Gaskill v. United States

• Decision Date: 31 January 1983
• Docket Number: Civ. A. No. 82-1160.
• Citation: 561 F. Supp. 73
• Parties: Glen C. GASKILL, Executor of the Estate of Sophie B. Gaskill, Deceased, Plaintiff, v. The UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of Kansas

561 F. Supp. 73

Glen C. GASKILL, Executor of the Estate of Sophie B. Gaskill, Deceased, Plaintiff, v. The UNITED STATES of America, Defendant.

Civ. A. No. 82-1160.

United States District Court, D. Kansas.

January 31, 1983.

Jack E. Dalton, Mangan Dalton & Trenkle Chartered, Dodge City, Kan., for plaintiff.

Jim J. Marquez, U.S. Atty., Topeka, Kan., Glen R. Dawson, Trial Atty., Tax Div., Dept. of Justice, Washington, D.C., for defendant.

OPINION AND ORDER GRANTING SUMMARY JUDGMENT TO PLAINTIFF

THEIS, District Judge.

This is a suit by Glen C. Gaskill, as Executor of the Estate of his mother, Sophie B. Gaskill, to force the refund of $90,306.62 in estate taxes that were paid on or about December 26, 1979, because of the allegedly erroneous inclusion in Sophie Gaskill's gross estate of certain life estate interests as general powers of appointment under 26 U.S.C. § 2041. The parties agree that no material facts are in dispute, as the proper resolution of the case depends only on whether those life estate interests are properly categorized as pure life estates or as general powers of appointment. The case is currently before the Court on cross motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.

I. Factual Background

Sophie Gaskill's husband, E.L. Gaskill, died testate on November 13, 1952. His will directed that his wife take the house, furniture, fixtures, utensils, and family automobile in fee simple, along with an undivided one-half interest in all of the residue of his estate. Debts, taxes, and administrative expenses were directed to be paid from the remaining half of the residue, and the remainder of that half was disposed of by the following clauses of the will:

"III. If my said wife survive me I give, devise and bequeath her a life estate in and to all of the rest, residue and remainder of my estate, real, personal and mixed, wheresoever situated or located, with full rights, powers and authorities to sell, convey, exchange, lease for oil and gas and otherwise, assign, transfer, deliver and otherwise dispose of any part or all of said estate during her lifetime, all without authority of or order from any Court.

"IV. Subject to said life estate I give, devise and bequeath all of the remainder of my estate, or if my wife not survive me then all of the rest, residue and remainder of my estate after payment of all items in Paragraph II hereof, unto my children, to-wit:

Blanche McCue, my daughter, Moscow, Kansas; Gerald E. Gaskill, my son, Hugoton, Kansas; Glen V. Gaskill, my son, Moscow, Kansas; Lloyd A. Gaskill, my son, Moscow, Kansas; Evelyn Gaskill, my daughter, Elkhart, Kansas; and Mildred Greenwood, my daughter, Moscow, Kansas,

equally, share and share alike, in fee simple, subject only to the following provisions, to-wit:

Should any of my said children precede me in death then their share and portion of said estate shall descend to their children, issue of their body, share and share alike if more than one. If such deceased child leave no child or children, issue of his or her body, then such share shall pass to the surviving beneficiaries under this residuary clause, to be divided among them equally, share and share alike, per stirpes and not per capita."

According to Schedule H of Sophie Gaskill's federal estate tax return, the property in which she received the interest specified in clause III of E.L. Gaskill's will consisted of fourteen quarter-sections of land. The interest held by Sophie Gaskill was described in Schedule H as "a life estate with power of sale," and her gross estate was augmented by $294,698 by the inclusion of this property.

II. Controlling Legal Principles

The pertinent provisions of 26 U.S.C. § 2041 are as follows:

"§ 2041. Powers of Appointment.

(a) In general. The value of the gross estate shall include the value of all property.

. . . . .

(2) ... To the extent of any property with respect to which the decedent has at the time of his death a general power of appointment created after October 21, 1942, or with respect to which the decedent has at any time exercised or released such a power of appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent, such property would be includible in the decedent's gross estate under sections 2035 to 2038, inclusive.

(b) Definitions. For purposes of subsection (a) —

(1) General power of appointment. The term `general power of appointment' means a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate; except that —

(A) A power to consume, invade, or appropriate property for the benefit of the decedent which is limited by an ascertainable standard relating to the health, education, support or maintenance of the decedent shall not be deemed a general power of appointment."

The Treasury Regulations promulgated under this section provide additional insight:

"20.2041-1. Powers of Appointment, in general.

. . . . .

(b) Definition of `power of appointment' —

(1) In general. The term `power of appointment' includes all powers which are in substance and effect powers of appointment regardless of the nomenclature used in creating the power and regardless of local property law connotations. For example, if a trust instrument provided that the beneficiary may appropriate or consume the principal of the trust, the power to consume or appropriate is a power of appointment.

. . . . .

(c) Definition of `general power of appointment' —

(1) In general. The term `general power of appointment' as defined in section 2041(b)(1) means any power of appointment exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate, except

(i) joint powers ... and

(ii) certain powers limited by an ascertainable standard, ..."

Of course, the provisions of the will of E.L. Gaskill do not grant a power of appointment to Sophie Gaskill in so many words. Instead, a life estate with a power of disposition is granted. This Court must look to Kansas law to ascertain the substance and effect of this life estate and power of disposition, Gunn v. United States, 233 F.Supp. 931 (D.Kan.1964), even though the taxability of the interest as so determined is controlled by federal law, Morgan v. Commissioner, 309 U.S. 78, 60 S.Ct. 424, 84 L.Ed. 585 (1940).

III. Analysis and Discussion

The issue in this case must be resolved by interpreting the language of the will to determine if the life estate and power of disposition granted to Sophie Gaskill gave her the power, under Kansas law, to "appoint" the subject matter of the life estate to herself, her estate, her creditors, or the creditors of her estate. Because a life estate with a power of disposition is not equivalent to a fee interest under Kansas law, Windscheffel v. Wright, 187 Kan. 678, 360 P.2d 178 (1961), and because such a life estate therefore terminates at death, the inherent nature of the interest itself precludes the possibility of an "appointment" to an estate or the creditors of an estate. The question, therefore, is simplified to whether Sophie Gaskill could have "appointed" her interest to herself or her creditors under Kansas law. Because the will does not expressly provide for any appointment of the life estate property, the question can be further simplified to the following crucial inquiry. Do the terms of E.L. Gaskill's will, as interpreted under Kansas law, imply in favor of Sophie Gaskill the right to consume the life estate property? If they do, that power of consumption is a general power of appointment under Reg. 20.2041-1(b)(1), and consequently taxable under 26 U.S.C. § 2041.

As a preliminary matter, this Court notes that it is required by Kansas law "in construing the provisions of a will to place itself in the shoes of the testator at the time he made the will and determine as best it can the purpose and intentions he endeavored to convey by the language used." In re Estate of Lehner, 219 Kan. 100, 102, 547 P.2d 365 (1976). The intent of the testator, as perceived by this Court, must be given effect if possible, id. at 103, 547 P.2d 365.

The will of E.L. Gaskill, in this Court's opinion, expresses a clear and unambiguous intent that the entirety of the property comprising the life estate eventually find its way to the named remaindermen. The language in clause IV leaves no doubt on this score: "Subject to said life estate I give, devise and bequeath all of the remainder of my estate ... unto my children." (Emphasis added.) This language is obviously inconsistent with a power on the part of Sophie Gaskill to appoint the property to...