28 T.C. 1256 (1957)

A spouse’s consent to gift-splitting under Internal Revenue Code § 1000 can be timely even if the consenting spouse’s attorney-in-fact filed a separate gift tax return earlier in the year before the marriage occurred.

Summary

Alex Frieder made gifts to his children in 1953, after marrying Helen Salinger. Frieder and Helen both filed gift tax returns in 1954, with Helen consenting to split the gifts. The IRS challenged the timeliness of the consent, arguing that Helen’s earlier gift tax return filed by her son (before her marriage to Frieder) precluded a later consent. The Tax Court ruled in favor of Frieder, holding that Helen’s consent was valid because the earlier return related to gifts made before she was a spouse, and the relevant statute concerned the consent to split gifts between spouses.

Facts

Alex Frieder married Helen Salinger on June 18, 1953. Frieder made gifts to his children on December 2, 1953. Frieder and Helen were absent from the United States from December 6, 1953, to May 10, 1954. Helen’s son, acting as her attorney-in-fact, filed a gift tax return for her on March 15, 1954, reporting gifts she made prior to her marriage to Frieder. On May 28, 1954, Frieder and Helen each filed gift tax returns, showing Frieder’s gifts and Helen consenting to split the gifts. Helen’s return was accompanied by an affidavit explaining her absence from the United States and the filing by her son. The IRS argued Helen’s consent was invalid because she had filed a return before the spousal return.

Procedural History

The Commissioner determined a deficiency in Frieder’s gift tax. The case was heard by the United States Tax Court. The Tax Court ruled in favor of the petitioner, Frieder, concluding that the spousal consent was timely.

Issue(s)

1. Whether Helen’s consent to split the gifts made by her husband, Alex Frieder, was timely under Section 1000(f) of the Internal Revenue Code.

Holding

1. Yes, because Helen’s consent was valid as the prior return filed by her attorney-in-fact related to gifts made before she was a spouse, and the statute focuses on the splitting of gifts between spouses.

Court’s Reasoning

The court examined Section 1000(f) of the Internal Revenue Code of 1939, which allows spouses to treat gifts to third parties as if each spouse made one-half of the gift. The court focused on whether Helen’s consent was timely, given the earlier return filed by her son. The court reasoned that the earlier return filed by Helen’s son, before her marriage to Frieder, did not relate to gifts made by a spouse as defined in section 1000(f). The court stated that the purpose of the law was to ensure mutual consent for gift-splitting and not to preclude a spouse from consenting to split gifts made by the other spouse. The court held that the forms filed earlier by the son did not constitute a complete return as required by the law, until Helen ratified them.

Practical Implications

This case illustrates how the timing of spousal consent for gift-splitting can be interpreted, particularly when separate returns are filed. It emphasizes that consent is valid as long as the earlier return does not involve a spouse’s gift to a third party and the parties comply with statutory rules on consent. It also suggests that the substance of the consent matters more than the precise date of the filing, as long as it falls within permissible statutory windows. This decision reinforces that the IRS must demonstrate that the prior filings would have misled or complicated administration of the tax laws.