## Facts

- A taxpayer became engaged to a widow whose late spouse had established two trusts: one for her benefit and one for her child.
- Under the trust terms, the widow’s trust income would terminate upon her remarriage and shift to the child.
- To address her reluctance to remarry due to the resulting loss of trust income, the parties executed an antenuptial agreement.
- Pursuant to that agreement, the taxpayer transferred a block of stock to his fiancée valued at $149,456.13.
- The parties married within about one month after the transfer.
- The Commissioner assessed a federal gift-tax deficiency, treating the transfer as a taxable gift under the Revenue Act of 1932.
- The Tax Court sustained the deficiency; the court of appeals reversed; the Supreme Court granted review.

## Issues

1. Whether an antenuptial transfer of property made in consideration of marriage and to offset the prospective spouse’s loss of trust income is a taxable gift under §§ 501 and 503 of the Revenue Act of 1932.
2. Whether the promise to marry and the prospective spouse’s relinquishment of trust income constitute “adequate and full consideration in money or money’s worth” sufficient to exclude the transfer (in whole or in part) from gift-tax treatment.

## Decision

- The Supreme Court reversed the court of appeals and reinstated the Tax Court’s determination sustaining the deficiency.
- The stock transfer was a taxable gift in its entirety because it was not supported by “adequate and full consideration in money or money’s worth” within § 503.
- The Tax Court’s finding that the transfer lacked such consideration was binding on review.
- The fiancée’s loss of trust income and promise to marry did not supply the required statutory consideration because they did not confer an economically measurable benefit on the transferor.

## Legal Principles

- For federal gift-tax purposes, a transfer is treated as a gift to the extent it is made “for less than an adequate and full consideration in money or money’s worth.”
- The “money or money’s worth” inquiry is a tax-law concept and is not controlled by common-law contract notions of valuable consideration.
- To avoid gift-tax characterization, the consideration must provide an economically measurable benefit to the transferor; detriment to the transferee, standing alone, is insufficient.
- A promise of marriage, and a transferee’s forgoing income or rights that do not flow back as an economic benefit to the donor, does not constitute “money or money’s worth” consideration under § 503.

## Conclusion

The Court held that an antenuptial stock transfer intended to compensate a fiancée for the loss of trust income upon remarriage was fully subject to the federal gift tax because neither marriage nor the fiancée’s loss of income provided “adequate and full consideration in money or money’s worth” benefiting the transferor.


Commissioner v. Wemyss, 324 U.S. 303 (1945)