62 STAT.] SEC. 373. TECHNICAL AMENDMENT. Section 1004 (c) of the Internal Revenue Code is hereby amended to read as follows: "(c) EXTENT OF DEDUCTIONS. -The deductions provided in subsec- tion (a) (2) or (3) or in subsection (b) shall be allowed only to the extent that the gifts therein specified are included in the amount of gifts against which such deductions are applied." SEC. 374. GIFT OF HUSBAND OR WIFE TO THIRD PARTY. Section 1000 of the Internal Revenue Code (relating to imposition of gift tax) is hereby amended by adding at the end thereof a new subsection to read as follows: "(f) GFT OF HUSBAND OR WIFE TO THIRD PARTY.- "(1) CONSIDERED AS MADE ONE-HALF BY EACH.- "(A) In General. - A gift made after the date of the enactment of the Revenue Act of 1948 by one spouse to any person other than his spouse shall, for the purposes of this chapter, be considered as made one-half by him and one-half by his spouse, but only if at the time of the gift each spouse is a citizen or resident of the United States. This subpara- graph shall not apply with respect to a gift by a spouse of an interest in property if he creates in his spouse a power of appointment, as defined in subsection (c) of this section, over such interest. For the purposes of this subsection an 53 Stat. 148. 26U.. c. 1004(c). 53 Stat. 144; 58 Stat. 71. 26 U. S. C. §1000; Supp. I , § 1000. Ante, p. 125. 80TH CONG., 2D SESS.-CH. 168-APR. 2, 1948 "(F) Community Property. - "(i) A deduction otherwise allowable under this para- graph shall be allowed only to the extent that the transfer can be shown to represent a gift of property which is not, at the time of the gift, held as community property under the law of any State, Territory, or possession of the United States, or of any foreign country. "(ii) For the purposes of clause (i), community prop- erty (except property which is considered as community property solely by reason of the provisions of clause (iii)) shall not be considered as 'held as community prop- erty' if the entire value of such property (and not merely one-half thereof) is treated as the amount of the gift. "(iii) If during the calendar year 1942 or after the date of the enactment of the Revenue Act of 1948, property held as such community property (unless considered by reason of clause (ii) as not so held) was by the donor and the donee spouse converted, by one transaction or a series of transactions, into separate property of the donor and such spouse (including any form of co-ownership by them), the separate property so acquired by the donor and any property acquired at any time by the donor in exchange therefor (by one exchange or a series of exchanges) shall, for the purposes of clause (i), be con- sidered as 'held as community property'. "(iv) Where the value (at the time of such conversion) of the separate property so acquired by the donor exceeded the value (at such time) of the separate prop- erty so acquired by such spouse, the rule in clause (iii) shall be applied only with respect to the same portion of such separate property of the donor as the portion which the value (as of such time) of such separate property so acquired by such spouse is of the value (as of such time) of the separate property so acquired by the donor."
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