Cite as: 511 U. S. 224 (1994)
Opinion of the Court
corpus would be distributed to Mr. Ordway's surviving grandchildren and the issue of any grandchildren who had died before termination. When the trust terminated on June 27, 1979, the corpus was subject to division into 13 equal shares among 12 grandchildren living and the issue of one who had died. Prior to distribution, on August 23, 1979, one of the grandchildren, Sally Ordway Irvine, filed a disclaimer of five-sixteenths of her interest in the trust principal. Mrs. Irvine had learned of her contingent interest in the trust at least as early as 1931 when she reached the age of 21, and she had begun receiving a share of the annual trust income after her father's death in 1966. Her disclaimer was nonetheless effective under a Minnesota statute on the books at the time, which permitted the disclaimer of a future interest at any time within six months of the event finally identifying the disclaimant and causing her interest to become indefeasibly fixed.1 As a result of her disclaimer, each of Mrs. Irvine's five children received one-sixteenth of her share of the distributed trust principal.
Mrs. Irvine reported the disclaimer in a federal gift tax return, but did not treat it as resulting in a taxable gift. The Commissioner of Internal Revenue determined on audit that the disclaimer indirectly transferred property by gift within the meaning of Internal Revenue Code of 1986 §§ 2501(a)(1) 2 and 2511(a),3 and was not excepted from gift
1 Minn. Stat. § 501.211, subd. 3 (1978), repealed by 1989 Minn. Laws, ch. 340, art. 1, § 77 (and replaced by Minn. Stat. § 501B.86, subd. 3 (1992) (changing the time permitted for disclaiming to nine months, effective January 1, 1990)).
2 "A tax . . . is hereby imposed for each calendar year on the transfer of property by gift during such calendar year by any individual resident or nonresident." 26 U. S. C. § 2501(a)(1).
3 "Subject to the limitations contained in this chapter, the tax imposed by section 2501 shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible . . . ." 26 U. S. C. § 2511(a).
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