Transcript Arnes v. United States Arnes v. Commissioner Judges: Hug, Fay

Estate of Casey
v. Commissioner
Judge: Phillips
948 F.2nd 895
Code Section 2038
Petra Durova
Facts:
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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).
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”.
Facts:
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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.
Tax Court
Reasoning:
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Robert had power to make gifts to family as it was within the
scope of the power granted.
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Olives established pattern of giving by joining Carlton in
transferring property to kids.
Decision:
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Tax Court held that Robert was authorized to make the gifts in
question on decedent’s behalf.
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Results in no tax deficiency.
Commissioner appealed >> U.S Court of Appeals
Reasoning:
1)
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VA court strictly limits the authority of agent to letter of his instructions
“bright line rule”.
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No gift power expressed in letter.
2)
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3)
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Of four principal purposes for asset transfer- sale, lease, mortgage and giftall but gift are expressly authorized.
Intentional omission-indicator of her intent.
None of Olives previous gifts were gifts of her own property. Only release
dower interest. While Carlton alive, different financial situation.
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.