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 Rev. Rul. 75-8

1975-1 C.B. 309

IRS Headnote

Future interests; tenancy by the entirety; North Carolina. The interest of a wife in real property conveyed as a gift to her and her husband as tenants by the entirety in North Carolina, where the wife is excluded from any right to the use or income from property during the existence of such tenancy, is not a present interest and does not qualify for the $3,000 annual exclusion.

Full Text

Rev. Rul. 75-8

Advice has been requested whether the interest of a wife in property which she and her husband own as tenants by the entirety in North Carolina is a present interest which qualifies for the annual exclusion under section 2503(b) of the Internal Revenue Code of 1954.

On October 8, 1973, D conveyed certain real property located in North Carolina by deed of gift to his son and daughter-in-law as tenants by the entirety.

D has requested advice whether the interest of his daughter-in-law in the gift property qualifies for the annual exclusion from taxable gifts under section 2503(b) of the Code.

Section 2503(b) of the Code provides that $3,000 may be excluded from the value of gifts made by a donor to any donee during the calendar year, if such gifts are not gifts of future interests.

Section 25.2503-3(b) of the Gift Tax Regulations contains the following provisions:

An unrestricted right to the immediate use, possession, or enjoyment of property or the income from property (such as a life estate or term certain) is a present interest in property. An exclusion is allowable with respect to a gift of such an interest (but not in excess of the value of the interest).

Under the law of North Carolina, the husband has the sole right to the rents, profits, and use of property which he and his wife own as tenants by the entirety, so long as they remain married. Koob v. Koob, 283 N.C. 129, 195 S.E. 2d 552 (1973); Nesbitt v. Fairview Farms, 239 N.C. 481, 80 S.E. 2d 472 (1954); Davis v. Bass, 188 N.C. 200, 124 S.E. 566 (1924); West v. Aberdeen & R.R. Co., 140 N.C. 620, 53 S.E. 477 (1906).

Since the wife is excluded from any right to the use or income from property held in North Carolina by herself and her husband as tenants by the entirety, she has no present interest in the property which qualifies for the Federal gift tax annual exclusion.

Accordingly, in the situation described above, the annual exclusion provided by section 2503(b) of the Code is not applicable to the interest of D's daughter-in-law in the property which she and her husband received by gift from D. The interest of D's son in the property, however, qualifies as a present interest with respect to which an exclusion is allowable under section 2503(b).