Spruance v. Commissioner

60 T.C. 141 (1973)

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Spruance v. Commissioner

United States Tax Court
60 T.C. 141 (1973)

Facts

Preston Spruance (plaintiff) and Margaret Spruance entered into two agreements that, read together, operated as the couple’s property-settlement agreement for their divorce. The combined divorce agreement provided that Preston would transfer approximately $1 million in stock into a trust for Margaret and the couple’s four children. The trust’s income would be used to provide support and maintenance for Margaret and the three children who were still minors. After Margaret and Preston both died, the trust’s remainder would be distributed to all four children. The commissioner of Internal Revenue (defendant) determined that $450,000 of Preston’s $1 million transfer was not attributable to the support and maintenance payments. Rather, this amount was a direct property transfer to the four children, who would receive the property outright when their parents died. Preston did not contest the calculations. However, Preston petitioned for a determination that the entire $1 million transfer was not a gift because it was made pursuant to a divorce agreement.

Rule of Law

Issue

Holding and Reasoning (Dawson, J.)

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