2.) Should Section 2512(b) be viewed as a part of the definition of \"gift\" or

Question

2.) Should Section 2512(b) be viewed as a part of the definition of "gift" or as a measuring rod for transfers otherwise identified as gifts? For example, for several months C negotiated with a parent's sibling T for the purchase of 100 acres of T's ranch. T finally sells the property to C for $1,900,000. If the Commissioner asserts, and it cannot be disproved, that the property was worth $2,000,000:

a.) Has T made a gift? See Reg. 25.2512-8.

b.) Is T's intent, donative or otherwise, entirely irrelevant?

Explanation / Answer

a) If the Commissioner asserts that the property was worth $ 2,000,000, it can be said that T has made a gift.

b) T's intent is to be considered relevant only if it is donative in nature. If the property is given to settle a family dispute or with the intention of keeping family relations intact, then it needs to be taxed as his income and treated accordingly.

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