Moore v. Comm'r
| Decision Date | 07 April 2020 |
| Docket Number | T.C. Memo. 2020-40,Docket No. 22082-09.,Docket No. 21209-09 |
| Parties | ESTATE OF HOWARD V. MOORE, DECEASED, VIRGIL L. MOORE, EXECUTOR AND TRUSTEE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent HOWARD V. MOORE, DONOR, a.k.a. ESTATE OF HOWARD V. MOORE, DECEASED, VIRGIL L. MOORE, EXECUTOR AND TRUSTEE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
Gregory A. Robinson, for petitioner.
Derek W. Kaczmarek, Brandon A. Keim, Doreen Marie Susi, and Michael R. Harrel, for respondent.
HOLMES, Judge: Howard Moore was born into rural poverty but over a long life built a thriving and very lucrative farm in Arizona. In September 2004 he began negotiating its sale, but his health went bad. He was released from the hospital and entered hospice care by the end of that year.
Then he began to plan his estate.
What his lawyer came up with was quite complex--a combination of five trusts and a partnership--and it required him to contribute most of his farm to the partnership. His stated reason was to protect the farm from various business risks and bring his sometimes fractious family together to learn to manage the business without him. But five days after the partnership received part ownership of the farm, Moore sold it. And even after the sale, Moore stayed on the farm and directed its operations until he died.
The key question we have to answer is whether Moore's plan works to reduce the size of his taxable estate. We also have to figure out whether Moore's efforts to reduce the size of his taxable estate resulted in taxable gifts.
Howard Moore was born in 1916 in Coffee, Texas. He had a particularly difficult upbringing. When Moore was young, his father suffered a mental breakdown and lost the family farm and home. The family stayed together but moved to Arizona and lived on the banks of the Colorado River in a home thatched out of arrowweed, not that different from the precolonial homes of the local Native Americans.
This was an unpromising start in life, made more difficult by an education that stopped with the eighth grade. But Moore had learned to work and found a job in the Dome Valley near Yuma, Arizona. There he became a land leveler,2 in a local economy where there was so little cash money that land levelers sometimes got paid with the land they leveled. This was the beginning of the Moore family farm. He began to acquire more land of his own in the riverbed of the Gila River. And though that river was for a long time dried out on the surface, water still ran beneath the soil. By pumping water from the soil, Moore was able to irrigate hisfields. He slowly assembled more than 1,000 acres3--and consolidated his many parcels into what became Moore Farms.
In the following years Moore started a family. Moore and his first wife had four children--Virgil, Ronnie, Milton, and Lynda. But Moore separated from her in the early 1970s and began a long battle with alcoholism. Milton credibly testified that it was nearly a decade before his dad finally went to a rehab facility in Washington State for help. Even aside from this problem, his relationship with his children was complicated. During trial his children described him as "strong", "manipulative", "firm", and "tough", particularly on his sons. Milton shared an evocative childhood memory with the Court: He'd just come home from a schoolyard fight with a classmate. Seemingly indifferent to the boy's injuries, Moore asked Milton to show him his hands. Seeing they were unblemished, he warned Milton that the next time he got in a fight, he "[didn't] want to see no skin on them knuckles."
Moore often played his sons against each other to motivate them. This bred conflict, and in 1987, a final dispute: Milton borrowed Ronnie's tractor to pull hisfarming equipment. When Ronnie found out, he became "very angry," pulled out his semiautomatic rifle, and emptied a clip into the tractor. The bullets caused thousands of dollars in damage to the tractor's radiator but even more damage to the Moore family. Milton fled out of concern for his wife and unborn child. He would not return for many years.
As Moore entered extreme old age, he began to think about selling the farm, and by 2004 became more focused. Ronnie successfully negotiated the terms of a sale of Doval Farms--the portion of land Moore had partly conveyed to him and his wife--before, as we will see, giving it away to a family partnership for sale with Moore Farms. Moore Farms itself had long attracted the interest of agribusiness outfits, but Moore didn't want his lifelong venture to fall into the hands of corporate agriculture. One of his neighbors, Mellon Farms, was large but still a family operation, well known and well respected. Moore was interested, and negotiations began.
Then a crisis struck. In December 2004, before Moore could finish a deal with the Mellons, he was rushed to the emergency room with congestive heart failure. He then suffered a heart attack, developed heat stroke, and was unable to breathe on his own. Despite his doctors' noting his condition as critical, he insisted that he wanted to return home. A hospice doctor gave him less than six months to live and certified him for in-home hospice care. Once he was home, an initial assessment by another hospice provider described Moore as anxious but alert, though he did need help with various everyday tasks like bathing and walking. Moore was aware of his condition and his prognosis, and told his caretaker that one of his hopes was that he would have time to complete an estate plan. The hospice's initial assessment and other records do show that, throughout his entire time in hospice, Moore's priority was making sure his affairs were in order.
Even under the care of hospice, Moore would not stay in bed, and with the help of his grandson--who would be out in the field every day to report back--Moore stayed in charge of all final decisions about Moore Farms. By the end of December 2004, though, he was ready to make an estate plan.
Moore called Bradley Hahn, an attorney who's specialized in estate planning for almost 15 years. Hahn's previous work on Mrs. Moore's estate plan before her passing made Moore familiar with his work. Hahn testified to the nature of the call: Moore believed that his release from the hospital was "an extension of his life," and he wanted to meet with Hahn to try to "save the millions of dollars of taxes" to protect his family. So Hahn entered what he calls a "design phase" whereby he compiled a list of the client's goals for his estate plan.
From Moore's own description of his estate-planning goals we find that he was focused primarily on maintaining control and eliminating his estate tax. His written goals were as follows:
By the end of the year, Moore set up a partnership, a charitable foundation and a series of trusts to achieve these goals. He created all of the following entities with Hahn's help, on December 20, 2004--just four days after being discharged from the hospital:
A. Howard V. Moore Living Trust
Living trusts, unlike wills, come into effect during the creator's life. Ralph M. Engel, "The Pros and Cons of Living Trusts as Compared to Wills," 29 Est. Plan. 155, 155 (2002). Because they are revocable, they are frequently used by tax planners in instances where the client wishes to retain control of his assets during his lifetime. Id. Moore transferred all his real and intangible personal property to the Living Trust--and this included Moore Farms. The Living Trust's initial trustees were Moore, Virgil, and Lynda. Moore retained complete power over any asset held in the Living Trust during his life. The trust documents provided that Moore had the express and total power to control and direct payments, add or remove trust property, and amend or revoke the trust. Upon his death, the Living Trust provided that after payment of Moore's expenses, claims, taxes, and specific distributions of personal property and real estate, the remaining trust property should be divided between two trusts: the Charitable Trust and...
To continue reading
Request your trial