on appeal to the 9th Cir.
How later courts described this case
- on appeal to the 9th Cir.
- Tax Court dismissed revenue ruling as “simply the contention of one of the parties to the litigation”
- “A revenue ruling, without more, of course, is simply the contention of one of the parties to the litigation, and is entitled to no greater weight.”
- “Congress intended to use the term ‘gift’ in its broadest and most comprehensive sense in the gift tax area.”
Written by the judges who cited it.
The opinion
Drennen, J., dissenting in part: I respectfully disagree with the conclusion of the majority that decedent made taxable gifts to Howard at the time the statute of limitations ran on the recovery of the amounts “loaned” to Howard in 1962 and 1963. The weakness of the majority’s conclusion is emphasized by the fact that it relies on petitioner’s failure to carry its burden of proof to find for respondent on this issue.
The burden of proof here would relate to the production of evidence to prove facts contrary to those upon which respondent bases his conclusion. It would be an impossible task for anyone, absent some affirmative act on the part of decedent at the time the statute of limitations ran in 1962 and 1963, to prove that decedent did or did not “knowingly let the statute run” in order to consummate gifts. The fact that she took affirmative steps to make known her intention with respect to the 1966 and 1967 loans to Howard and in her will suggests she did not intend to consummate gifts in 1962 and 1963 when she took no affirmative action.
Furthermore, in my opinion, the facts upon which respondent, and the majority, base their conclusion do not support the conclusion.
The majority stresses that donative intent is not required to constitute a gift under the gift tax law. If this is so, the only “fact” upon which the conclusion is based is that the statute of limitations was permitted to run. But there must be a “transfer” or a “transaction” to constitute a gift for gift tax purposes. See language quoted from Commissioner v. Wemyss, 324 U.S. 303, 306 (1945), and from sec. 25.2511-1(g)(1), Gift Tax Regs., in the majority opinion. In other words there must be a taxable event. I do not believe “the mere running of the statute of limitations on a loan” constitutes a taxable event under the circumstances assumed to exist here.
The statute of limitations is a plea in bar and must be affirmatively pleaded or it is waived as a defense. See 54 C.J.S. sec. 354; R. G. Robinson, 12 T.C. 246, 248 (1949); also see Rule 39, Tax Court Rules of Practice and Procedure. Had decedent brought suit to collect the loans at any time up to her death she might have been successful had not Howard affirmatively pleaded the statute of limitations. In my opinion, if decedent made a gift of these loans to Howard it was either at the time she transferred the funds to him with no intention of collecting them, or at the effective date of her will in which she forgave any remaining obligations owing to her from Howard. I cannot agree that taxable gifts were made at the time the statute of limitations ran on collection of the loans, without more.
Forrester, Fay, Sterrett, and Goffe, JJ., agree with this dissent.