Dickman v. Commissioner - 465 U.S. 330, 104 S. Ct. 1086 (1984)

Rule:

Transfers of property by gift, by whatever means effected, are subject to the federal gift tax. 

Facts:

Section 2501(a)(1) of the Internal Revenue Code of 1954 imposes a tax upon "the transfer of property by gift." Section 2511(a) provides that such tax shall apply whether "the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible." Petitioner wife and her husband, now deceased, made substantial interest-free demand loans to their son and a closely held family corporation. The Commissioner of Internal Revenue determined that the loans resulted in taxable gifts to the extent of the value of the use of the loaned funds, and assessed gift tax deficiencies. Petitioner wife and petitioner personal representative of her husband sought redetermination of the deficiencies in the Tax Court, which held that the loans were not subject to the gift tax. The Court of Appeals reversed.

Issue:

Did interest-free demand loan result in taxable gift of value of use of loaned funds?

Answer:

Yes.

Conclusion:

The Court affirmed. The Court held that the gift tax statutes clearly encompassed within their broad sweep the gratuitous transfer of the use of money. The right to use money was plainly a valuable right, readily measurable by reference to current interest rates. Thus, the interest-free loan of funds was a transfer of property by gift within the contemplation of federal gift tax statutes.