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the treaty. Thus, pursuant to Article 2(2) of the treaty, the
term “shall, unless the context otherwise requires, have the
meaning which it has under the laws of the Contracting State
whose tax is being determined”; here, the United States.
The term “adequate and full consideration” appears
extensively in the Internal Revenue Code, generally followed by
the phrase “in money or money’s worth”,7 in a multitude of
contexts.8 The term is generally used to connote a purchase or
exchange of property that is bona fide and at an arm’s-length
price, as distinguished from a gift or other transfer of property
between persons who do not transact at arm’s length. A
definition of “adequate and full consideration” appearing in the
regulations under section 6323, concerning the validity and
priority of tax liens, provides that “adequate and full
consideration” means consideration that has a “reasonable
relationship to the true value of the interest in property
7 The meaning of the phrase “in money or money’s worth”,
when it follows “adequate and full consideration”, has been
interpreted to confine the scope of “consideration” to money or
its equivalent; i.e., to exclude a mere promise or agreement as
consideration. See, e.g., Commissioner v. Wemyss, 324 U.S. 303
(1945). Since the only consideration that petitioner claims is
“adequate and full consideration” in this case is money, we do
not believe the absence of the “in money or money’s worth”
qualifier in the treaty language has any material effect on the
analysis herein.
8 See, e.g., secs. 274(e)(8), 675(1), 2035(d), 2036(a),
2037(a), 2038(a), 2040(a), 2043(a), 2043(b), 2053(c)(1)(A),
2055(e)(2), 2056(b)(1)(A), 2106(a)(1), 2512(b), 2522(c)(2),
2523(b)(1), 6019(3)(A)(ii), 6323(h)(6).
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