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Hackl v. Commissioner

United States Court of Appeals for the Seventh Circuit

335 F.3d 664 (2003)

Facts

Albert (A. J.) Hackl and his wife, Christine Hackl (plaintiffs), were initially the sole shareholders of Treeco, LLC. A. J. had formed Treeco with an initial contribution of approximately $12.5 million in assets to provide himself with a retirement hobby as a tree farmer. Treeco’s governing documents appointed A. J. as its manager and vested virtually all economic decisions in the manager. All Treeco shareholders were required to seek the manager’s consent either to withdraw from the company or to sell their shares. A. J. and Christine annually transferred a portion of their Treeco shares to their children. It was A. J.’s and Christine’s intent that such transfers would qualify for exclusion from the gift tax by virtue of being under $10,000 in value. The Internal Revenue Service (IRS) (defendant) determined that the shares constituted future interests, which did not qualify for the gift-tax exclusion, and imposed gift taxes on the couple. The Hackls challenged the IRS in tax court. The tax court ruled in favor of the IRS, and the Hackls appealed.

Rule of Law

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Issue

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Holding and Reasoning (Evans, J.)

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