QUASI-CONTRACTS -- TAXATION -- RESCISSION OF GIFT FOR FAILURE TO ACHIEVE DONOR'S PURPOSE OF MINIMIZING FEDERAL INCOME TAXES

Authors

N. S. Peterman S. Ed., University of Michigan Law SchoolFollow

Abstract

In 1937, plaintiff made a gift of stock in a closed corporation to his wife, the defendant. For two years defendant received cash dividends on the stock transferred to her and paid income taxes thereon. Late in 1938 the corporation was dissolved; the assets were distributed to the shareholders, and a partnership was formed. Defendant continued to report the income received by her from the partnership. In 1946, the Tax Court sustained the contention of the commissioner of internal revenue that the entire income from this partnership was taxable to plaintiff under the doctrine of Commissioner v. Tower. Plaintiff sought rescission of his gift, claiming that the gratuitous transfer had been induced by a. mistaken assumption as to tax consequences. The evidence showed that the prime purpose of the gift was to build up defendant's estate and that the intent to reduce income taxes was only an incidental motive. Relief was denied by the trial court. On appeal, held, affirmed. Since the chief purpose in making the gift was not defeated, plaintiff was not entitled to equitable relief. Lowry v. Kavanagh, 322 Mich. 532, 34 N.W. (2d) 60 (1948).

Recommended Citation

N. S. Peterman S. Ed., QUASI-CONTRACTS -- TAXATION -- RESCISSION OF GIFT FOR FAILURE TO ACHIEVE DONOR'S PURPOSE OF MINIMIZING FEDERAL INCOME TAXES, 47 Mich. L. Rev. 859 (1949).
Available at: https://repository.law.umich.edu/mlr/vol47/iss6/25