Washington (Oct. 18, 2002) -- The Tax Court has held that gifts of stock warrants to charities which turned around and sold them to a buyer who was known to the contributors did not result in income to the donors under the anticipatory assignment of income doctrine.In reaching its decision, the court concluded that the IRS was bound by a 1978 revenue ruling, which favored the taxpayers, despite the IRS argument that the ruling did not bind it and was incorrect. The court stated that while revenue rulings are not binding on the courts, "we cannot agree that the Commissioner is not bound to follow his revenue rulings in Tax Court proceedings."
The revenue in question, Rev. Rul. 78-197, has been in existence for nearly 25 years, has not been revoked or modified, and has been cited by the IRS in a number of private rulings.
Since taxpayers relied on the revenue ruling in making their charitable contribution, the court treated the ruling as a concession by the IRS that the anticipatory assignment of income doctrine did not apply in the circumstances covered by the taxpayers' case.
-- Roger Russell
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