form to substance where a decedent was in a position during his/her lifetime to manipulate the future value of an asset at death. We believe, however, that in the absence of atypical circumstances, not present here, the "instant of death" rule enunciated in United States v. Land, supra, and as we have applied it, is an objective test where the question of intent— inherent in contrived value situations-is not relevant. Petitioner also argues that the general policy of the unified gift and estate transfer tax system (enacted as a part of the Tax Reform Act of 1976, Pub. L. 94-455, sec. 2001, 90 Stat. 1520, 1846) dictates that the restrictions have an effect on the determination of value for estate tax purposes, and that since the securities law restrictions were applicable to gifts by decedent, they are required to be taken into account in this case for the sake of consistency. Petitioner's argument is not convincing. According to a Joint Committee "Blue Book", Congress believed that, as a matter of equity, transfers of the same amount of wealth should be treated substantially the same when transfers were made both during life and at death or made only upon death. Congress believed that it was desirable to reduce the disparity of treatment between lifetime transfers and transfers at death through the adoption of a single unified estate and gift tax rate schedule providing progressive rates based on cumulative transfers. See Staff of Joint Comm. on Taxation, General Explanation of the Tax Reform Act of 1976, at 525 (J. Comm. Print), 1976-3 C.B. (Vol. 2) 537. Accordingly, the Tax Reform Act of 1976 provided a rate schedule for estate and gift taxes which eliminated the preferential rate for lifetime transfers. The Tax Reform Act of 1976 also provided for a unified credit against estate and gift taxes. The amount of the estate tax was to be determined by applying the unified rate schedule to the aggregate of cumulative transfers during life and at death and then subtracting the gift taxes payable on the lifetime transfers. General Explanation, supra. The Joint Committee explanation indicates that Congress intended that the transfer tax for the same amount of property should be the same whether the property was transferred by gift or at death. There is nothing to suggest that Congress intended to ignore changes in the value of property that were brought about by death. In the instant case, the value of property transferred would depend on whether the stock was donated before death or whether the stock passed to the estate at the moment of death, since the nature of the property changed at the moment of death. The unified gift and estate transfer tax system was not, we believe, intended to affect the question of value for transfer tax purposes, whether the tax in question were to be the gift tax or the estate tax. We consequently cannot accept petitioner's argument to the contrary. To reflect the foregoing and concessions, Decision will be entered under Rule 155. ESTATE OF MILADA S. NEUMANN, DECEASED, ERIC W. SHAW, ANCILLARY ADMINISTRATOR, C.T.A., PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT Docket No. 11060-94. Filed April 9, 1996. Decedent, a nonresident alien, died in 1990. She bequeathed Edward L. Peck and Thomas V. Glynn, for petitioner. OPINION TANNENWALD, Judge: Respondent determined a deficiency in petitioner's Federal estate tax and generation-skipping transfer (GST) tax in the amount of $2,002,102.05. After concessions, the sole issue remaining for decision is whether the GST tax, under sections 2601 through 2663,1 applies to the transfer of U.S. situs property to decedent's grandchildren, where, at the time of death, decedent was a nonresident alien and regulations had not yet been promulgated under section 2663(2). All the facts have been stipulated and are so found. The stipulation of facts and the exhibits attached thereto are incorporated herein by this reference. Petitioner is the Estate of Milada S. Neumann (decedent), who died testate on July 14, 1990. Decedent was a resident and citizen of the Republic of Venezuela at the time of her death. Eric W. Shaw is the ancillary administrator and resided in Larchmont, New York, at the time the petition was filed. Decedent's will was admitted to ancillary probate by the Surrogate's Court of New York County, New York. As translated into English, the will provides in part as follows: Second: I resolve that all that is legitimate (that is fifty percent) corresponds to my only legitimate heir, my son Michal * * * Third: I instruct that after the legitimate is subtracted, all the available portion of my estate (that is fifty percent) is distributed as follows: half of the available (that is twenty-five percent) to my legitimate granddaughter Vanesa *** and the other half of the available (that is twenty five percent) to my legitimate grandson, Ricardo. Vanesa and Ricardo are the children of decedent's son, Michal. At the time of decedent's death, Michal and Ricardo were citizens and residents of Venezuela, and Vanesa was a citizen and resident of the United States. Decedent's estate included U.S. situs property consisting of works of art and other tangible personal property, and a cooperative apartment, all located in New York, New York. The estate also included foreign situs property including cash and securities located in Venezuela and in a Cayman Islands Trust. At the time of death, the U.S. situs property had a value of approximately $20 million, and the foreign situs property had a value of approximately $15 million. In the notice of deficiency, respondent determined that the testamentary transfers of property to Vanesa and Ricardo, decedent's grandchildren, were subject to the GST tax. 1 All statutory references are to the Internal Revenue Code in effect as of the date of decedent's death, and all Rule references are to the Tax Court Rules of Practice and Procedure. The generation-skipping transfer tax was first imposed by the Tax Reform Act of 1976, Pub. L. 94-455, sec. 2006, 90 Stat. 1520, 1879, but applied only to transfers in trust and not to "direct skip" transfers such as are involved herein, e.g., outright bequests by a decedent to a grandchild. See Staff of Joint Comm. on Taxation, General Explanation of the Tax Reform Act of 1976, at 565 (J. Comm. Print 1976), 1976-3 C.B. (Vol. 2) 577. Section 2614(b), enacted in 1976, made clear that the GST tax was to apply only to nonresident aliens in respect of property that would otherwise be taken into account for purposes of the estate tax to which nonresident aliens were already subject by virtue of section 2101(a). See General Explanation of the Tax Reform Act of 1976, supra at 580, 1976-3 C.B. (Vol. 2) at 592. In 1986, dissatisfied with the GST tax, Congress retroactively repealed the 1976 provisions and enacted new provisions extending the GST tax to "direct skip" transfers such as are involved herein. See Tax Reform Act of 1986, Pub. L. 99514, sec. 1431, 100 Stat. 2085, 2717.2 Section 2663, enacted in 1986, provided: The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this chapter, including (2) regulations (consistent with the principles of chapters 11 and 12) providing for the application of this chapter in the case of transferors who are nonresidents not citizens of the United States, *** No regulation in respect of generation-skipping transfers by nonresident aliens had been issued at the time of decedent's death. Notice of proposed regulations dealing with the GST tax as applied to nonresident aliens was first published in the Federal Register on December 24, 1992. See PS-73-88, 1993-1 C.B. 867, 883. Final regulations were published on December 27, 1995. T.D. 8644, 1996-7 I.R.B. 16, 44 (Feb. 12, 1996). Both the proposed and final regulations had effective dates subsequent to the date of decedent's death. Petitioner argues the GST tax should not apply to "direct skips" by nonresident aliens which occurred prior to the adoption of implementing regulations on the ground that sec 2 Sec. 2614(b) disappeared in the 1986 amendments presumably because Congress intended the limitation to be reflected in the definitions in sec. 2612. tion 2663(2) manifests the intent of Congress to require such regulations as a condition to the imposition of such tax. Respondent counters that the statute itself imposes the tax and that section 2663(2) represents simply a recognition by Congress that regulations might be needed to fill in some of the details affecting the application of the GST tax to transfers by nonresident aliens. In this connection, we note that respondent apparently determined the manner in which the GST tax should be applied herein consistently with the methodology set forth in the proposed regulations, and that petitioner does not question that methodology except in the context of the contention that such regulations were necessary to the imposition of the GST tax and that therefore the use of that methodology constituted an unjustified retroactive application of the regulations. Thus, we are called upon to resolve the following question: Are the regulations a necessary condition to determining "whether" the GST tax applies, as petitioner contends, or do they constitute only a means of arriving at "how" that tax, otherwise imposed by the statute, should be determined, as respondent contends. In support of its position, petitioner relies heavily on Alexander v. Commissioner, 95 T.C. 467 (1990), affd. without published opinion sub nom. Stell v. Commissioner, 999 F.2d 544 (9th Cir. 1993). In that case, section 465(c)(1), as then in effect, set forth specific types of transactions to which the at-risk provisions applied (see 95 T.C. at 469 n.4) and then provided in section 465(c)(3): (3) EXTENSION TO OTHER ACTIVITIES. (A) IN GENERAL.-In the case of taxable years beginning after December 31, 1978, this section also applies to each activity (i) engaged in by the taxpayer in carrying on a trade or business or for the production of income, and (ii) which is not described in paragraph (1), (D) APPLICATION OF SUBSECTION (b)(3).—In the case of an activity described in subparagraph (A), subsection (b)(3) shall apply only to the extent provided in regulations prescribed by the Secretary. [Emphasis added.] The activity of the taxpayer was not one of the specified types of transactions that fell within the scope of an activity |