Farid-Es-Sultaneh v. Commissioner

Doris Farid-Es-Sultaneh, Petitioner, v. Commissioner of Internal Revenue, Respondent Farid-Es-Sultaneh v. Commissioner Docket No. 2968 United States Tax Court 6 T.C. 652; 1946 U.S. Tax Ct. LEXIS 241; April 5, 1946, Promulgated *241 Decision will be entered under Rule 50. Basis -- Property Transferred Under a Prenuptial Agreement. -- A transfer of property by a prospective husband to a prospective wife pursuant to a prenuptial agreement is not a sale or exchange giving the wife a new basis for the property, but is a gift, so that the property in the hands of the wife retains the same basis as it had in the hands of the transferor. August Merrill, Esq., and Zivel B. Niden, C. P. A., for the petitioner. Clay C. Holmes, Esq., for the respondent. Murdock, Judge. MURDOCK *653 OPINION. The Commissioner determined deficiencies in the petitioner's income tax of $ 1,298.69, $ 27,758.11, and $ 706.37 for the calendar years 1937, 1938, and 1939. The respondent has conceded that the petitioner is entitled to a deduction of $ 16,000 for 1937. The petitioner presses no assignment of error except one that the Commissioner erred, in determining her profit from the sale in 1938 of 12,000 shares of S. S. Kresge Co. stock, by holding that her basis for gain or loss on that stock was the same as that of her former husband, S. S. Kresge. The facts have been stipulated. The petitioner is a citizen of the*242 United States. She filed her income tax return for 1939 with the collector of internal revenue for the third district of New York. The petitioner received 2,500 shares of S. S. Kresge Co. stock, part in December 1923 and the rest in January 1924, under a prenuptial agreement with S. S. Kresge, whom she married in April 1924. They were divorced in 1928. The petitioner received stock dividends on the stock which increased her shares many times. She sold 12,000 shares in 1938. The Commissioner held, in determining the deficiency, that her basis on the shares sold was the same as that of S. S. Kresge, adjusted for the dividends, since the transfer was a gift and she took the donor's basis. The petitioner contends that she acquired the shares for a consideration larger than the basis of the donor. The determination of the Commissioner is approved upon the authority of , and . Decision will be entered under Rule 50.