On or about April 15, 1988, the grandparents filed separate United States Gift1994 U.S. Tax Ct. LEXIS 32">*41 (and Generation-Skipping Transfer) Tax Returns (Forms 709) for 1987 (the gift tax returns), with the Internal Revenue Service Center in Chamblee, Georgia. On the gift tax returns, the grandparents reported the gifts using the value the stock could be sold for under the buy-sell restrictions, as amended. The gift tax returns fully identified the company stock given to petitioners and other family members, as well as the basis for valuing that stock. Attached to the gift tax returns were copies of the buy-sell restrictions, as in effect at the time, and copies of the company's financial statements.

The grandparents also completed payment of gift taxes as shown on the returns with the gift tax returns in the aggregate amount of $ 1,630,851. ³

Mr. O'Neal's health began to decline in the spring of 1988, and he died on August 7, 1988. A timely Federal Estate (and Generation-Skipping Transfer) Tax1994 U.S. Tax Ct. LEXIS 32">*42 Return (Form 706) (the estate tax return) was filed on behalf of Mr. O'Neal's estate, and $ 1,632,128 of Federal estate tax was paid by the estate.

The estate tax return was selected by the Internal Revenue Service (IRS) for audit. During the audit by the IRS of the estate tax return, an examination of the gift tax returns was begun. At the time the audit of the estate tax return began, there was around 20 months remaining before the period of limitations expired as to the grandparents for assessment of gift tax and generation-skipping transfer tax with respect to the gifts.

The examining agent's first request to the executors of Mr. O'Neal's estate was that they furnish copies of: The gift tax returns, the buy-sell restrictions, the stock ownership records of the company from its inception, details concerning dispositions of stock in the company, a description of the company's business, copies of the company's corporate tax returns, and information on payment of the grandparents' 1987 gift taxes. All of this information was furnished by the executor to the IRS within 30 days of the request.

The period of limitations for gift tax and generation-skipping transfer tax as to the1994 U.S. Tax Ct. LEXIS 32">*43 grandparents for 1987 expired on April 15, 1991. At no time prior to April 15, 1991, did respondent ever assert that the grandparents had failed to properly pay their 1987 gift tax or generation-skipping transfer tax or request an extension of time for determining a deficiency in gift tax against the grandparents.

On or about September 30, 1991, approximately 1 year after the gift tax returns and the buy-sell restrictions had been provided to respondent's designated agent (the agent), the agent prepared a memorandum requesting that an expert valuation study be performed on the stock of the company. The agent suggested that a "guesstimate" of the true value of the company stock was between $ 60 million and $ 100 million. Mr. Mitchell Kaye was engaged by respondent to make an appraisal of the value of the company's stock. Mr. Kaye's report (the Kaye report), which was delivered to respondent's representative on February 6, 1992, concluded that as of November 3, 1987, the value of the company as a whole was approximately $ 92 million, with each class A share being valued at $ 375 and each class B share being valued at $ 415. Respondent used the Kaye report as the basis for calculating1994 U.S. Tax Ct. LEXIS 32">*44 petitioners' determined transferee liability.

On or about April 13, 1992, respondent sent to each petitioner two notices of transferee liability (the notices). The notices were issued to petitioners with respect to alleged deficiencies of the grandparents for gift tax, generation-skipping transfer tax, and additions to tax arising from the grandparents' gifts to petitioners on November 3, 1987. Respondent never asserted these deficiencies against the grandparents.

At the time the notices of transferee liability were sent to petitioners, the 3-year period of limitations under section 6501(a) had expired with respect to any liability for Federal gift tax or Federal generation-skipping transfer tax which might have been owed by Mr. or Mrs. O'Neal with respect to the 1987 gifts.

Respondent's motion requests entry of partial summary judgment in her favor as to the following issues: (1) Whether under section 6324(b) gift tax and generation-skipping transfer tax liability at law may properly be determined against petitioners, and (2) whether the statutory notices of deficiency issued to each petitioner were validly issued under section 6901(c) within the 1-year period after the expiration1994 U.S. Tax Ct. LEXIS 32">*45 of the period of limitations for assessment against the donors/transferors.

Petitioners' motion requests entry of summary judgment in their favor on the ground that there can be no transferee liability where collection of any transferor liability is barred by the statute of limitations. Petitioners contend that respondent must assert a deficiency against the donors before she can assert a liability for gift tax against the donees. Petitioners' second motion requests entry of summary judgment in their favor on the basis that respondent is precluded by sections 2504(c) and 2642(b) from creating multiple valuations of the same gift on the same valuation date by revaluing the stock given to petitioners by the grandparents on November 3, 1987, after the period within which to determine a deficiency against the donors has expired.

Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials of phantom factual issues. Northern Ind. Pub. Serv. Co. & Subs. v. Commissioner,101 T.C. 294">101 T.C. 294, 101 T.C. 294">295 (1993) (citing Shiosaki v. Commissioner, 61 T.C. 861">61 T.C. 861, 61 T.C. 861">862 (1974)). Because the granting of summary judgment1994 U.S. Tax Ct. LEXIS 32">*46 decides an issue against a party without a trial, it is granted cautiously and sparingly, and only after carefully ascertaining that the moving party has met all the requirements for summary judgment. Associated Press v. United States, 326 U.S. 1">326 U.S. 1, 326 U.S. 1">6 (1945); Espinoza v. Commissioner, 78 T.C. 412">78 T.C. 412, 78 T.C. 412">416 (1982).

Under Rule 121(b), summary judgment is appropriate "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Kroh v. Commissioner, 98 T.C. 383">98 T.C. 383, 98 T.C. 383">389 (1992). Summary judgment will not be used to resolve disagreements over factual issues. 101 T.C. 294">Northern Ind. Pub. Serv. Co. & Subs. v. Commissioner, supra at 295; Shioska v. Commissioner, supra at 862. Factual inferences are viewed in the light most favorable to the party opposing the motion. Blanton v. Commissioner, 94 T.C. 491">94 T.C. 491, 94 T.C. 491">494 (1990). 1994 U.S. Tax Ct. LEXIS 32">*47 The moving party bears the burden of proving that there is no genuine issue of fact and that he is entitled to judgment on the substantive issues as a matter of law. Id.; 78 T.C. 412">Espinoza v. Commissioner, supra at 416. However, the party opposing summary judgment cannot rest upon mere allegations or denials set forth in that party's pleadings, but must set forth specific facts showing that there is a genuine issue for trial. Rule 121(d); Marshall v. Commissioner, 85 T.C. 267">85 T.C. 267, 85 T.C. 267">271 (1985).

Section 2501 imposes a tax on the transfer of property by gift. An additional tax on a generation-skipping transfer is imposed by section 2601. A generation-skipping transfer is defined to include transfers of property from a grandparent to a grandchild. Secs. 2611, 2612, and 2613.

The second sentence of section 6324(b)⁴1994 U.S. Tax Ct. LEXIS 32">*49 provides that if the gift tax or generation-skipping transfer tax ⁵ is not paid when due, the donee is personally liable for the gift tax or the generation-skipping transfer tax to the extent of the value of the gift. Mississippi Valley Trust Co. v. Commissioner, 147 F.2d 186">147 F.2d 186, 147 F.2d 186">187-188 (8th Cir. 1945),1994 U.S. Tax Ct. LEXIS 32">*48 affg. a Memorandum Opinion of this Court. In Fletcher Trust Co. v. Commissioner, 141 F.2d 36">141 F.2d 36, 141 F.2d 36">40 (7th Cir. 1944), affg. 1 T.C. 798">1 T.C. 798 (1943), the Court of Appeals for the Seventh Circuit, in affirming our decision, held that the predecessor to section 6324(b) imposed liability at law upon a donee. See also Baur v. Commissioner, 145 F.2d 338">145 F.2d 338 (3d Cir. 1944), affg. 2 T.C. 1016">2 T.C. 1016 (1943). There are no requirements that respondent first assert a deficiency against a donor or that other steps be taken to collect from the donor. 147 F.2d 186">Mississippi Valley Trust Co. v. Commissioner, supra at 188; Moore v. Commissioner, 1 T.C. 14">1 T.C. 14, 1 T.C. 14">15 (1942), affd. 146 F.2d 824">146 F.2d 824 (2d Cir. 1945). ⁶ Likewise, there is no requirement under section 6324(b) that the period of limitations on assessment of tax against the donor has not expired. If the tax "is not paid when due", the donee is personally liable for the tax to the extent of the gift under section 6324(b).

The fact of the personal liability of the donee "at law" distinguishes this case and similar cases from those cases such as Commissioner v. Stern, 357 U.S. 39">357 U.S. 39 (1958), where respondent was required to show liability of the transferee in equity under State law. Cases such as Stern have no applicability to the instant case.

No matter what the reason for the donor's failure to pay the tax when due, the donee1994 U.S. Tax Ct. LEXIS 32">*50 is liable for the tax to the extent of the value of the gift. 147 F.2d 186">Mississippi Valley Trust Co. v. Commissioner, supra at 187-188. That the reason for the donor's not paying the tax when due was that no deficiency had been determined against the donor before the period of limitations for assessment against the donor expired is immaterial. The only requirement is that there be tax due with respect to the gift which remains unpaid.

Respondent relies on 1 T.C. 14">Moore v. Commissioner, supra; 141 F.2d 36">Fletcher Trust Co. v. Commissioner, supra, and similar cases to support her motion for partial summary judgment. Petitioners recognize that if the above-cited cases are still viable law, their motions for summary judgment are not well taken. However, petitioners contend: (1) That these cases were incorrectly decided and should be reconsidered in the light of statements in later cases, (2) that in the Eleventh Circuit the case of Brafman v. United States, 384 F.2d 863">384 F.2d 863 (5th Cir. 1967), is controlling under our holding in Golsen v. Commissioner, 54 T.C. 742">54 T.C. 742 (1970),1994 U.S. Tax Ct. LEXIS 32">*51 affd. 445 F.2d 985">445 F.2d 985 (10th Cir. 1971), and the holding in 384 F.2d 863">Brafman v. United States, supra, is contra to the cases relied on by respondent, and (3) that there has been a change in the statute since the cases relied on by respondent were decided, which requires that a different result be reached.

The cases relied on by respondent are well reasoned and have been the law for over 50 years. Therefore, unless we should agree with one of the other reasons petitioners argue in support of their position, we will follow those cases.

Petitioners contend that 384 F.2d 863">Brafman v. United States, supra, requires that respondent assess the tax against the transferor before asserting transferee liability, unless such assessment would be unavailing because of insolvency of the transferor. Petitioners further assert that according to 54 T.C. 742">Golsen v. Commissioner, supra, we are required to follow 384 F.2d 863">Brafman v. United States, supra.⁷

1994 U.S. Tax Ct. LEXIS 32">*52 We disagree with petitioners' interpretation of the Brafman case. We have concluded that the Brafman case is factually distinguishable and is not applicable to the present case.

The Brafman case involved a transferee collection suit against the daughter of a decedent. This suit was filed in July 1962. The decedent had died in January 1951, so that more than 10 years had expired prior to the commencement of the suit. The Government had mailed no deficiency notice to the decedent's daughter as transferee and, since the record shows the Tax Court decision was entered on June 20, 1956, based on a stipulated decision, it is obvious that the period for mailing a deficiency notice to a transferee had expired. In fact, the statement is made in the case that the Government concedes that there is no personal liability against the transferee. It appears that the Government's theory in this case was some form of trust fund theory and did not involve specific issues under either section 6901(c) or section 6324(a) (the estate tax provisions comparable to section 6324(b) with respect to gift tax). It is in this collection context that the Court held that where no assessment 1994 U.S. Tax Ct. LEXIS 32">*53 had been made against a transferor within the period of limitations for such assessment prior to the filing of a collection suit against the transferee, recovery on such collection suit was barred. The instant case involves the provisions of sections 6901(c) and 6324(b) and, therefore, the decision in the Brafman case is neither applicable nor helpful.

Section 6901⁸ provides that the liability at law or in equity of a donee shall, except as otherwise provided, be assessed, paid, and collected in the same manner as the tax with respect to which the liability was incurred. Gumm v. Commissioner, 93 T.C. 475">93 T.C. 475, 93 T.C. 475">479 (1989), affd. without published opinion 933 F.2d 1014">933 F.2d 1014 (9th Cir. 1991). The liability of the donee created under the second sentence of section 6324(b) is an independent liability and is included within the liability at law mentioned in section 6901. Mississippi Valley Trust Co. v. Commissioner, 147 F.2d 186">147 F.2d at 188; LaFortune v. Commissioner, 29 T.C. 479">29 T.C. 479, 29 T.C. 479">488-490 (1957), affd. 263 F.2d 186">263 F.2d 186, 263 F.2d 186">194 (10th Cir. 1958). Section 6901(c)1994 U.S. Tax Ct. LEXIS 32">*54 extends the period of limitations for assessment of a deficiency against the donee to 1 year after the expiration of the period of limitations against the donor.

1994 U.S. Tax Ct. LEXIS 32">*55 Section 6501(a) provides the general rule that a deficiency in gift tax or generation-skipping transfer tax must be assessed against the donor within 3 years after the Federal gift tax return is filed. In the present case, since the gift tax returns were filed on or about April 15, 1988, the period of limitations for assessment of gift taxes or generation-skipping transfer taxes against the grandparents expired on or about April 15, 1991. Therefore, according to section 6901(c) the period of limitations for assessment of the gift tax against a donee of a gift from the grandparents would expire on or about April 15, 1992. Since the notices were issued on or about April 13, 1992, they were validly issued in accordance with section 6901(c).

Petitioners contend that the amendment to section 6324(b) made by section 102 of the Federal Tax Lien Act of 1966 (the 1966 Act), Pub. L. 89-719, 80 Stat. 1125, 1132, made it clear that a donee's liability under section 6324(b) is limited to amounts determined against the donor during the period during which respondent can collect the tax from the donor under the general statute of limitations on assessment and collection. According to petitioners' 1994 U.S. Tax Ct. LEXIS 32">*56 argument, once the 3-year period of limitations for assessing the gift tax against the donor under section 6501 expires, respondent is not allowed to determine the tax against the donee under section 6324(b), unless she has made a determination against the donor during the period of limitations applicable to the donor.

Section 6501(a) sets forth the general rule that any assessment must be made within 3 years after the return was filed. After an assessment is made, according to section 6502(a), entitled Collection After Assessment, collection of the tax assessed can be by levy so long as the levy is made or begun within 6 years of the assessment. ⁹ So there are two statutes of limitations. The first is the 3-year statute of limitations concerning assessment and the second is the 6-year statute of limitations for collection after assessment.

1994 U.S. Tax Ct. LEXIS 32">*57 Prior to the 1966 Act, the first sentence of section 6324(b) read as follows:

Except as otherwise provided in subsection (c) * * * and subsection (d) * * *, the gift tax imposed by chapter 12 shall be a lien upon all gifts made during the calendar year, for 10 years from the time the gifts are made. * * *

Both the House Ways and Means Committee and the Senate Finance Committee reported that the 1966 Act adds a phrase to section 6324 making it clear that although "these special liens" normally terminate after 10 years, they will terminate earlier if the estate or gift tax liability becomes unenforceable by reason of the running of the statute of limitations on collection, which the reports point out is usually a 6-year period after assessment. H. Rept. 1884, 89th Cong., 2d1994 U.S. Tax Ct. LEXIS 32">*58 Sess. 12-13 (1966), 1966-2 C.B. 815, 823; S. Rept. 1708, 89th Cong., 2d Sess. 14-15 (1966), 1966-2 C.B. 876, 885-886. ¹⁰

1994 U.S. Tax Ct. LEXIS 32">*59 In our view, the amendment by the 1966 Act to section 6324(b) was meant to clarify that once an assessment concerning a gift tax has been made and the period of limitations for collection under section 6502(a) has expired, respondent's lien provided for in section 6324(b) no longer exists. The statute of limitations referred to in the amendment is the statute of limitations for collection under section 6502(a) and not, as petitioners assert, the statute of limitations for assessment under section 6501. This case is not an action by the Government to enforce a special gift tax lien, but a suit by petitioners to contest notices of transferee liability under section 6901(c). Thus, the controlling limitations period is the one prescribed in section 6901(c)(1), irrespective of the duration of the special gift tax lien.

In petitioners' second motion, petitioners contend that section 2504(c)¹¹ precludes respondent from revaluing the gifts made by the grandparents since: (1) The period of limitations for assessment against the grandparents expired before the notices of transferee liability were mailed, and (2) the gift tax shown on the gift tax returns as owed by the grandparents has1994 U.S. Tax Ct. LEXIS 32">*60 been assessed and paid.

The gift tax is a cumulative tax. According to section 2502, the amount of gift tax imposed by section 2501 for a calendar year is equal1994 U.S. Tax Ct. LEXIS 32">*61 to the excess of the following: (1) The tentative tax computed on the aggregate sum of taxable gifts for such calendar year and for each preceding calendar period, over (2) the tentative tax on the aggregate sum of the taxable gifts for each preceding calendar period. Therefore, the valuation given a gift in a prior year has an effect on the gift tax owed in a subsequent year.

Section 2504 gives instructions on how to calculate the amount of the taxable gifts for the preceding calendar periods. In making this calculation, section 2504(c) restricts changing the valuation employed to compute the gift tax on a prior gift. According to section 2504(c), if two requirements are met, the value of the preceding year's gift is the value that was used to compute the gift tax for such gift. The two requirements are as follows: (1) The statutory period for assessment of the gift tax on the prior gift has expired, and (2) the gift tax has been assessed or paid for the prior gift.

Section 2504(c) was originally enacted as part of the Internal Revenue Code of 1954 (1954 Code), ch. 736, 68A Stat. 405. Prior to the 1954 Code, respondent was prohibited from assessment and collection of gift 1994 U.S. Tax Ct. LEXIS 32">*62 tax for a closed year, but could increase the value of gifts made in a closed year to correct the gift tax liability for open years. Estate of Smith v. Commissioner,94 T.C. 872">94 T.C. 872, 94 T.C. 872">875 (1990) (citing Commissioner v. Disston, 325 U.S. 442">325 U.S. 442 (1945)). Respondent's potential to revalue a prior gift at the time of a later gift created a sense of uncertainty, which section 2504(c) was designed to alleviate. 94 T.C. 872">Estate of Smith v. Commissioner, supra at 875. The legislative history clearly sets forth the purpose of section 2504(c). The report of the House Ways and Means Committee states:

Due to the cumulative nature of the gift tax and the progression in gift-tax rates, the tax liability for gifts in a particular year is dependent on the correct valuation of gifts in prior years. Therefore, a taxpayer's gift tax liability for 1953, for example, might be dependent on whether the valuation of a gift made in 1935 is larger, smaller, or the same as previously reported, although the statute of limitations has run on the tax paid on the 1935 transfer.

It is believed that once the value of a gift has1994 U.S. Tax Ct. LEXIS 32">*63 been accepted for purposes of the [gift] tax by both the Government and the taxpayer, this value should be acceptable to both in measuring the tax to be applied to subsequent gifts. For this reason the bill provides that the value of a gift as reported on a taxable gift tax return for a prior year is to be conclusive as to the value of the gift (after the statute of limitations has run) in determining the tax rate to be applied to subsequent gifts. This substantially increases certainty in the gift tax area. [H. Rept. 1337, 83d Cong., 2d Sess. 93-94 (1954)].

The report of the Senate Finance Committee states:

Under present law, the amount of gifts made in a prior year may be adjusted for the purpose of computing the tax for a current year, even though the statutory period within which an additional tax might be assessed for the prior year has expired. Subsection (c) of this section will prevent the value of a gift from being adjusted under such circumstances in cases where a tax was paid for the prior year in question. This subsection, however, will not prevent such an adjustment if no tax was paid for the prior year and, in any case, will not prevent adjustment where issues1994 U.S. Tax Ct. LEXIS 32">*64 other than valuation of property are involved. [S. Rept. 1622, 83d Cong., 2d Sess. 479 (1954)].

Section 2504(c) does not limit how respondent values a gift of the current year. It limits the valuation for a prior year where the time within which "a tax may be assessed under this chapter" for the year has expired. Here, we have held that the time to assess the gift tax for the year would have not expired as to the transferee. Section 2504(c) limits how a gift from a preceding calendar year is valued for assessment of the gift tax for a subsequent calendar year. In the present case, the asserted deficiency is for the 1987 calendar year, and the gifts took place during 1987. Since the gifts are not gifts from a calendar period preceding the year in issue, the valuation of the gifts is not restricted by section 2504(c).

Based on our above conclusions, we hold that section 6324(b), creates gift tax and generation-skipping transfer tax liability of petitioners personally at law and does not require that respondent assert the liability against either the donors or the donees prior to the expiration of the 3-year limitations period for assessment against the donors. We also hold1994 U.S. Tax Ct. LEXIS 32">*65 that in accordance with section 6901(c), respondent properly sent notices of liability to petitioners during the 1 year following the expiration of the period of limitations against the grandparents. Further, we hold that respondent's determination has not violated section 2504(c). Therefore, based on our conclusions, we grant respondent's motion for partial summary judgment and we deny petitioners' cross-motion for summary judgment and petitioners' second motion for summary judgment.

An appropriate order will be issued.