Also known as: adequate consideration · full consideration · sufficient consideration
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
An objective valuation standard applied to transfers of property. A transfer qualifies as a bona fide sale when the transferor receives property or money equal in value to the property transferred. The standard determines whether the transfer depletes the transferor's estate or triggers gift tax liability.
An objective valuation standard applied to transfers of property. A transfer qualifies as a bona fide sale when the transferor receives property or money equal in value to the property transferred. The standard determines whether the transfer depletes the transferor's estate or triggers gift tax liability.
Select any source to read its text and confirm it supports the definition.
Value or benefit exchanged in a transaction that the law deems sufficient to support an enforceable agreement or valid share issuance. The standard confirms that each party has restricted its freedom or provided something of legal value in return.
Select any source to read its text and confirm it supports the definition.
Value or benefit exchanged in a transaction that the law deems sufficient to support an enforceable agreement or valid share issuance. The standard confirms that each party has restricted its freedom or provided something of legal value in return.
Each sense below has its own examples, sources, and questions.
Arthur Abrams transferred his vacation home to his adult daughter during his lifetime. In exchange he received cash equal to the home's appraised market value plus a promissory note secured by other assets. At his death the executor excluded the home from the augmented estate because the transfer met the adequate and full consideration test.
Amber Alonzo attempted to place an expectancy in a yet-to-be-formed corporation into a trust for her children. The court held the transfer lacked adequate and full consideration because the expectancy had no present value and no bargained-for exchange occurred.
Ariana Azizi's university maintained racially discriminatory policies while claiming tax-exempt status. The Court ruled the institution did not qualify because its practices were not supported by adequate and full consideration in a commercial sense.
Property transferred during marriage is excluded from the augmented estate to the extent the decedent received adequate and full consideration in money or money's worth. The exclusion prevents inclusion of arm's-length sales that do not deplete the estate.
Supporting sources
The excess value of the property transferred over the value of the consideration received is treated as a taxable gift under the objective test of I.R.C. § 2512(b).
Supporting sources
Alexandra Armstrong sold a parcel subject to a racial covenant. The buyer later sought to enforce the restriction against a subsequent purchaser. The Court held the covenant unenforceable because the original transaction did not involve adequate and full consideration supporting the restraint.
Amelia Amari's company owned Grand Central Terminal and challenged landmark restrictions as a taking. The Court analyzed whether the regulatory burden was offset by adequate and full consideration in the form of transferable development rights.
Albert Allen and his partner orally agreed that one would perform household services in exchange for a share of property appreciation. The court enforced the agreement because contributions to the relationship supplied adequate and full consideration.
Yes. When the board determines before issuance that the consideration received is adequate, that determination is conclusive on whether the shares are validly issued, fully paid, and nonassessable.
Supporting sources
Yes. Corporate statutes permit issuance of shares for any tangible or intangible property or benefit to the corporation, including patents and contracts for services, provided the board determines the consideration adequate.
Supporting sources
…that, in recent years, large numbers of historic structures, landmarks, and areas have been destroyed[^maj-2] without adequate consideration of either the values represented therein or the possibility of preserving the destroyed properties for use in economically productive ways.[^maj-3] The second is a widely shared belief that…