Monday, November 11, 2013

Estate of Rapp v. Commissioner case brief

Estate of Rapp v. Commissioner case brief summary
140 F.3d 1211 (1998)


CASE SYNOPSIS
Appellant estate challenged the decision of the United States Tax Court, which determined that a trust established by decedent did not qualify as qualified terminable interest property as defined by 26 U.S.C.S. § 2056(b)(7).

CASE FACTS

Decedent left a will disposing of property for the benefit of wife. The probate court granted his wife's petition to reform his will so that she could qualify for a marital deduction. The Internal Revenue Service allowed the deduction only to the extent of the property that passed directly to the wife under the will, consisting of the household furnishings and other personal property valued at $ 435,262.50. The appellant estate appealed the decision and his claim was heard before the tax court. The tax court concluded that the probate court had erred in reforming the will because the will was not ambiguous and there was little or no evidence that decedent intended to create a qualified terminable interest property trust, 26 U.S.C.S. § 2056(b)(7).

DISCUSSION


  • The IRS argued, and the tax court agreed, that the probate court's reformation of the will was without binding effect for the purpose of determining federal estate taxes owed, unless California's highest court has affirmed the result. 
  • That decision was appealed and the court agreed with the tax court concluding that for federal estate tax purposes the wife at no time had a QTIP trust, and the deficiency was correct.

CONCLUSION
The court affirmed the judgment of the tax court finding, that because the tax court was not bound by the probate court's reformation of decedent's will and because under California law the will should not have been reformed, his wife could not establish for federal estate tax purposes that she had a qualified terminable interest property trust at any time, either at her husband's death or at the time of QTIP election.


Suggested Study Aids For Wills, Trusts & Estate Law

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