Hypothetical question. I purchased a number of foreign currency notes for $35.00 USD each from a currency dealer. Subsequently I enter into a contract to exchange those currency notes with an unrelated party for $4,000,000.00 each. I realize that there is a tax liability on the gain of 3,999,965.00 on each note. I pay the tax on that transaction. Subsequently my brother-in-law purchases 2 of the same type of currency notes for $35.00 USD per note from a currency dealer. I enter into a contract with him to purchase those 2 notes from him for $3,000,000.00 each and he sends me the 2 notes and I send him a cashiers check for $6,000,000.00. Another fact is that those notes can still be purchased on the open market for $35.00 each. Which of these statements is true. 1. My brother-in-law incurrs a tax liability on the gain of 2,999,965.00 on each note and must pay the associated tax. 2. Because I purchased the notes for $6,000,000.00 from my brother-in-law when they could still be purchased elsewhere for $35.00 each I will encounter a gift tax liability and will have exceeded my 5.4 million lifetime exemption for gifts in excess of $14,000 per year. Does the fact that I sold like notes at the same price to an unrelated party as I bought the like notes from my brother-in-law establish that I was not gifting my brother-in-law; but was conducting a legitimate sale to him, even if I never subsequently sell the notes I bought from him for $6,000,000.00.