Jeffrey N. Pennell (Emory) has published Wealth Transfer Taxation: 'Transfer' Defined, 128 Tax Notes 615 (Aug. 9, 2010). Here is the abstract:

To be valid under the U.S. Constitution, the estate, gift, and generation-skipping taxes must be imposed on the transfer of wealth. The most significant flaw in these wealth transfer taxes is the lack of a coherent definition of the word ‘‘transfer.’’ For example, a taxpayer conveys $100x of marketable assets into a discount entity in exchange for interests that contain restrictions that yield an appraised value of $60x. Does the differential constitute a transfer that could be subject to gift tax? Historically, taxpayers would ask, ‘‘A gift to whom?’’ suggesting that there cannot be a gift if, for example, three individuals each place $100x of marketable assets into a discount entity and each takes back one-third of the ownership interests, each third appraised at $60x. Taxpayers argue that each 40 percent reduction in net worth did not enrich anyone — and thus that there is no transferee of the $40x that each taxpayer lost, and that there is therefore no transfer. And without a transfer, there can be no gift, and thus no gift tax. This report attempts to understand the proper meaning of transfer in this context.

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