- 83 -
see how proportionality aids the inquiry as to whether the value
of the property transferred exceeded the cash value of the
consideration received in exchange. See id. Here, because of
the presence of donative intent, the transfers cannot be
considered in the ordinary course of business, as that term is
used in section 25.2512-8, Gift Tax Regs., and proportionality is
irrelevant.
Finally, as I read the majority’s approach to the bona fide
sale exception, the majority has added to the exception the
requirement that the taxpayer show that the decedent’s transfer
to the entity was motivated “by a legitimate and significant
nontax purpose.” Majority op. p. 39.6 If, indeed, that is the
majority’s approach, then even if an objective analysis indicates
that the transferor received full consideration, the bona fide
sale exception presumably would not be satisfied if a subjective
analysis reveals that the transaction did not have a legitimate
and significant nontax purpose. According to the majority,
indicators of the lack of such purpose include (1) that the
5(...continued)
arm’s length. Unless a gift motive is conceded or some secret
knowledge is presumed, I am not persuaded that a rational person
dealing at arm’s length would ever knowingly exchange assets
worth $300 for an interest in an entity worth $200, with no right
to control the entity or compel a distribution of her share of
the entity’s assets.
6 As I see it, the addition of that separate test is not
necessary here, since petitioner has not otherwise shown that the
transfers satisfy the bona fide sale exception.
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