Estate of Bruning v. C.I.R.
Decision Date | 25 October 1989 |
Docket Number | No. 88-2547,88-2547 |
Citation | 888 F.2d 657 |
Parties | -5950, 89-2 USTC P 13,821 ESTATE OF Francis L. BRUNING, Deceased, Ilse M. Bruning, Personal Representative, Petitioner-Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant. |
Court | U.S. Court of Appeals — Tenth Circuit |
James W. Buchanan, III, of Buchanan, Thomas & Johnson, P.C., Lakewood, Colo. (Rick Budd and Benjamin Spitzer of Budd and Spitzer, P.C., Denver, Colo., and Susan Buchanan of Buchanan, Thomas & Johnson, P.C., Lakewood, Colo., with him on the brief), for petitioner-appellee.
Nancy G. Morgan, Attorney, Tax Div., Dept. of Justice, Washington, D.C. (William S. Rose, Jr., Asst. Atty. Gen., Gary R. Allen, Richard Farber, and Raymond W. Hepper, Attorneys, Tax Div., Dept. of Justice, Washington, D.C., on the brief), for respondent-appellant.
Before LOGAN, SETH, and MOORE, Circuit Judges.
Petitioner Ilse M. Bruning, the personal representative of the estate of Francis L. Bruning (decedent), brought this action against the Commissioner of Internal Revenue in the Tax Court seeking a redetermination of a deficiency in estate tax asserted by the Commissioner. Deciding the case on stipulated facts, the Tax Court held that petitioner is entitled to an unlimited marital estate tax deduction, because the trust established under the will of the decedent did not contain a maximum marital deduction formula clause within the meaning of Sec. 403(e)(3) of the Economic Recovery Tax Act of 1981 (ERTA), Pub.L. No. 97-34, 95 Stat. 172, 305. Estate of Bruning v. Commissioner, 54 T.C.M. (CCH) 1469 (1988). On appeal, the Commissioner argues petitioner should have been permitted to claim only a limited marital deduction. For the reasons set forth below, we affirm.
Decedent died testate on April 22, 1982. On March 2, 1981, he had executed his will, bequeathing the residue of his estate to a trust. Neither the trust nor the will were amended during decedent's lifetime. The trust contained the following provision:
95 Stat. at 305 ( )(emphasis added).
Petitioner filed a federal estate tax return taking an unlimited marital deduction and indicating that no taxes were due. The Internal Revenue Service issued a notice of deficiency based upon its determination that the decedent's will contained a maximum marital deduction formula clause within the meaning of Sec. 403(e)(3) which had not been amended.
The issue before the Tax Court, and now before us, is whether Sec. 403(e)(3) precludes the estate from qualifying for an unlimited marital deduction. The marital deduction provisions in decedent's will provide that his surviving spouse is to receive "the lesser of (1) an amount equal in value to the maximum marital deduction allowable ... or (2) the amount which after taking into account all credits, exemptions and deductions, other than the marital deduction, ... will result in the elimination of all federal estate tax in Settlor's estate." Based on this language, the Tax Court determined that the decedent's intent was to minimize estate taxes, not maximize the marital deduction and, therefore, that Sec. 403(e)(3) does not limit the marital deduction. 54 T.C.M. (CCH) at 1470-71.
The purpose of Sec. 403(e)(3) is to preserve rather than defeat the testator's intent. Liberty Nat'l Bank & Trust Co. v. United States, 867 F.2d 302, 304 (6th Cir.1989). To determine whether the limitation of Sec. 403(e)(3) applies, the will and trust must be examined to determine decedent's intent at the time of execution of the will. Id. Intent is to be determined from the entire will. Wright v. Poudre...
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