Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 79-54

1979-1 C.B. 313

Section 2503 -- Taxable Gifts

IRS Headnote

Gift exclusion; present interest; tenancy by the entirety; Tennessee. The interest of a wife in property transferred as a gift to her and her husband as tenants by the entirety in Tennessee qualifies as a present interest for purposes of the annual exclusion under section 2503(b) of the Code; Rev. Rul. 74-345 revoked.

Full Text

Rev. Rul. 79-54

ISSUE

Does a wife possess a present interest in property for purposes of the annual exclusion under section 2503(b) of the Internal Revenue Code of 1954, where the property is given to the wife and her husband as tenants by the entirety in Tennessee?

LAW AND ANALYSIS

Rev. Rul. 74-345, 1974-2 C.B. 323, holds that an annual exclusion is not allowable to a donor under section 2503(b) of the Code, with respect to the interest received by a wife in a gift transfer of property to her and her husband as tenants by the entirety under Tennessee law. The ruling concluded that under Tennessee law, a wife has no right to the income, use, or possession of the property during the existence of the tenancy. Therefore, any interest acquired by the wife as a result of the transfer is a future interest, which is not eligible for the annual exclusion under section 2503(b). The ruling relies on a decision of the Tennessee Supreme Court, In re Guardianship of Plowman, 217 Tenn. 494, 398 S.W. 2d 721 (1966). This case holds that a tenancy by the entirety confers, on the husband, the right to possession and control of the property and the use and profits of the property, without any obligation to account to his wife. See also, Mitchell v. Sinclair Ref. Co., 221 Tenn. 516, 428 S.W. 2d 299 (1968).

However, in Robinson v. Trousdale County, 516, S.W. 2d 626 (Tenn. 1974), the court reversed its previous position, as enunciated in Plowman, and held that where property is owned by a husband and wife as tenants by the entirety, each tenant has a joint right to the use, possession, control and income of the property. Under these circumstances, the wife's right to the use, possession and income of the property qualifies as a present interest for purposes of section 2503(b) of the Code. See section 25.2503-3(b) of the Gift Tax Regulations.

HOLDING

The wife possesses a present interest in property for purposes of the annual exclusion under section 2503(b) of the Code, where property is given to the wife and her husband as tenants by the entirety in Tennessee.

Rev. Rul. 74-345 is hereby revoked.