United States v. Irvine, 511 U.S. 224, 2 (1994)

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Cite as: 511 U. S. 224 (1994)

Syllabus

transferred from a decedent's estate does not result in a gift if it is unequivocal and effective under local law, and made "within a reasonable time after knowledge of the existence of the transfer." The Jewett Court held that "the transfer" in the 1958 version of the Regulation refers to the creation of the interest being disclaimed, with the "reasonable time" therefore beginning to run upon knowledge of the creation of the trust. Pp. 232-234. (b) If the Regulation applies to Mrs. Irvine's disclaimer, her act resulted in taxable gifts. The knowledge and capacity to act, which are presupposed by the requirement that a tax-free disclaimer be made within a reasonable time of the disclaimant's knowledge of the transfer of the interest to her, were present in this instance at least as early as Mrs. Irvine's 21st birthday in 1931. Although there is no bright-line rule for timeliness in the absence of a statute or regulation providing one, Mrs. Irvine's delay for at least 47 years in making her disclaimer could not possibly be thought reasonable. Pp. 234-236. (c) Respondents' arguments that the Regulation is inapposite by its own terms to the facts of this case need not be resolved here, for the result of the Regulation's inapplicability would not be, as respondents claim, a freedom from gift taxation on a theory of borrowed state law. State property transfer rules do not translate into federal taxation rules because the principles underlying the two look to different objects. In order to defeat the claims of a disclaimant's creditors in the disclaimed property, the state rules apply the legal fiction that an effective disclaimer of a testamentary gift cancels the transfer to the disclaimant ab initio and substitutes a single transfer from the original donor to the disclaimant's beneficiary. In contrast, Congress enacted the gift tax as a supplement to the federal estate tax and a means of curbing estate tax avoidance. Since the reasons for defeating a disclaimant's creditors would furnish no reasons for defeating the gift tax, the Court in Jewett, supra, at 317, was undoubtedly correct to hold that Congress had not meant to incorporate state-law fictions as touchstones of taxability when it enacted the Act. Absent such a legal fiction, the federal gift tax is not struck blind by a disclaimer. Pp. 236-240. (d) Taxation of the transfer following Mrs. Irvine's disclaimer would not violate § 501(b) of the Act, which provided that it would "not apply to a transfer made on or before the date of the enactment of this Act [June 6, 1932]." Section 501 merely prohibited application of the gift tax statute to transfers antedating the enactment of the Act; it did not prohibit taxation where, as here, interests created before the Act were transferred after enactment. Pp. 240-241. 981 F. 2d 991, reversed.

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