Court Opinion

ID: 9465193
Source: CourtListenerOpinion
Date Created: 2023-08-05 00:38:33.557657+00
Date Added: 2024-06-11T17:39:01.586071
License: Public Domain

ROBERT VAN PELT, Senior District Judge,
dissenting:
It is with reluctance that I note my dissent. The judges who constitute the majority are men of honor and competence and I respect their judgment. The fact that the Tax Court was divided on this issue, with *242four judges dissenting,1 I mention only to show that I am not alone in the views herein expressed.
While the amount involved in the notice of deficiency is only slightly more than a million dollars, the overall interest-free loans, as the majority opinion recognizes, totalled approximately $18,000;000. I conclude gifts of such magnitude, and of lesser amounts also, if not de minimis, embody a gift. That a gift is being given seems evident to me when you consider the example used by Judge Simpson who dissented in the Tax Court. He says, if the taxpayer here had
arranged for the borrowers to obtain the money from financial institutions and agreed to pay the interest thereon, clearly, the payment of such interest would constitute a taxable gift.
Crown v. Commissioner of Internal Revenue, 67 T.C. 1060,1066 (1977). The taxpayer here has in effect paid the interest on these loans when he does not demand payment or interest at the prevailing rate. The majority recognized the recipient has been enriched. Under the majority decision, the disparaté treatment of gift-giving taxpayers becomes more obvious when we follow through with what has happened. We have here a lender loaning money to his children and other close family members without interest in an amount which, if placed in U.S. Government Bonds, even by one “not bright” in the handling of money, could hardly help resulting in annual income of a million dollars. All of this is received without any gift tax or other transfer tax being paid, if the Tax Court is affirmed.
On the other hand, a grandparent who, without tax advice of lawyers and accountants, gives a grandchild $10,000 in one year, and has previously used his or her gift tax exclusion, pays tax on what by comparison with eighteen million dollars could be called “the widow’s mite.” I use the populist expressions and comparisons in this paragraph only to point up more graphically my feelings that the decision of the Tax Court’s majority “just ain’t right.”
This dissent is not based solely on what I think is right or wrong. The moral sense and conscience of the majority of this panel is as trustworthy as mine. I dissent, mainly, because I feel Internal Revenue Code §§ 2501, 2511 and 2512 are broad enough to cover this transaction. Where the Congressional history, as related in the majority opinion, indicates that Congress intended the gift tax statutes to “cover and comprehend all transactions . . . whereby and to the extent . . . that property or a property right is donatively passed to or conferred upon another, regardless of the means or device employed in its accomplishment,” there is little need to specifically enumerate interest-free loans as a taxable gift or as included in the term “all transactions.” I can only conclude, as the Commissioner of Internal Revenue and four members of the Tax Court have concluded, that the authority for treating this as a taxable event has long been available in the statutes as written.
I would reinstate the decision of the Commissioner of Internal Revenue and reverse the Tax Court.

. Additionally, three judges did not participate in the consideration or disposition of the case.