Source: http://openjurist.org/521/f2d/878
Timestamp: 2013-05-24 15:37:54
Document Index: 467702875

Matched Legal Cases: ['§ 2503', '§ 2503', '§ 2503', '§ 2503', '§ 2503', '§ 25']

521 F2d 878 Gall v. United States | OpenJurist
521 F. 2d 878 - Gall v. United States	Home521 f2d 878 gall v. united states
521 F2d 878 Gall v. United States 521 F.2d 878
75-2 USTC P 13,107
Gene GALL, and Cecile Florence Gall, Plaintiffs-Appellants,v.UNITED STATES of America, Defendant-Appellee.
No. 75-2365Summary Calendar.*
26 U.S.C.A. § 2503(b) provides that the first $3,000 of gifts made to any person during any calendar year shall not be subject to the federal gift tax. This exclusion, however, is expressly inapplicable to gifts of future interests they are taxable without regard to the $3,000 exclusion. The future interests limitation created substantial difficulty for donors seeking to make gifts in trust for minors; such gifts were generally deemed future interests, not qualifying for the exclusion. See, e. g., Commissioner v. Disston, 1945, 325 U.S. 442, 65 S.Ct. 1328, 89 L.Ed. 1720; Fondren v. Commissioner, 1945, 324 U.S. 18, 65 S.Ct. 499, 89 L.Ed. 668.
Under the terms of the trust, the property and income of the trust may be expended for the benefit of the beneficiary, and to the extent not so expended, will pass to the beneficiary when she reaches the age of twenty-one. Thus, the requirements of § 2503(c)(1) and (c)(2)(A) are not in issue.
The trust provides that in the event of the beneficiary's death before reaching twenty-one, the corpus is payable first to the settlors' surviving issue in default of appointment by the beneficiary. Since the corpus is not payable to the estate of the beneficiary, the first portion of § 2503(c)(2)(B) is inapplicable, and, according to the second portion of § 2503(c)(2)(B), the annual exclusion will apply only if the beneficiary possesses a general power of appointment while under the age of twenty-one. The government argues that since the trust prohibits the beneficiary from exercising the power of appointment until she reaches the age of nineteen, the absolute requirement of § 2503(c)(2)(B) is not met.
Section 2514(c) defines "general power of appointment" as "a power which is exercisable in favor of the individual possessing the power . . . , his estate, his creditors, or the creditors of his estate" subject to certain exceptions
if the transfer is to qualify for the exclusion under this section, there must be no restrictions of substance (as distinguished from formal restrictions of the type described in paragraph (g)(4) of § 25.2523(e)-1) by the terms of the instrument of transfer on the exercise of the power by the donee.
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