of the papers remained in Washington. Thus, these papers had not been delivered to the library, and no deed or other written document conveying the papers existed.

On these facts the question before the Surrogate Court was whether an inter vivos gift had been made; if not, the papers would be included in the President's estate and, since no provision had been made for them in his will, an estate tax would have had to be paid. The court held that given the President's public announcement of his intention to donate the papers, a constructive delivery of them had been made and the gift was effective. The brief goes on to discuss two other cases in which gifts were deemed to be effective regardless of delivery of papers in cases where an intent to give all of an entire group of papers or other materials was clear.

The brief then states in its discussion of delivery, "Evidence of donative intent is often subjective, and courts normally insist upon corroborative evidence in the form of actual or constructive delivery. In many cases this means there must be a transfer of possession and dominion from one party to another." The brief states that the requirement of delivery serves an evidentiary function and if the delivery is ambiguous, donative intent often becomes the "critical evaluative tool."

The brief concedes that no segregation of the papers listed in the deed dated March 27, 1969, was made before July 25, 1969.

The brief argues that what was given before July 25, 1969, was like a gift of an undivided interest in the property delivered in March 1969. Cases are cited which involved a gift of an undivided interest in bonds, in savings accounts, and in corporate shares. The brief concludes that segregation is unimportant if the gift is one of an undivided interest. The brief goes on to state that cases have held delivery to have been accomplished even though the donor has retained some control over donated property (through restrictions in the gift) and in cases where the potential for revocation of the gift by the donor exists (because the donor has not given up complete dominion and control over the property). In addition, the brief states that there is no requirement for communication with the donee to perfect delivery, but that delivery vests immediate title in the donee, subject to his right to repudiate when informed of the gift.

The brief argues that acceptance is the least important and most flexible of the three criteria for establishing a gift. Indeed, the brief argues that the criteria of acceptance has been dropped by many courts in the absence of any evidence of repudiation by the donee. The brief concludes that courts will assume acceptance of a gift by the donee unless the donee explicitly rejects it.

Thus, the brief relies heavily on two arguments. First, that a strong public policy of encouraging presidents to donate their papers to the government affects the standard by which it is determined what constitutes a completed gift, and that the key to determining whether a completed gift has occurred is the intent of the donor. Finally, the brief implies that what was given in the President's case was an undivided interest in property rather than a specific group of papers. The brief concludes that under these standards, a gift had been made by July 25, 1969.

4. Staff Analysis of Legal Considerations

A. TAX LAWS RELATING TO GIFTS OF PAPERS

Law prior to Tax Reform Act of 1969

Prior to the effective date of the Tax Reform Act of 1969, taxpayers were permitted an income tax deduction for the fair market value of appreciated property, including papers, memoranda, and letters (or collections thereof) given to the United States or charitable or certain other specific types of organizations. In general, in the case of gifts to the United States, contributions were limited to 30 percent of the taxpayer's adjusted gross income; however, excess contributions could be carried forward for 5 years. Gains on the sale of papers or letters sold by the author or original owner were taxed at capital gains rates. Changes made by the Tax Reform Act of 1969

The 1969 Act made three principal changes in the tax treatment of sales or gifts of papers. First, papers, letters, memoranda and similar property held by a taxpayer whose personal efforts created the property or for whom the property was prepared or produced (or by a person who received the property as a gift from the person who created or prepared it) were no longer to be treated as capital assets. Therefore, gains on the sale of such property were to be taxed at the rates applicable to ordinary income, not capital gains. Second, the Act denied the charitable deduction for the fair market value of appreciated ordinary income property, like papers. Such a deduction was made allowable only to the extent of the cost of the property to the taxpayer, which in the case of the papers of public officials is usually nominal.

Finally, the percentage of adjusted gross income that could be deducted as a gift to the United States was raised to 50 percent. The five-year carryforward on contributions was not changed by the 1969 Act.

The effective date of the provisions in the 1969 Act relating to gifts of papers was July 25, 1969, so that under present law no deduction is allowed for the fair market value of gifts made after that date. The increase in the 30-percent limitation to 50 percent was made effective for tax years beginning in 1970.

Legislative history relating to the provisions of the 1969 Act dealing with gifts of papers

Some questions have been raised whether possible changes in the tax law with respect to gifts of papers were contemplated before May 1969. The staff is not aware that either the tax writing committees of Congress or the Treasury Department were considering changes in the tax provisions relating to the gift of papers in early 1969. It is possible, however, that there may have been some private discussions about the possibility of Congress' reviewing this area during the course of its consideration of tax reform, although the Joint Committee staff (which provides technical assistance to both the House Ways and Means Committee and the Senate Finance Committee on tax legislation) was not aware of any such discussions. That is not to say, however, that any such discussions did not take place in early 1969.

The staff believes it is meaningful to set forth a brief legislative history of the provisions in the 1969 Act dealing with gifts of papers. This is intended to show when this subject was first taken up by the House Ways and Means Committee and the course of the decisions relating to those provisions.

In January 1969, the House Committee on Ways and Means announced its intention to hold public hearings on a number of tax reform areas. The public hearings began in February and lasted to the end of April. The administration presented its proposals to the House Committee on Ways and Means on April 22, 1969; there was no provision in these proposals to change the tax treatment of gifts of papers.

The House Ways and Means Committee began discussing the tax treatment of charitable contributions as part of its executive sessions on general tax reform in early May. On May 27, 1969, it announced a set of tentative decisions, none of which included gifts of papers, but in the first public announcement on this matter, the committee did say that it was reviewing that issue. On July 25, 1969, the committee announced a second set of tentative decisions including one that deductions for gifts of papers were to be limited to cost. The Tax Reform Act of 1969 passed the House on August 7, 1969. The House bill included an effective date of July 25, 1969, for ordinary income treatment of sales of papers but a date of December 31, 1969, for the denial of the charitable deduction for the fair market value of gifts of papers. Thus, as of August 1969, an owner of papers could have reasonably believed that he would have a chance to make additional tax-deductible contributions in 1969.

The Senate Finance Committee took up tax reform after the 1969 Act passed the House. In late October 1969, the committee announced that its bill would deny the deduction for gifts of papers after December 31, 1968. On December 11, 1969, the Tax Reform Act passed the Senate containing the December 31, 1968, effective date.

The House-Senate conference compromised the difference in the effective dates of the two bills by making it July 25, 1969, the day of the original Ways and Means Committee announcement. The conference bill passed both Houses and was signed by the President on December 30, 1969. It was not until later December 1969, therefore, that an owner of papers who had not made a gift on or before July 25, 1969, knew for sure that he would not be entitled to a deduction for the value of the papers.

Introduction

B. COMMON LAW REQUIREMENTS OF A GIFT

Present tax law does not define the term "contribution" or the term "gift." However, the regulations state that "ordinarily a contribution is made at the time delivery is effected." (Reg. § 1.170-1(b)). Despite the fact that the law and regulations contain little information as to what constitutes a gift, the courts have reached basic agreement as to the elements of a valid gift and have applied these elements to income,

It should be noted that on May 22, 1969, an article appeared in the Wall Street Journal claiming that personnel in the executive departments, legislators and members of the judiciary were claiming tax deductions for gifts of their official papers to schools and colleges. The article indicated that several dozen lawmakers (both past and present at that time) were "trimmine" their taxes through deductions from gifts of their papers.

gift, and estate tax cases. See Pauley v. United States, 459 F. 2d 624 (9th Cir. 1972), and Nehring v. Commissioner, 131 F. 2d 790 (7th Cir. 1942). Although the description by various courts of the requirements for making a gift vary, the substance of these requirements is essentially the same. See Richardson v. Commissioner, 126 F. 2d 562 (2d Cir. 1942). These requirements are: (1) an intent to make a gift by the donor; (2) delivery and relinquishment of dominion and control by the donor; and (3) acceptance by the donee. See Edson v. Lucas, 40 Ě. 2d 398 (8th Cir. 1930).5

As the cases indicate, there are two basic objectives of these requirements. First, because gifts by definition are transactions which do not involve consideration, the courts want to be sure that the donor has seriously considered the nature of his action and fully intends to make a gift, Smith v. Smith, 313 S.W. 2d 753 (Mo. Ct. App. 1958). Second, the courts demand objective evidence that a gift was in fact made to the donee. See Norman Petty, 40 T.C. 521 (1963). This latter requirement can in some circumstances be met through delivery of the property to the donee, but at other times it must also involve notice to the donee and his specific acceptance of the gift property.

Generally, the burden of proof under common law that a gift has been made rests with the party asserting that the gift is valid, whether this is the donee or the donor. See Chamberlain v. Chamberlain, 287 A. 2d 530 (D.C. Ct. App. 1972). However, where the Internal Revenue Service is involved, the burden of proof is on the taxpayer to overcome the determination of the Commissioner of Internal Revenue. See Helvering v. Taylor, 293 U.S. 507 (1935). This is true whether the taxpayer is asserting the validity of a gift for income tax deduction purposes or is asserting that no gift was made for gift tax purposes. Donative intent

Donative intent is an important requirement in determining whether a valid gift has been made; see Kropf v. Anacostia Federal Savings and Loan, 170 F. Supp. 495 (D.D.C. 1959). In elaborating this requirement the courts have first stated that a donor's subjective intent must be indicated in some objective way so that some evidence of his intent exists other than his own testimony. Second, the courts have insisted that the donor intent to make a present gift, not merely a gift at some future date.

The requirement of some objective indication of the donor's intent has frequently been applied. Requiring concrete evidence that a donor really intended to part with his property protects the property of the individual from ill-founded and fraudulent claims of gift. Berl v. Rosenberg, 336 P. 2d 975 (Cal. Ct. App. 1959). Another obvious reason for this requirement is that without it donors could change their mind about a purported gift and thus make it unenforceable. The gift tax regulations also have made this requirement of an objective standard quite clear: "The application of the tax is based on the objective facts of the transfer in circumstances under which it is made, rather than the subjective motives of the donor."

In addition, these cases and others state that the donor must be competent to make a gift and the donee capable of receiving the gift, Adolph Weil, 31 B.T.A. 899 (1934), aff'd., 82 F. 2d 561 (5th Cir. 1936).

(Treas. Regs. sec. 25.2511-1(g)(1)). These objective indications are particularly important in determining what was the subject matter of the gift, 5 Mertens' Law Federal Gift and Estate Taxation, Section 34.03.

The donor's actions must also clearly show that he intended to make a present gift, not merely that he intended to make a gift at some future date:

"The transaction of gift is obviously one resting on the volition of the two parties, the donor and the donee. The mere fact of the delivery of possession does not therefore, standing alone, prove a gift, but the donor must also have intended gratuitously to pass the title to the donce. The alleged donor may have intended simply to constitute the deliveree his agent or bailee to have custody and possession of the thing delivered, but not to exercise over it the rights of ownership. Unless, therefore, the intent to give title be proven clearly the transaction will not be sustained as a gift." Ray Andrews Brown, A Treatise on the Law of Personal Property, supra, at 118.

The President's brief argues that donative intent is the paramount requirement which courts will look to in determining the validity of a gift. It is true that in virtually all cases donative intent must be established. But, as indicated in the discussions of delivery and acceptance below, the staff believes that the cases do not support the conclusion that donative intent is all that must be established. In all of the cases the staff has examined, something more than donative intent has been required. The courts have at least required that the property be delivered to the donee in a way which effectively ends the donor's dominion and control over the property, or that the donee explicitly be notified of the fact of the gift and accept it. Delivery and relinquishment of dominion and control

The requirements of delivery and relinquishment of dominion and control are closely interrelated. What is required is

"the irrevocable transfer of the present title, dominion, and control of the thing given to the donee, so that the donor can exercise no further act of dominion and control over it . . . and the delivery by the donor to the donee of the subject of the gift or of the most effectual means of commanding the dominion of it." Allen-West Comm. Co. v. Grumbles, 129 F. 287, 290 (8th Cir. 1904). Thus, the crucial requirement is that the donor relinquish dominion and control. Delivery is usually the means by which this relinquishment of dominion and control is accomplished. As the Supreme Court said in Burnet v. Guggenheim, 288 U.S. 280, 286 (1933), "a gift is not consummate until put beyond recall." A promise to make a gift, a statement of intent, or even delivery of some forms of property without consideration do not necessarily constitute a completed gift until the donor has relinquished to the donee dominion and control over the property. See Norman Petty, 40 T.C. 521 (1963); 5 Mertens' Law Federal Gift and Estate Taxation, § 534.32.