Opinion ID: 297695
Heading Depth: 1
Heading Rank: 2

Heading: R.C. 273, 26 U.S.C. 273 provides:

Text: 'Holder of a Life or Terminable Interest. 'Amounts paid under the laws of a State, a Territory, the District of Columbia, a possession of the United States, or a foreign country as income to the holder of a life or terminable interest acquired by gift, bequest, or inheritance shall not be reduced or diminished by any deduction for shrinkage (by whatever name called) in the value of such interest due to the lapse of time.' The section is without helpful legislative history. See Gist v. United States, 423 F.2d 1118, 1120 (9th Cir. 1970). 4 The I.R.S. limited its acquiescence in decisions such as Bell and Fry to transactions that are bona fide and not for tax avoidance purposes. Rev.Rul. 62-132, 1962-2 Cum.Bull. 73 5 See n. 6, infra 6 We are not prepared to accept the somewhat broader proposition suggested in the Commissioner's brief, that the nature of the transaction by which taxpayers acquired their interest in the stock governs the tax treatment of the life interest. It is the nature of the underlying and disputed claim resolved by the settlement which is crucial, and the nature of the transaction by which taxpayers asserted ownership of the stock is only relevant here because it was the validity of that precise transaction which was in dispute and was resolved by the compromise That this broader proposition may have been advanced inadvertently by the Commissioner is indicated by his apparent acceptance of Ewing, supra, and Matheson, supra, as correct, but distinguishable from the case under consideration because the taxpayers in each of those decisions had a clear and pre-existing right to that which they exchanged. 7 She was not permitted to amortize that portion of the life interest in the community property which was attributable to her share of the community, for she was entitled to that in any event and in no sense acquired it by either 'purchase' or 'compromise.' 296 F.Supp. at 529 8 In reaching this conclusion we do not rely on the absence of any reported gain or loss on the transaction, in view of the Commissioner's concession below that the rights exchanged should be deemed to be of equal value. However, we are not required to accept taxpayer's contention that the exchange was in fact taxable. As far as we are able to ascertain from the record, the Commissioner conceded only that the rights exchanged should be deemed equal in value, so that if the exchange was taxable, no gain was realized. See 52 T.C. at 565. We consider that the question whether the exchange was taxable is not a consideration in this case 9 Thus, we need not consider whether the decision has present viability 10 102 of the 1954 Code 11 See Lockard v. C.I.R., 166 F.2d 409, 411 (1st Cir. 1948) 'At the bottom of (taxpayers') contentions is this implied assumption: The same transaction cannot be a completed gift for one purpose and an incomplete gift for another. Of course, that is not true, as the cases above cited make clear. Perhaps to assuage the feelings and aid the understanding of affected taxpayers, Congress might use different symbols to describe the taxable conduct in the several statutes, calling it a 'gift' in the gift tax law, a 'gaft' in the income tax law, and a 'geft' in the estate tax law.' C.I.R. v. Beck's Estate, 129 F.2d 243, 246 (2d Cir. 1942). 12 The original estate tax return for the Rose Van Wert estate, together with the federal estate tax examiner's corrections thereto, which a covering letter discloses that taxpayer assented to, are among the original exhibits in this case 13 Of course, nothing we have said in any way intimates a view on the validity of the imposition of the 1957 gift tax