## Facts

- Sarah A. Bergan and Margaret L. Goggin were sisters.
- Their sister, Kate A. Johnson, died intestate in 1932 leaving an estate of about $500,000, distributable equally to Bergan and Goggin.
- After Johnson’s death, Bergan (about 74, in good health) proposed that Goggin take all of Johnson’s estate except $50,000 in bonds to be transferred to Bergan.
- The sisters orally agreed that Bergan would live with Goggin for the rest of Bergan’s life and that Goggin would pay Bergan’s living expenses.
- The agreement was carried out: Goggin received Bergan’s share of the Johnson estate in excess of the $50,000 bonds and provided Bergan support until Bergan’s death.
- The Commissioner asserted (1) a 1933 gift tax deficiency and penalty for failure to file a gift tax return, and (2) an estate tax deficiency by including the transferred property in Bergan’s gross estate at death.
- Other estate-tax adjustments (stock valuation and a small medical-expense deduction dispute) were resolved by concessions, leaving only the gift-tax/estate-tax treatment of the inheritance diversion.

## Issues

1. Whether Bergan’s transfer of her Johnson-estate share (beyond the $50,000 bonds) was includible in her gross estate as a transfer with possession/enjoyment at or after death or with a retained life interest.
2. Whether the same transfer was a completed inter vivos transfer for less than full and adequate consideration in money or money’s worth, making it subject to federal gift tax in 1933.
3. Whether the transfer could be subjected to both gift tax and estate tax.

## Decision

- The court held the transferred property was not includible in Bergan’s gross estate.
- The court held the 1933 transfer constituted a taxable gift to the extent it exceeded any ascertainable consideration for Goggin’s support promise.
- The Commissioner’s gift-tax determination was sustained in principle (with valuation to reflect the court’s approach), and the estate-tax inclusion theory was rejected.

## Legal Principles

- A completed lifetime transfer made in exchange for an informal promise of lifetime support may be treated as a gift to the extent the transfer exceeds “full and adequate consideration in money or money’s worth.”
- A support arrangement, without a trust or legally retained income/possession interest in the transferred property, does not by itself establish a retained life estate that pulls the transferred corpus into the transferor’s gross estate.
- When a transfer is complete during life and no qualifying retained interest exists, the government may tax the transfer under the gift tax rather than recharacterizing it for estate-tax inclusion at death.

## Conclusion

The Tax Court characterized Bergan’s diversion of most of her inheritance to her sister in return for lifetime support as a completed 1933 transfer lacking full and adequate consideration, producing gift-tax liability but not gross-estate inclusion because Bergan retained only a contractual right to support rather than a property interest in the transferred assets.


Estate of Bergan v. Commissioner, 1 T.C. 543 (1943)