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30-year old daughter, but also on the failure of any issue of the
daughter to attain the age of 21 years, is disregarded as an
offset in determining the value of the gift; actuarial science
cannot establish the probability of whether the daughter would
marry and have children).
Our conclusion is further buttressed by broader
considerations of Federal gift tax law. Under the “estate
depletion” theory of the gift tax, it is the benefit to the donor
in money or money’s worth, rather than the detriment to the
donee, that determines the existence and amount of any
consideration offset (sale proceeds) in the context of an
otherwise gratuitous transfer. See Commissioner v. Wemyss, 324
U.S. 303, 307-308 (1945); 2 Paul, Federal Estate and Gift
Taxation 1114-1115 (1942). When a donee agrees to pay the gift
tax liability resulting from a gift, the benefit to the donor in
money or money’s worth is readily apparent and ascertainable,
since the donor is relieved of an immediate and definite
liability to pay such tax. If that donee further agrees to pay
the potential 2035 tax that may result from the gift, then any
benefit in money or money’s worth from the arrangement arguably
would accrue to the benefit of the donor’s estate (and the
beneficiaries thereof) rather than the donor. The donor in that
situation might receive peace of mind, but that is not the type
of tangible benefit required to invoke net gift principles.
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