Raymond Syufy Marcia Syufy, Plaintiffs-Counterclaim v. United States of America, Defendant-Counterclaimant-Appellant

The government appeals from a summary judgment entered in favor of taxpayers Raymond and Marcia Syufy. The district court held that I.R.C. § 1491 did not apply to Raymond Syufy’s 1972 transfer of appreciated securities to a Bahamian trust in exchange for a lifetime annuity of equal value, 651 F.Supp. 1282 . We have jurisdiction under 28 U.S.C. § 1291 , and we affirm.

FACTS AND PROCEEDINGS

On February 14, 1972, Raymond Syufy transferred 5,654 shares of Syufy Investment Corporation (“SIC”) preferred stock, valued at $2,827,000, to Wobaco Trust, Ltd. (“Wobaco”), as trustee of a Bahamian trust (the Smoller Trust), in exchange for Wobaco’s promise to pay Syufy an annuity of $268,982 per year for life. The annual payments were computed by dividing the February 14, 1972 fair market value of the transferred SIC stock by the appropriate annuity factors listed in Table A(l) of the Estate Tax Regulations § 20.2031-10. It is undisputed that the value of the annuity was equal to the value of the stock on the date of the transfer.

Wobaco, as trustee of the Smoller Trust, has made every payment required by the February 1972 annuity agreement. Pursuant to I.R.C. § 72, as interpreted by Rev.…