Estate of Casey v. Commissioner
| Decision Date | 21 September 1989 |
| Docket Number | Docket No. 3214-88. |
| Citation | 1989 TC Memo 511,58 TCM (CCH) 176 |
| Parties | Estate of Olive D. Casey, Deceased, Carlton D. Casey, C. Lewis Casey and Robert T. Casey, Co-Executors v. Commissioner. |
| Court | U.S. Tax Court |
John E. Donaldson, 112 Crownpoint Rd., Williamsburg, Va., for the petitioners. John C. McDougal, for the respondent.
Respondent determined a deficiency of $56,532.51 in Federal estate tax due from the Estate of Olive D. Casey. After concessions, the sole issue for decision is whether decedent's son, acting pursuant to a power of attorney, was authorized to make $146,360 in gifts to decedent's three children and seven trusts established for the benefit of her grandchildren.
This case was submitted fully stipulated pursuant to Rule 122.1 The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.
Olive D. Casey ("decedent") died testate on September 9, 1983. Decedent was a resident of Williamsburg, Virginia, at the time of her death. Decedent's three children; Carlton D., C. Lewis, and Robert T. Casey, were named as co-executors of her estate. The co-executors timely filed a Federal estate tax return on the estate's behalf.
Decedent executed a power of attorney on December 26, 1973, which appointed her son, Robert T. Casey (Robert) as attorney-in-fact. This power was to remain in effect until revoked, in writing, by her and was not to terminate in the event of her disability or incapacity. The power of attorney remained in effect until decedent's death. The power of attorney authorized Robert "to transact all of my business and to do and perform all things and acts relating to my property, real, personal or mixed, which I might do." The power of attorney specified that Robert's powers included, but were not limited to, the following:
Decedent was married to Carlton C. Casey (Carlton) at all relevant times prior to his death on June 10, 1982. The combined wealth of decedent and her husband was largely titled in his name and consisted in substantial part in real estate owned by Carlton, but to which decedent had a dower interest under the laws of Virginia. Approximately 90 percent of the combined wealth of decedent and Carlton was held in his name.
In December 1974, decedent participated with her husband and children in formulating a plan for the minimization of transfer tax liability through the periodic transfer of property to their three children and seven grandchildren (the donees) in order to take advantage of the annual gift tax exclusion. To this end, a separate trust was established for the benefit of each of the seven grandchildren. Decedent was required to join in any conveyance of property held in Carlton's name to the donees in order to release her dower rights and transfer marketable title.
Pursuant to the plan, Carlton conveyed various parcels of land to the donees in 1974, 1975, 1976 and 1977. Decedent joined in each of these conveyances thereby relinquishing her dower rights. Decedent filed gift tax returns in those years for the purpose of consenting to be treated as having made one-half of each transfer. Decedent had previously joined in gifts made by her husband to their children in 1962, 1968 and 1969.
Additional conveyances were made in 1980 and 1981. However, at some time after 1977, decedent had been rendered incompetent to manage her own affairs by the effects of Alzheimer's Disease. Therefore her son, Robert, acting under authority of the power of attorney conferred on him in 1973, joined in the conveyances on decedent's behalf.
In December 1982, Robert Casey, pursuant to his power of attorney, transferred $14,000 ($1,400 per donee) from decedent's bank account to each of the ten donees. In July 1983, Robert Casey, acting in the same capacity, conveyed real property of the decedent with a value of $47,360 to the ten donees equally and drew checks payable to them in the aggregate amount of $50,000 on her bank account. In both instances, Robert Casey believed he was acting within the scope of his power of attorney and in his mother's best interest in making the gifts in question. In both 1982 and 1983, decedent's income exceeded amounts required for her support. Decedent had assets in excess of $642,000 after the 1982 and 1983 gifts. Decedent passed away on September 9, 1983 at the age of 86.
The estate tax return filed by the co-executors did not include in the gross estate the gifts made to the donees in 1982 and 1983 by Robert Casey pursuant to his power of attorney. In his notice of deficiency, respondent determined that such amounts had been improperly excluded from the gross estate.
OpinionSection 2001 imposes a tax on the taxable estates of all citizen and resident decedents. Section 2051 defines the taxable estate as the gross estate less deductions. Section 2038(a)(1) specifies that a decedent's gross estate includes all property transferred by the decedent where the enjoyment by the transferee is subject at the date of death to any change through the exercise by the decedent of a power to alter, amend, revoke or terminate the transferee's interest. Respondent contends that, in the absence of an express grant of authority, a general power of attorney does not authorize the holder of such power to make gifts of his principal's property. He thus argues that the transfers in question were revocable and thus includable in decedent's gross estate pursuant to section 2038.
Petitioner argues that Robert Casey acted within the scope of his authority under the power of attorney in making the gifts in question, with the result that the value of the purported gifts are not includable in the decedent's gross estate.
State law determines whether a decedent has an interest in particular property at the time of death. Morgan v....
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