Estate of Kalahasthi v. U.S.

Decision Date07 July 2008
Docket NumberCase No. CV 07-05771 MMM (RCx).
PartiesESTATE OF Prasanna KALAHASTHI, Nadadur S. Kumar and Vartkes Kassouni, as Co-Administrators, Plaintiff, v. UNITED STATES of America, Defendant.
CourtU.S. District Court — Central District of California

Elliott H. Kajan, Lydia Bottome Turanchik, Kajan, Mather and Barish, Beverly Hills, CA, for Plaintiff.

Richard G. Stack, AUSA, Office of U.S. Attorney, Los Angeles, CA, for Defendant.


MARGARET M. MORROW, District Judge.

On September 5, 2007, the Estate of Prasanna Kalahasthi filed this action challenging the government's refusal to tax Kalahasthi's estate at the reduced rate set forth in 26 U.S.C. § 2201(b)(2) and (c). Kalahasthi's husband was a passenger on one of the airplanes that was hijacked on September 11, 2001 and crashed into the World Trade Center. Five weeks after his death, Kalahasthi took her own life. Plaintiff claims that Kalahasthi should be considered a "victim" of the September 11, 2001 terrorist attacks as defined in 26 U.S.C. § 692(d)(4) and that it should be deemed eligible for reduced estate tax rates as a result. On May 9, 2008, plaintiff filed a motion for summary judgment. The government opposed the motion and filed a cross-motion on June 4, 2008. The question presented by both motions is whether Kalahasthi is properly considered a "victim" as that term is used in the statute. The facts relevant to this legal issue are undisputed.

A. Undisputed Facts

Pendyala Vamsikrishna and Kalahasthi were married on January 25, 1999.1 At some point thereafter, they moved to the United States.2 Vamsikrishna was a software engineer employed by DTI in Fremont, California.3 Kalahasthi was a licensed dentist in India, but she could not practice in the United States without significant additional schooling.4 As a consequence, she enrolled as a graduate student at the University of Southern California ("USC") and remained a student there until she died.5

On September 11, 2001, Vamsikrishna was returning to Los Angeles from a business trip to Boston, Massachusetts. He was a passenger on American Airlines Flight 11 when it was hijacked and crashed into the north tower of the World Trade Center in New York. Vamsikrishna was killed immediately in the crash.6

Kalahasthi was devastated by her husband's death.7 On October 17, 2001, she purchased a length of rope from Home Depot and on October 19, committed suicide by hanging herself.8 Kalahasthi left two detailed suicide notes. The first, written to her brother, stated:

"I love Vamsi [Vamiskrishna] too much and the pain is excruciating[.] I am not able to deal with it. If there exists any form after this life I will be with him[;] if not at least it will relieve me from this deep pain."9

The second note was written to Vamsikrishna's brother, and stated: "I am doing this since I love Vamsi too much and I don't want to make my life without him."10 Kalahasthi also left an audio recording for her family in which she stated:

"I can't live without Vamsi, Sekhar. It's very tough for me. I loved him too much. I don't feel like ... I don't feel like living for anyone. I'm sorry, but I loved him too much. And the pain ... just can't take the pain. Hurts me too much."11

At the time of her death, Kalahasthi was a lawful resident alien of the United States and lived in California.12 After Nadadur S. Kumar and Vartkes Kassouni were appointed co-executors of the estate, the probate court found that Kalahasthi's suicide notes were holographic wills.13 The proceeds of the estate were ultimately split between her family and Vamsikrishna's family.14 Plaintiff computed the estate tax due using the reduced rates set forth in 26 U.S.C. § 2201(b)(2). After examining the estate tax return, the IRS determined that plaintiff was not entitled to take advantage of the reduced rates, and assessed a deficiency of $669,552.68. Plaintiff paid the deficiency in October 2004. Thereafter, on November 21, 2005, plaintiff filed a claim for refund from the IRS, arguing that it should have been taxed at the reduced rate. On May 22, 2007, the IRS denied the claim, and on September 5, 2007, plaintiff instituted this suit.15

B. Disputed Facts

Although the parties dispute certain facts, none is relevant to resolution of the legal question presented by the cross-motions. The facts in dispute relate, inter alia, to the closeness of the bond between Kalahasthi and Vamsikrishna, and the extent of Kalahasthi's suffering as a result of her husband's death. Plaintiff asserts, for example, that Kalahasthi and Vamsikrishna were "an extraordinarily happy couple" and that Kalahasthi considered Vamsikrishna her "soulmate."16 Plaintiff notes that Vamsikrishna called Kalahasthi as he was boarding Flight 11, and left a voicemail stating that he would be home by lunchtime. Plaintiff contends that Kalahasthi listened to this message "over and over and over again" after September 11.17 The government purports to "dispute" these facts; in reality, however, it objects to most of them as "irrelevant and immaterial."18 Apart from a minor dispute regarding the amount of Kalahasthi's telephone bill,19 the government's only substantive dispute concerns plaintiff's assertion that "[Kalahasthi's] suicide was a direct result of her husband's death."20 The government contends this is a legal conclusion, and posits an alternate chain of causation in which Kalahasthi's depression following Vamsikrishna's death was an intervening factor contributing to her suicide.21

The parties also dispute the proper characterization of certain actions of the state probate court. Plaintiff asserts that the probate judge "determined that [Kalahasthi] was a victim of the September 11, 2001 tragedy."22 The government counters that the probate court also stated that Kalahasthi "died as a result of an alleged suicide in Los Angeles," undermining plaintiff's suggestion that the court found the terrorist attacks were the direct cause of her death. The government also notes that the language cited by plaintiff was not drafted by the probate judge, but by counsel for one of the administrators of the estate after a non-adversarial hearing. Finally, the government notes that division of the estate—which was the purpose of the probate proceeding—did not require that the court determine the cause of Kalahasthi's death.23

Plaintiffs assertion that the state court determined Kalahasthi was a victim of the terrorist attacks misrepresents the import of court's holding. Even were this not true, however, and even had the probate court unequivocally determined that Kalahasthi was a victim of the attacks, the law is clear that such a state court determination is not binding for purposes of assessing federal estate taxes. See United States v. Boulware, 384 F.3d 794, 804 (9th Cir.2004) ("It is clear, therefore, that with regard to the calculation of estate taxes, federal courts are not bound by the judgments of a state probate court," citing Estate of Rapp v. Comm'r, 140 F.3d 1211, 1215-16 (9th Cir.1998)). For both reasons, the court accords no weight to plaintiff's assertion that the probate court determined that Kalahasthi was a victim of the terrorist attacks.24

Finally, plaintiff asserts that Kalahasthi and Vamsikrishna paid no income tax in 2001. This is not disputed.25 Plaintiff suggests that the reason neither paid tax in 2001 was that, as victims of the September 11 attacks, their income tax liability was forgiven.26 The government disputes this. The government acknowledges that it did not assess income tax against Vamsikrishna because he was clearly a "victim" of the terrorist attack. It asserts that the same is not true of Kalahasthi, because Vamsikrishna's wages accounted for nearly all of the taxable income reported on the couple's joint return, and consequently it "did not allocate any of the tax liability [on this income] to Kalahasthi."27 In the end, both parties acknowledge that the outcome of their motions turns on proper interpretation of "specified terrorist victim" as that term is used in 26 U.S.C. § 692(d)(4), and that the essential facts relevant to that inquiry are undisputed.28 They agree the question is whether the statute contemplates that a spouse who commits suicide in response to the death of her husband in a terrorist attack can be considered a victim of the attack for tax purposes.29

A. Legal Standard Governing Summary Judgment

A motion for summary judgment must be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED.R.Civ.PROC. 56(c). A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the moving party will have the burden of proof on an issue at trial, the movant must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. On an issue as to which the nonmoving party will have the burden of proof, however, the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party's case. See id. If the moving party meets its initial burden, the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, "specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In judging evidence at the summary judgment stage, the court does not make credibility determinations or...

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