TAXATION-FEDERAL GIFT TAX-TRANSFERS MADE PURSUANT TO POSTNUPTIAL SEPARATION AGREEMENTS

Taxpayer and her husband entered into a property settlement whereby she agreed to make certain payments to him in return for his promise to relinquish all marital rights in her property. The agreement was not to become operative unless a divorce decree was entered in a then pending action, but it was further provided that "the covenants in this agreement shall survive any decree of divorce which may be entered." The subsequent divorce decree approved the agreement and directed performance of its provisions. The Tax Court, which expunged the gift tax deficiency assessed by the Commissioner, was reversed by the Court of Appeals for the Second Circuit, which held the payments subject to the gift tax. On review under a writ of certiorari, held, reversed.

The transfers were not founded upon a promise or agreement and therefore they need not meet the requirements of an adequate and full consideration in money or money's worth. Four justices dissented. Harris v. Commissioner of Internal Revenue, 340 U.S. 106, 71 S.Ct. 181 (1950).