Transfers reached by the gift tax are not confined to those only which, being without a valuable consideration, accord with the common law concept of gifts, but embrace as well sales, exchanges, and other dispositions of property for a consideration to the extent that the value of the property transferred by the donor exceeds the value in money or money's worth of the consideration given therefor. However, a sale, exchange, or other transfer of property made in the ordinary course of business (a transaction which is bona fide, at arm's length, and free from any donative intent), will be considered as made for an adequate and full consideration in money or money's worth. A consideration not reducible to a value in money or money's worth, as love and affection, promise of marriage, etc., is to be wholly disregarded, and the entire value of the property transferred constitutes the amount of the gift. Similarly, a relinquishment or promised relinquishment of dower or curtesy, or of a statutory estate created in lieu of dower or curtesy, or of other marital rights in the spouse's property or estate, shall not be considered to any extent a consideration “in money or money's worth.” See, however, section 2516 and the regulations thereunder with respect to certain transfers incident to a divorce. See also sections 2701, 2702, 2703 and 2704 and the regulations at §§ 25.2701-0 through 25.2704-3 for special rules for valuing transfers of business interests, transfers in trust, and transfers pursuant to options and purchase agreements.
[T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8395, 57 FR 4255, Feb. 4, 1992]
Notes of Decisions
Cited in
21
cases (
1 in the last 5 years), 1964–2021 · leading case:
Harwood v. Comm'r, 82 T.C. 239 (Tax Ct. 1984).
Harwood v. Comm'r, 82 T.C. 239 (Tax Ct. 1984).
· cites it 4× “However, a sale, exchange, or other transfer of property made in the ordinary course of business (a transaction which is bona fide, at arm's length, and free from any donative intent), will be considered as made for an adequate and full consideration in money or money's worth.”
Steinberg v. Comm'r, 141 T.C. 258 (Tax Ct. 2013).
· cites it 12× “The amount of the gift is the amount by which the value of the property transferred exceeds the value of consideration received in money or money's worth.”
Redstone v. Comm'r, 2015 T.C. Memo. 237 (Tax Ct. 2015).
· cites it 12× “The regulations define a "transfer of property made in the ordinary course of business" as "a transaction which is bona fide, at arm's length, and free from any donative intent.”
Est. of Shapiro v. United States, 634 F.3d 1055 (9th Cir. 2011).
· cites it 2× “, 26 C.F.R. § 25.2512-8 ("A consideration not reducible to a value in money or money's worth, as love and affection, promise of marriage, etc.”
In re Wyly, 552 B.R. 338 (Bankr. N.D. Tex. 2016).
“26 C.F.R. § 25.2512-8 (Transfers for insufficient consideration).”
Saltzman v. Comm'r, 68 T.C.M. 1544 (Tax Ct. 1994).
· cites it 12× “Background Petitioners argue that the 1986 recapitalization was not a gift from Arnold Saltzman to his son, Eric Saltzman. 9 Petitioners contend that: (a) The recapitalization was for fair market value; (b) the recapitalization was a bona fide arm's-length business transaction…”
Heyen v. United States, 731 F. Supp. 1488 (D. Kan. 1990).
“” This exception is defined and explained as “a sale, exchange or other transfer of property made in the ordinary course of business (a transaction which is bona fide, at arm’s length, and free from any donative intent), will be considered as made for an adequate and full…”
Hunt v. Comm'r, 57 T.C.M. 919 (Tax Ct. 1989).
· cites it 4× “, provides a three part test to qualify for the ordinary course of business exception. The taxpayer must prove the transaction (1) was bona fide, (2) was at arm's length, and (3) was free from donative intent.”
Est. of Cullison v. Comm'r, 1998 T.C. Memo. 216 (Tax Ct. 1998).
· cites it 10× “Thus, the Federal gift tax provisions reach further than the common law concept of gifts and embrace sales and other exchanges of property where the value of the property transferred exceeds the value of the consideration received. Sec. 25.”
Hrobon v. Comm'r, 41 T.C. 476 (Tax Ct. 1964).
· cites it 2× “, provides in part as follows: Transfers reached by the gift tax are not confined to those only which, being without a valuable consideration, accord with the common law concept of gifts, but embrace as well sales, exchanges, and other dispositions of property for a…”
Natkanski v. Comm'r, 64 T.C.M. 55 (Tax Ct. 1992).
· cites it 4× “, the gift tax is not applicable to a transfer for full and adequate consideration in money or money's worth, or to ordinary business transactions, described in section 25.2512-8 , Gift Tax Regs. 6 In applying these regulations within the context of settlements arising from…”
Lewis v. Comm'r (In re Est. of Brown), 2013 T.C. Memo. 50 (Tax Ct. 2013).
· cites it 8× “According to petitioner: Regardless of value, a transfer of property is not considered a taxable gift if the transfer is made in the ordinary course of business, even if the transfer is for less than adequate and full consideration.”
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