Contents

§ 3.1 MEANING OF GIFTThe IRS follows another principle of law:Where consideration in the form of substantial privileges or benefits isreceived in connection with payments by patrons of fund-raising activities,there is a presumption that the payments are not gifts. 8A corollary of these seemingly simple rules is that, as these guidelines reflect, asingle transaction can be partially a gift and partially a purchase, so that when acharitable organization is the payee, only the gift portion is deductible. 9In an oft-quoted passage, the Supreme Court observed that a gift is a transfermotivated by “detached or disinterested generosity.” 10 Along this same line,the Court referred to a gift as a transfer made “out of affection, respect, admiration,charity or like impulses.” 11 A third element, reflected in these quotations,that may be considered in this context is donative intent. 12 This component of thedefinition is inconsistently applied. 13 It is the most problematic of the three, inasmuchas it is usually difficult to ascertain what was transpiring in the mind of adonor at the time of a gift (if, in fact, that is what the transaction was); somecourts struggle in efforts to determine the subjective intent of a transferor. 14 Theother two factors focus on the external circumstances surrounding the transaction,with emphasis on whether the putative donor received anything of value asa consequence of the putative gift. 15In one donative-intent case, a partnership was formed to assist a religiouscenter, which was deeply in debt, by borrowing funds and purchasing the center8 Rev. Rul. 86-63, 1986-1 C.B. 88.9 See §§ 3.1(b), 22.2.10 Commissioner v. Duberstein, 363 U.S. 278, 285 (1960), quoting from Commissioner v. LoBue, 351 U.S. 243,246 (1956).11 Robertson v. United States, 343 U.S. 711, 714 (1952).12 See, e.g., DeJong v. Commissioner, 309 F.2d 373 (9th Cir. 1962), aff’g 36 T.C. 896 (1961); TransamericaCorp. v. United States, 254 F. Supp. 504 (N.D. Cal. 1966), aff’d, 392 F.2d 522 (9th Cir. 1968); Fausner v.Commissioner, 55 T.C. 620 (1971); Wolfe v. Commissioner, 54 T.C. 1707 (1970); Howard v. Commissioner,39 T.C. 833 (1963); Crosby Valve & Gage Co. v. Commissioner, 46 T.C. 641 (1966), aff’d, 380 F.2d 146 (1stCir.), cert. denied, 389 U.S. 976 (1967).13 For example, in the context of the charitable split-dollar insurance plans legislation (see § 17.6), the legislativehistory states that the concept of a charitable gift “generally is interpreted to mean a voluntary transfer of moneyor other property without receipt of adequate consideration and with donative intent.” H. Rep. No. 106-478,106th Cong., 1st Sess. 168 (1999). By contrast, however, the Tax Court, on one occasion, applied only the firstelement of that definition. In fact, the court wrote that, in determining whether the transactions ostensibly involvinga gift were entered into “with the expectation of any quid pro quo from” the charitable organizationinvolved, “we shall focus on the external features relating to” the transactions. Signom v. Commissioner, 79T.C.M. (CCH) 2081, 2091 (2000).14 Transamerica Corp. v. United States, 254 F. Supp. 504 (N.D. Cal. 1966), aff’d, 392 F.2d 522 (9th Cir. 1968);Crosby Valve & Gage Co. v. Commissioner, 46 T.C. 641 (1966), aff’d, 380 F.2d 146 (1st Cir.), cert. denied,389 U.S. 976 (1967); Wardwell Estate v. Commissioner, 301 F.2d 632 (8th Cir. 1962), rev’g 35 T.C. 443(1960); Citizens & S. Nat’l Bank v. United States, 243 F. Supp. 900 (W.D.S.C. 1965); Marquis v. Commissioner,49 T.C. 695 (1968); Perlmutter v. Commissioner, 45 T.C. 311 (1965).15 In one instance, the IRS erroneously issued a tax refund to an individual; when the mistake was discovered,the individual’s defense was that the refund was a gift from the IRS. The Tax Court observed that although theCommissioner of Internal Revenue “has the authority to make a refund of overpayments,” the court was “unawareof any provision [in the Internal Revenue Code] that authorizes him to make gifts.” Young v. Commissioner,(unpublished) (2004). Moreover, the court found itself “hard pressed to find that [the IRS] made thepayment based on a detached and disinterested generosity, out of affection, respect, or admiration of [this taxpayer]so as to constitute a gift”) (see notes 10, 11). The court said nothing about donative intent. 59