Saturday May 4, 2024

Rev. Rul. 73-287

GiftLaw Note: One of the requirements under Sec. 2503(b) for an annual exclusion is that the beneficiary holds a present interest. However, several exceptions are designed to allow a beneficiary to receive gifts up to the annual exclusion amount without the donor being required to use his or her gift exemption amount. Under Sec. 2503(c), an exception is made for gifts under the Uniform Gifts to Minors Act, so long as the beneficiary receives title to the property by age 21. Even if a State lowers the age of majority to 18 and requires distribution in that State to the minor when he or she is age 18, the exception is permitted and gifts qualify for use of the annual exclusion.

Rev. Rul. 73-287
1973-2 C.B. 321

IRS Headnote

Gifts to minors; age of majority lowered. The allowance of the annual exclusion under section 2503(b) of the Code is not affected by the amendment of a State's Uniform Gifts to Minors Law lowering the age of majority and thus, requiring that property be distributed to a minor donee at age 18.

Full Text
Rev. Rul. 73-287

Advice has been requested as to the Federal gift tax consequences of a transfer to a minor under the circumstances described below.

The donor, a resident of State Y, transferred property to his infant son, naming M trust company as custodian. The gift was made pursuant to the statute of State Y patterned after the Uniform Gifts to Minors Act. A recent amendment to the statutes of State Y provides that, for the purposes of all laws of the State, a person shall reach the age of majority when he becomes 18 years of age. Correspondingly, the age at which property held by a custodian under the Uniform Gifts to Minors Law of State Y will be delivered to the donee has been lowered from age 21 years, as provided in the Uniform Act, to age 18 years.

The question raised is whether the change in the laws of State Y will adversely affect the allowance of the annual exclusion under section 2503(b) of the Internal Revenue Code of 1954 because of failure to satisfy all the conditions of section 2503(c) of the Code.

Section 2503(b) of the Code provides an exclusion of the first $3,000 of gifts made to any person by the donor during the calendar year. This exclusion applies to all gifts other than gifts of future interests. A future interest is defined in section 25.2503-3(a) of the Gift Tax Regulations to include reversions, remainders, and other interests or estates, whether vested or contingent and whether or not supported by a particular interest or estate, which are limited to commence in use, possession or enjoyment at some future date or time.

Section 2503(c) of the Code excludes from the future interest provisions of section 2503(b) of the Code gifts to an individual who has not attained the age of 21 years on the date of the transfer if the property and the income therefrom may be expended by, or for the benefit of the donee, before his attaining the age of 21 years. It further requires that, to the extent the income is not so expended it must pass to the donee on his attaining the age of 21 years, or in the event the donee dies before attaining the age of 21 years, be payable to the estate of the donee or as he may appoint under a general power of appointment as defined in section 2514(c) of the Code, in order for the exclusion to be available.

Any transfer of property to a minor under a statute patterned after the Uniform Gifts to Minors Act has been held to meet the requirements of section 2503(c) of the Code and, therefore, qualifies for the annual gift tax exclusion authorized by section 2503(b) of the Code. Rev. Rul. 59-357, 1959-2 C.B. 212.

The provisions of section 2503(c) of the Code set forth the maximum restrictions that may be attached to gifts to minors and still have such gifs considered as present interests for purposes of the annual exclusion allowable under section 2503(b) of the Code. Therefore, a provision that the custodial property be paid to the minor donee when he attains the age of 18 years will meet the requirement that the property pass to the donee at least by his attainment of age 21, and, hence, will satisfy the greater age requirement of section 2503(c) of the Code.

Accordingly, the amendment of the Uniform Gifts to Minors Law of State Y by which the property is required to be distributed to the minor donee at age 18 years, instead of age 21 years, will not prevent the allowance of the annual exclusion provided for by section 2503(b) of the Code because of failure to satisfy all the conditions of section 2503(c) of the Code.