## Facts

- Anthony F. DiMarco worked for IBM from 1950 until his death in 1979 and was married to Joan M. DiMarco.
- IBM maintained a Survivors Income Benefit Plan under which benefits were payable only to an employee’s eligible survivors upon the employee’s death.
- DiMarco’s participation in the plan was mandatory as a condition of eligible employment.
- DiMarco had no power to select or change beneficiaries, alter the amount/form/timing of payments, substitute other benefits, or terminate coverage except by resigning.
- IBM retained discretionary authority to modify the plan at any time.
- After DiMarco’s death, Joan received survivor income benefit payments under the plan.
- The Commissioner treated the present value of the survivor income benefit as an adjusted taxable gift included in the estate tax computation, asserting the employee made a taxable gift to the spouse.

## Issues

1. Whether the employee-decedent made a completed taxable gift under I.R.C. § 2503 when an employer’s survivor income benefit became payable to the surviving spouse under a mandatory, employer-controlled plan.
2. If so, whether the present value of that benefit must be included as an “adjusted taxable gift” in computing estate tax under I.R.C. § 2001.

## Decision

- The Tax Court held the decedent did not make a taxable gift of the survivor income benefit to his spouse within the meaning of § 2503.
- Because no taxable gift occurred, the present value of the survivor income benefit was not an adjusted taxable gift within the meaning of § 2001.
- The estate prevailed on the remaining disputed issue in the deficiency determination.

## Legal Principles

- A taxable gift generally requires a voluntary transfer of property, or an interest in property, by the donor accompanied by sufficient dominion and control over the disposition.
- Benefits arising solely from an employer’s mandatory plan, where the employee lacks power to designate beneficiaries or alter benefits, are not treated as transferred property interests of the employee for gift tax purposes.
- An employer’s retained discretion to amend or terminate a benefit plan supports the conclusion that the employee lacks a fixed, transferable interest capable of being the subject of a completed gift.
- For estate tax computation, an amount can be included as an adjusted taxable gift under § 2001 only if it first qualifies as a taxable gift under the gift tax provisions.

## Conclusion

Because the survivor income benefit was created, controlled, and payable under IBM’s mandatory plan without any meaningful ability by the employee to direct or transfer the benefit, the employee did not make a completed taxable gift to the surviving spouse, and the benefit’s present value was excluded from adjusted taxable gifts in the estate tax calculation.


Estate of DiMarco v. Commissioner, 87 T.C. 653 (1986)