Farid-Es-Sultaneh v. Commissioner
United States Court of Appeals for the Second Circuit
160 F.2d 812 (1947)
S.S. Kresge transferred shares of stock to Farid-Es-Sultaneh (plaintiff) both before and shortly after his divorce, ahead of their planned marriage, and the two later signed an ante-nuptial agreement stating the shares were given in exchange for her agreement to marry him and to give up her marital rights, including support as his wife. When she later sold a large block of shares, the tax question turned on her cost basis: if she purchased the stock, her basis was its fair market value when received; if it was a gift, she'd inherit Kresge's much lower original basis. The Commissioner (defendant) argued that because she didn't provide "fair consideration" for the stock under gift-tax and estate-tax standards, the transfer was a gift, and the Tax Court agreed.
Whether the absence of fair consideration under gift-tax and estate-tax standards renders a stock transfer a gift for purposes of calculating the recipient's cost basis under the income tax laws.