Rev. Rul. 69-346

Advice has been requested as to the effective date of a transfer of property for Federal gift tax purposes pursuant to section 2511 of the Internal Revenue Code of 1954 under the circumstances described below.

The taxpayer and her husband, both domiciliaries of the State of Washington, entered into an agreement that was properly executed in compliance with section 26.16.120 of the Revised Code of Washington. Under the terms of the instrument the taxpayer agreed that if her husband would make provisions for her comfort in a trust to be created under his will, she would transfer her one-half interest in their community property to the trust. However, the agreement provided that the taxpayer would not be required to transfer her interest to the trust until the executor had completed its administration of the husband's estate and had assumed its duties as trustee.

The taxpayer's husband died in 1967 leaving a will consistent with the agreement. At the time of his death, the value of the property that the taxpayer was required to transfer was greater than the interest that she acquired. As of December 31, 1967, the trust under the husband's will was not yet established and the taxpayer was not required to transfer ownership of her interest to the trustee. The question presented is when, for Federal gift tax purposes, the taxpayer will be deemed to have made a completed gift.

Section 26.16.120 of the Revised Code of Washington provides that no law of the State of Washington shall prevent a husband and wife from jointly entering into any agreement concerning the status or disposition of the whole or any portion of the community property then owned by them or afterwards to be acquired by them, which agreement shall take effect upon the death of either. It has been held that an agreement entered into in conformance with that statute is an enforceable contract, which contract becomes completely executed when one of the parties to the contract dies. In Re Wittman's Estate, 58 Wash. 2d 841, 365 P.2d 17 (1961); In Re Brown's Estate, 29 Wash. 2d 20, 185 P. 2d 125 (1947).

Section 2501 of the Code imposes a tax on the transfer of property by gift. Generally, a transfer is complete when the donor has so parted with dominion or control as to leave in him no power to change its disposition, whether for his own benefit or for the benefit of another. Section 25.2511-2(b) of the Gift Tax Regulations.

Revenue Ruling 69-347, this page, this Bulletin, holds that the effective date of a gift for Federal gift tax purposes is the date upon which a promise to make a future transfer becomes enforceable under State law, and not the date upon which an actual transfer of property is made, provided the gift is susceptible of valuation at the time it becomes enforceable.

In the above-described circumstances, the agreement between the taxpayer and her husband was enforceable at the time entered into. However, it was not determinable at that time whether the taxpayer had made a gift and, if so, of what value. Accordingly, it is held that the taxpayer in the instant case is not considered to have made a taxable gift until the death of her husband, at which time the amount of the gift first became susceptible of valuation. Compare Pacific National Bank of Seattle, Executor v. Commissioner, 40 B.T.A. 128 (1939), acquiescence, C.B. 1939-2, 28; Estate of Emma Bressani v. Commissioner, 45 T.C. 373 (1966), acquiescence, C.B. 1966-2, 4.