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of <h1>Gift Tax Guidelines Updated for Firm Transfers: New Partners, Profit-Sharing Changes, and Sole to Partnership Conversion.</h1> Attention is drawn to the Board's Instruction No. 942 and its modifications regarding gift tax considerations when interests in a firm are transferred. Paragraph 3 of Instruction No. 1063 clarifies that Gift Tax Officers should evaluate the adequacy of consideration, which may include capital or labor contributions, before imposing gift tax. The Estimates Committee noted interpretation issues, suggesting further clarification. It is emphasized that gift tax applies when new partners join a firm, profit-sharing ratios change, or a sole proprietorship converts to a partnership, unless covered by section 5(1)(xiv) and adequate consideration is provided. Officers are instructed to adhere to these guidelines.
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