Opinion ID: 409490
Heading Depth: 2
Heading Rank: 1

Heading: The Reach of the Gift Tax

Text: 7 Section 2501(a)(1) of the Internal Revenue Code of 1954 imposes a gift tax on any transfer of property by gift made by an individual during the taxable year. Section 2511(a) provides that the tax should 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. Section 2512(b) helps define the phrase transfer of property by gift: 8 Where the property is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift, and shall be included in computing the amount of gifts made during the calendar quarter. 9 The present gift tax provisions were enacted by the Revenue Act of 1932. The Congressional Committee reports reflect Congress' intent to reach any gratuitous transfer of any interest in property: 10 The terms property, transfer, gift, and indirectly are used in the broadest and most comprehensive sense; the term property reaching every species of right or interest protected by law and having an exchangeable value. 11 The words transfer ... by gift and whether ... direct or indirect are designed to cover and comprehend all transactions (subject to certain express conditions and limitations) whereby and to the extent ... that property or a property right is donatively passed to or conferred upon another, regardless of the means or the device employed in its accomplishment. 12 H.R.Rep.No.708, 72d Cong., 1st Sess. 27-28 (1932), reprinted in 1939-1 Cum.Bull. (Pt. 2) 457, 476; S.Rep. 665, 72d Cong., 1st Sess. 39 (1932), reprinted in 1939-1 Cum.Bull. (Pt. 2) 496, 524. 13 The Treasury Regulations embody the same expansive notion: 14 Thus, all transactions whereby property or property rights or interests are gratuitously passed or conferred upon another, regardless of the means or device employed, constitute gifts subject to tax. 15 Treas.Reg. § 25.2511-1(c), 26 C.F.R. (1981). 16 On several occasions, the Supreme Court has indicated that the gift tax provisions should be applied broadly to effectuate the clear, sweeping intent of Congress. For example, in Commissioner v. Wemyss, 324 U.S. 303, 65 S.Ct. 652, 89 L.Ed. 958 (1945), the Court held that when an individual made a transfer to his prospective wife to compensate her for trust income she would lose upon their marriage, the transfer was a taxable gift even though it was not motivated by donative intent. The Court stated that Congress intended to use the term 'gifts' in its broadest and most comprehensive sense and acknowledged the evident desire of Congress to hit all the protean arrangements which the wit of man can devise that are not business transactions within the meaning of ordinary speech. Id. 324 U.S. at 306, 65 S.Ct. at 654. See also Smith v. Shaughnessy, 318 U.S. 176, 180, 63 S.Ct. 545, 547, 87 L.Ed. 690 (1943) (The language of the gift tax statute 'property ... real or personal, tangible or intangible,' is broad enough to include property, however conceptual or contingent.); Robinette v. Helvering, 318 U.S. 184, 187, 63 S.Ct. 540, 542, 87 L.Ed. 700 (1943) (The purpose of the gift tax was to reach every kind or type of transfer by gift.).