Redstone: Tax Court Upholds a 43 Year Old Gift Tax Deficiency

In December 2015, the Tax Court rendered its opinion on Sumner Redstone v. Commissioner of Internal Revenue. The focus of the dispute was whether a stock transfer made by Sumner Redstone in 1972 was a gift for Federal gift tax purposes, or, as Sumner Redstone claimed, was a transfer for “adequate and full consideration in money or money’s worth.”1 Following an examination that concluded in early 2013, the IRS issued against Sumner Redstone a gift tax deficiency of $737,625 for the calendar quarter ending September 30, 1972.2 In addition, the IRS determined an additional $368,813 for fraud,3 $36,881 for negligence, 4 and $184,406 for failure to file a timely gift tax return. 5 Ultimately, after a trial, the Tax Court found that the transfer was a taxable gift but Sumner Redstone was not liable for any additional penalties.