
that the donee will bear the burden of the gift tax.
The value of the property transferred is reduced by the
amount of the gift tax paid by the donee, resulting in
the net amount transferred by gift, or the “net gift”.
The IRS has provided an algebraic formula for
determining the amount of gift tax owed on a “net gift”
in Rev. Rul. 75-72, 1975-1 C.B. 310. It is important
to keep in mind that once the “net gift” is calculated,
the full amount of the gift tax is paid on the “net
gift”.
When a “net gift” is made, a portion of the
property is transferred by gift and the remaining
portion is transferred by sale. * * *
The net gift rationale flows from the basic premise that the gift
tax applies to transfers of property only to the extent that the
value of the property transferred exceeds the value in money or
48 We note that, under our analysis, the assignee interest
received by the symphony is worth more than $134,000.
Nevertheless, we do not believe that petitioners have claimed any
increased charitable contribution deduction under sec. 2522 on
account of the transfer to the symphony. If we are mistaken on
that point, petitioners can bring that to our attention (or
perhaps petitioners and respondent can deal with it in the Rule
155 computation).
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