## Facts

- A wealthy Florida resident entered an antenuptial agreement one day before marriage with a fiancée who had negligible assets.
- The agreement required him, within 90 days after marriage, to create an irrevocable $300,000 inter vivos trust for her, with terms to conform to her wishes.
- He also agreed to provide by will for two additional $300,000 trusts: one for her with similar limitations and one for their surviving children.
- In exchange, the fiancée released any rights she might acquire as wife or widow in his property (except maintenance and support).
- Florida recognized enforceable antenuptial agreements and gave a wife an inchoate interest in the husband’s property during his life that became absolute upon his death.
- After marriage, the parties fully performed the agreement, including creation of the $300,000 inter vivos trust.
- The couple reported the trust on the 1939 gift tax return but claimed no tax was due.
- The Commissioner assessed a gift tax deficiency, treating the $300,000 transfer as a taxable gift; the taxpayer paid and sought a refund.
- The district court ruled for the taxpayer; the court of appeals reversed; the Supreme Court granted review.

## Issues

1. Whether, under § 503 of the Revenue Act of 1932, an inter vivos transfer made pursuant to an antenuptial agreement is exempt from gift tax to the extent it is exchanged for the fiancée’s release of marital rights.
2. Whether “adequate and full consideration in money or money’s worth” in the gift tax statute includes relinquishment of marital rights.
3. Whether identical consideration language in the estate and gift tax provisions should be construed consistently.

## Decision

- The Supreme Court affirmed the judgment for the government.
- The Court held that relinquishment of marital rights pursuant to an antenuptial agreement cannot constitute “adequate and full consideration in money or money’s worth” for gift tax purposes.
- Because no qualifying consideration offset the transfer, the $300,000 trust was subject to federal gift tax.

## Legal Principles

- For federal gift tax purposes, surrender or release of marital rights is not “consideration in money or money’s worth” and does not reduce the taxable amount of a lifetime transfer.
- Gift and estate tax provisions addressing the same subject matter should be construed harmoniously; identical statutory phrases should receive the same construction absent compelling reasons for divergence.
- State-law recognition or enforceability of marital rights does not control whether those rights qualify as “money or money’s worth” under federal transfer tax statutes.

## Conclusion

The Court treated the premarital trust as a taxable gift because the fiancée’s waiver of marital rights did not constitute “adequate and full consideration in money or money’s worth” under the federal gift tax statute, and the same consideration language was read consistently with parallel estate tax provisions.


Merrill v. Fahs, 324 U.S. 308 (1945)