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Estate of Casey v. Commissioner Judge: Phillips

Estate of Casey v. Commissioner Judge: Phillips. 948 F.2 nd 895 Code Section 2038 Petra Durova. Facts: Olive Casey, a resident of Virginia, died in 1989. Married to Carlton Casey until his death in 1982. 3 sons- Carlton, Lewis and Robert.

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Estate of Casey v. Commissioner Judge: Phillips

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  1. Estate of Casey v. CommissionerJudge: Phillips 948 F.2nd 895 Code Section 2038 Petra Durova

  2. Facts: • Olive Casey, a resident of Virginia, died in 1989. • Married to Carlton Casey until his death in 1982. • 3 sons- Carlton, Lewis and Robert. • 90% of assets held in Carlton’s name, Olive had dower interest. • 1962, 1968, 1969 Carlton transferred parcels to sons to eliminate estate tax, Olive joined to release her dower interests. • 1973 Olive appointed Robert her attorney-in-fact (valid when Olive incompetent).

  3. Power of Attorney authorized Robert to: "to lease, sell, grant, convey assign, transfer, mortgage and set over to any person, firm or corporation and for such consideration as he may deem advantageous, any and all of my property ... and "to accept and receive any and all consideration payable to me on account of any such lease, sale, conveyance, transfer or assignment and to invest and reinvest the proceeds derived therefrom." However, the instrument nowhere expressly conferred any power “to make gifts”.

  4. Facts: • 1974-1977 Carlton followed his plan to minimize his estate tax • Yearly transfers of property to children and grandchildren’s trusts. • 1980 Olive incompetent due to Alzheimer’s disease, Robert joined Carlton in execution of additional transfers in 1980 and 1981 as Olives attorney-in-fact. • Carlton dies 1982 • Robert transferres money to donees, including himself in 1982 and 1983. • 1989- Commissioner claims 1982 and 1983 gifts are voidable transfers • No express grant of authority to make gifts on Olives behalf. • Results in deficiency assessment.

  5. Tax Court Reasoning: • Robert had power to make gifts to family as it was within the scope of the power granted. • Olives established pattern of giving by joining Carlton in transferring property to kids. Decision: • Tax Court held that Robert was authorized to make the gifts in question on decedent’s behalf. • Results in no tax deficiency.

  6. Commissioner appealed >> U.S Court of Appeals Reasoning: 1) • VA court strictly limits the authority of agent to letter of his instructions “bright line rule”. • No gift power expressed in letter. 2) • Of four principal purposes for asset transfer- sale, lease, mortgage and gift- all but gift are expressly authorized. • Intentional omission-indicator of her intent. 3) • None of Olives previous gifts were gifts of her own property. Only release dower interest. While Carlton alive, different financial situation.

  7. Conclusion: U.S Court of Appeals agreed with Commissioner and reversed the decision of the Tax Court. It resulted in deficiency to the Casey estate tax.

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