Bogle v. Commissioner

DOROTHY T. BOGLE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Bogle v. Commissioner

Docket No. 1665-80.

United States Tax Court

T.C. Memo 1983-587; 1983 Tax Ct. Memo LEXIS 206; 46 T.C.M. (CCH) 1487; T.C.M. (RIA) 83587;

September 22, 1983.

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P made a gift of stock on condition that the donees pay the gift tax liability on the transfer. The donees paid the gift tax liability, which exceeded P's adjusted basis in the stock. Held, P realized gain measured by the excess of the gift tax liability over her adjusted basis in the stock. Diedrich v. Commissioner,457 U.S. 191">457 U.S. 191 (1982), followed.

Joel S. Marcus, for the petitioner.

Dennis Brager and Michael R. Morris, for the respondent.

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SIMPSON

MEMORANDUM OPINION

SIMPSON, Judge: This matter is before us on the Commissioner's motion for summary judgment.A hearing was held on the motion, at which the petitioner did not appear.

The Commissioner determined a deficiency of $298,650.94 in the petitioner's Federal income tax for 1976. The sole issue for decision is whether the petitioner, who made a gift of stock on condition that the donees pay the resulting gift taxes, realized gain to the extent that the gift taxes paid by the donees exceeded the petitioner's adjusted basis in the stock.

The facts are not in dispute. The petitioner, Dorothy T. Bogle, was a resident of Roswell, N. Mex., at the time she filed her petition in this case. She filed her Federal income tax return for 1976 with the Internal Revenue Service, Albuquerque, N. Mex.

In 1976, the petitioner gave to her son and his wife (the Holesapples) the following shares of stock on the condition that the Holesapples pay the gift tax liability resulting from the transfer:

	Number of
Name of Corporation	Shares
Bogle Farms, Inc.	83,300
X Bar Ranch, Inc.	166
Big Oak Farms, Inc.	83
Mt. Level Farms Co.	214

The petitioner's aggregate adjusted basis in the shares at the time of the gift was $187,866.00. On or before November 15, 1976, she filed a Federal gift tax return showing a gift tax due as a result of the stock transfer in the amount of $954,383.77. The Holesapples paid the gift tax with their own money. The Commissioner determined that the petitioner realized a gain of $766,517.77, which amount represented the excess of the gift tax liability paid by the donees over the petitioner's adjusted basis in the stock.

In , affg. , revg. a Memorandum Opinion of this Court, the Supreme Court held that "a donor who makes a gift of property on condition that the donee pay the resulting gift taxes realizes taxable income to the extent that the gift taxes paid by the donee exceed the donor's adjusted basis in the property." . The Supreme Court's holding in Diedrich is dispositive of the issue in this case. Accordingly, we will grant the Commissioner's motion for summary judgment.

An appropriate order will be issued and decision will be entered for the respondent.