Case Summaries
(plaintiffs purchased a pre-engineered building to serve as their personal residence and business location; contract entered into by plaintiffs personally and not their LLC, but defendant knew of dual purpose of building; quality issues arose with respect to building and plaintiffs refused to pay due to dissatisfaction with defendant's repair jobs; defendant filed mechanics' lien; plaintiffs and their LLC sued and trial court jury found in favor of plaintiffs for $108,017.13 in damages on breach of contract and warranty claims; trial court jury returned verdict for plaintiffs on deceptive acts and practices claim under KS Consumer Protection Act, and returned verdict on negligent misrepresentation claim for plaintiff's LLC of $149,824.65 in economic damages (due to need to rent space elsewhere, lost production, etc.); on appeal, defendant claimed that economic loss doctrine barred LLC's negligent misrepresentation claim because of lack of privity and appellate court agreed; on further review, KS Supreme Court rejected use of privity as bright-line test for determining application of economic loss doctrine; KS does not use economic loss doctrine to enforce boundary between contract and tort law, but KS courts determine nature of claim based on facts and pleadings with question one of whether defendant owed plaintiff duty imposed by law independent of contract; in present case, defendant owed LLC duty independent of contract; Court then determined that purpose of economic loss doctrine would not be furthered by applying it in this case).
(IRS could collect estate tax via estate tax lien more than 12 years after taxes assessed; decedent died in 2000 owning assets via revocable trust of approximately $4.57 million and IRA worth $3.85 million; estate tax determined to be approximately $2.47 million; four years of extensions granted via I.R.C. Sec. 616 due to market value decline of publicly traded securities; $200,000 of estate tax paid and insufficient assets in trust to pay balance; IRS sought payment of tax from transferee of IRA under I.R.C. Sec. 6324 estate tax lien; IRS not bound by four year assessment period of I.R.C. Secs. 6501 and 6901(c) and could proceed under I.R.C. Sec. 6324 (10-year provision); 10-year provision extended by four year extension period that had previously been granted to estate, and IRA transferee liability was derivative of estate's liability; immaterial that transferee may have not known of unpaid estate tax; amounts withdrawn from IRA to pay estate tax liability also subject to income tax in transferee's hands; while income tax deduction for estate taxes attributable to IRA available under I.R.C. Sec. 691(c), deduction could be limited due to failure to match tax year of deduction and income).
(undivided one-half interest in 15,000-acre cattle ranch owned in trust, but trustees (children of decedent) ran ranch as though trust did not exist; trustees engaged in self-dealing by leasing trust ground to themselves and breached fiduciary duty by not leasing trust ground to surviving spouse (mother of the trustees) at higher rental rate; no contract existed between mother and son for mother to make a will leaving son her portion of ranch in return for his ranching services; son lacked standing to sue mother for quantum meruit compensation for working and managing ranch and for expenses incurred).
(asset division in divorce proceeding; husband presented sufficient evidence that funds in joint bank account was husband’s separate property).
(decedent had executed his will in 1996 and learned of two biological children in 2006; decedent is survived by 11 children, but one received the entire estate; two "new" children assert recognition as "after-born" (pretermitted heir) child status with the result that they inherited essentially as legally adopted children; court applied the plain meaning of the statute and denied rights of "after-born" children).
(plaintiff owned several tracts of real estate and transferred seven tracts to family members; gift tax return filed for transfers; IRS challenged valuation of real estate as reported on Form 709 and increased total value by almost $5 million (later reduced by about $3 million), and increased tax by over $1 million; 75 percent civil fraud penalty imposed under I.R.C. Sec. 6663(a) in amount of $781,000 plus almost $500,000 of interest; plaintiff paid deficiency plus fraud penalty and interest and sued for refund; plaintiff's motion to remove fraud penalty not granted because IRS proved by "clear and convincing evidence" that taxpayer intentionally underpaid taxes; county valuation significantly higher than values plaintiff reported, sales contracts on parcels were at much higher value than what plaintiff reported; valuation at over 10 times the reported value could be interpreted by jury as fraud; plaintiff had written letters to appraiser to set value at specific low numbers).
(a mother died, leaving 117 tillable acres to her three surviving children; a probate court determined (and an appellate court affirmed) that the will gave the brother the right to farm the land for the remainder of his life, but provided that his sisters would equally share in the farm proceeds, each receiving one-third of the landlord’s share; when the brother failed to pay the sister for several years, she filed an action against him, seeking her proceeds under the doctrine of the “law of the case”; in affirming the trial court’s judgment in favor of the sister, the court held that the brother was precluded from challenging his obligation based on res judicata, specifically, issue preclusion; the record contained evidence supporting the trial court’s determination that the fair market rental value of the property was $140/acre; the trial court did err in awarding prejudgment interest because the amount of damages was based upon an exercise of judgment, not “simple math”).
(plaintiff sister filed a breach of fiduciary duty action against defendant brother, individually and as trustee of several family trusts established by their deceased parents; the lawsuit alleged, inter alia, that defendant had failed to provide a proper accounting, distribute trust income, and provide for support; in granting summary judgment to defendant, the court found that plaintiff’s lawsuit was barred by a 2003 family settlement agreement authorized by 760 Ill. Comp. Stat. 5/16.1(d)(4)(J); under Illinois law, “family settlements are especially favored on grounds of public policy upholding the honor and peace of families”; court also found no evidence that plaintiff entered into the family settlement agreement under duress and that even if a breach of fiduciary duty had occurred, plaintiff suffered no damage).
(upon settlor's death (the last of the spouses to die), trust beneficiaries disagreed over distributions and entered into settlement agreement that distributed trust assets disproportionately among beneficiaries; after IRS issued clearance letter, second dispute arose; successor trustee proposed distribution plan, as did a beneficiary; beneficiary opposed successor trustee's proposal because it would provide successor trustee with greater share of bank stock and allowed valuation to be at time of settlor's death rather than subsequent time when value was lower; trial court determined that objection was basically an equity argument and upheld successor trustee's proposed distribution because it was consistent with trust language and settlement agreement even though inequitable; trustee had discretionary power to make distributions as determined by trustee; trial court decision affirmed on appeal).
(decedent’s step-daughter claimed post-death that decedent step-mother’s marriage to father was void due to step-mother’s lack of mental capacity to marry shortly before death; father entitled to spousal share of estate (in this case everything); trial court held it could not annul marriage because decedent had died; on appeal, court drew distinction between annulment and declaration that marriage was void; action under Uniform Declaratory Judgment Act (UDJA) is appropriate manner to challenge validity of marriage post-death; legislative amendment to annulment statute did not evidence intent to limit judiciary’s ability to declare rights and status with respect to marriages, and UDJA does not conflict with annulment statute; trial court decision reversed and case remanded; on remand, marriage presumed valid and step-daughter bears burden to prove marriage should be voided upon presenting clear and convincing evidence that decedent lacked mental capacity to enter into marriage). Annotation
(son sued mother both personally and in mother’s capacity as trustee of two trusts in which she disinherited son pursuant to will and trust; while actions pending, mother died and son’s siblings substituted as defendants; son claimed that mother breached joint, mutual and contractual will made with his father entered into 15 years before execution of documents disinheriting him; trial court ruled against son and case affirmed on appeal on basis that irrevocable trust executed seven years after joint and contractual will which revoked or modified join and contractual will; on further review by state Supreme Court, Court determined that joint and contractual will not fully revoked and son could still possibly establish breach of contract as to provisions not revoked; case remanded).
(decedent created trust in 1991 that left all his real estate and farm equipment to a specific beneficiary or to the beneficiary’s children surviving him; decedent purchased additional farmland purchased after trust created; decedent later created pourover will directing any non-trust probate assets be placed in the trust at death; upon death, deed discovered purporting to transfer farm to decedent and another son, but deed never recorded and decedent held himself out as owner of farm until death and farm listed as asset of estate; trial court ruled for estate; on appeal court affirmed because farm was probate asset covered by pourover will and included in trust at death and distributed under terms of trust).
(before death, decedent created revocable trust to handle distribution of his property at death; two years after creating trust decedent purchased farmland, but never deeded it into the trust; farmland owned by decedent and wife; decedent survived wife still owning farm outright; pourover provision in decedent's will transferred property to residuary of trust upon death; residuary distributed to 19 beneficiaries rather than to two specific relatives).
(defendants challenged trial court’s appointment of an independent farm manager to safeguard property pending a final determination of the parties’ rights to 640 acres of farmland owned by various family members; in affirming the trial court’s order, the court first ruled that jurisdiction existed pursuant to Ill. S. Ct. R. 307(a)(2), allowing an appeal from an interlocutory order appointing a “receiver”; appointment of an independent manager was necessary because plaintiffs’ property and profits were in danger of waste or misconduct since one of the defendants was managing the farm; trial court had no duty to recuse himself because he owned only a de minimis number of shares in the bank he appointed to manage the property, and the trial court’s inquiry to the bank as to whether it still provided management services was not an improper ex parte communication).
(upon death of spouse, surviving wife became sole trustee and sole beneficiary for her life of husband's trust; trustee had authority to pay wife as much trust principal as requested in writing; wife withdrew entire trust property; after wife's death, remainder beneficiaries sued wife's estate on breach of fiduciary grounds because wife made no written request of herself at trustee to withdraw trust property; trial court ruled for estate and appellate court affirmed making point that requiring such act would be in vain and pointless).
(citizens of CA voted to approve constitutional amendment (Proposition 8) defining marriage as the union of a man and a woman; CA governor and attorney general refused to defend the law and citizen group that sponsored Proposition 8 sought enforcement; U.S. Supreme Court determined that citizen group lacked standing to defend such constitutional amendment under Article I, Sec. 2 because of lack of direct stake in outcome of appeal and only interest was to vindicate constitutional validity of generally applicable state law; U.S. Supreme Court did not create right to redefine marriage as anything other than that established by Natural Moral Law from the beginning of time).
(two homosexual women married in Canada at a time when homosexual marriages were legitimate under provincial law; at time of death of first of the two homosexuals, parties lived in NY which recognized such marriages as legal under state law; surviving homosexual claimed marital deduction for estate tax purposes; IRS denied deduction on basis that Defense of Marriage Act (DOMA) (which was passed by overwhelming majorities in both parties in the Congress and in both bodies) did not recognize homosexual marriages for purposes of federal benefits; Obama Administration refused to defend law so law defended by Bipartisan Legal Advisory Group from U.S. House of Representatives; Court held that, for purposes of federal law, portion of DOMA defining marriage in manner consistent with Natural Law as a union between one man and one woman unconstitutional as deprivation of equal liberty guaranteed by Fifth Amendment in absence of specific federal policy; by so holding, Court suggested that the Congress does not have the power to define meaning of words in statutes enacted by the Congress; Court's ruling does not impact portion of DOMA providing that no state is required to give effect to another state's recognition of homosexual marriage; presently 38 states have laws prohibiting homosexual marriage; Court's opinion lays groundwork for all types of consensual adult sexual behaviors to be deemed legal).
(attorney represented two siblings as personal representatives of their mother’s estate; following the closing of the estate, attorney continued to represent one sibling in all his family dealings and real estate; representation of brother included filing lawsuit against beneficiaries of estate; attorney held to have violated rules through representation when a conflict of interest to a former client applied because representation of sibling in estate created conflict of interest that could not be waived; attorney received public reprimand and ordered to pay costs of proceedings).
Lee v. Smith, No. 30A01-1208-DR-380, 2013 Ind. App. Unpub. LEXIS 741, 989 N.E.2d 844 (Jun. 19, 2103)
(in a dissolution action, the court reversed a trial court’s property division order and remanded; trial court had originally awarded the marital residence to wife, with an unspecified 50 percent of the equity to be paid to husband; however, in a later nunc pro tunc order, the trial court stated that there was no equity in the marital residence because the wife contributed significantly more premarital funds toward the purchase than the husband; in reversing, the court could “not say for certain” that trial court properly considered evidence as to each statutory factor set forth in Ind. Code § 31-15-7-5, so to allow for an unequal division of property; trial court did not even acknowledge that this was an unequal division of property or provide a rational basis as to why deviating from the statutorily presumed equal division would be “just and reasonable”; such explanation was required by Indiana law).
(decedent conveyed family farm to trust in 2008 with instructions that proceeds from sale of farm after her death be divided equally among three sons; in 2009, decedent changed her will to exclude one son; two sons probated 2009 will; trustee appeared in probate and stated farm had been conveyed to trust in 2008; trial held and court concluded farm was corpus of trust and should be divided equally; court’s opinion affirmed as reasonable interpretation of trust document).
(married couple owned real estate as tenants by the entirety; husband owed IRS $436,849 in income tax; husband transferred his interest in the real estate to his wife for $1; IRS then placed lien on the real estate; husband died with no distributable assets and no other assets with which to pay tax lien; surviving spouse died within year after husband’s death and property passed to son, defendant in this case; son was named as a co-executor of mother’s estate; IRS claimed that tax lien applied to real estate before legal title passed to mother and that executors had to satisfy lien out of assets of mother’s estate; executors conveyed real estate to son for a dollar after receiving letters from IRS asserting lien; son later sold real estate and invested proceeds in stock market, subsequently losing his investment; IRS brought collection action for 50 percent of sale proceeds from executors under federal claims statute (31 U.S.C. §3713 via I.R.C. §6901(a)(1)(B)); trial court ruled for IRS and appellate court affirmed; under federal claims statute, executor has personal liability for debts and obligations of decedent, and fiduciary that disposes of assets of estate before paying government claim is liable to extent of payment for unpaid governmental claims if fiduciary distributes assets of estate, distribution rendered estate insolvent, and distribution took place after fiduciary had actual or constructive knowledge of liability for unpaid taxes).
(taxpayer proposes to create charitable lead trust with required distributions from lead interest made to family private foundation or which taxpayer is founder/manager; IRS noted that tax benefits of trust during life and exclusion of trust property from grantor's gross estate at death can be achieved if donor acts appropriately with trust and foundation to ensure that gift is complete; IRS noted that grantor must separate himself from trust management (including trust funds received from foundation; IRS specified that donor cannot serve as trustee; while donor can be director of foundation, donor cannot vote on issues involving disbursements or decisions to distribute trust funds; under facts of ruling, quorum of foundation's Board, except the donor, established committee with sole authority to receive, invest and make all investment and administrative decisions, and distribution decisions on foundation's behalf; funds foundation receives to be segregated into separate account and committee will administer and distribute separate account, and donor will not have power over account).
(surviving spouse sold 8.49 acres to second wife and balance of farmland to LLC formed with son; six of the couple's nine children sued to set conveyances aside in attempt to divide mother's undivided 50 percent interest in entire acreage among the nine children; children based claim on argument that father possessed only life estate in 50 percent interest of predeceased spouse; thus, conveyances expired on his death with all nine children having an interest in predeceased mother's 50 percent interest unencumbered by claims of purchasers or mortgagors; farm owned in tenancy in common by spouses; upon wife's death, husband owned undivided 50 percent and life estate in other 50 percent with remainder to children; court noted that wife's will clearly gave husband power to sell real estate comprising wife's 50 percent undivided interest).
(spendthrift trust beneficiary executed $350,000 personal guarantee to company in which beneficiary was principal; beneficiary represented that he had almost $7 million available to him in the trust; business defaulted and trustee refused payment on guarantee due to trust's spendthrift limitation; lender sued on basis that state (FL) law makes enforceability of spendthrift trust provisions a violation of guarantee of equal access to courts contained in FL Constitution and that there is no longer a common law right to execute money judgment against any beneficial interest that debtor held; trial court granted summary judgment to trustee and appellate court affirmed; validity of spendthrift limitations recognized before statutory amendments and have not been abolished).
(debtor was real estate developer that resided in WA and suffered in the housing market downturn in 2008; debtor established self-settled asset protection trust in mid-late 2008 that adopted Alaska law as governing law; debtor's son named as trustee and trust provided for discretionary distributions for benefit of debtor, his children, grandchildren and step-children; debtor transferred approximately 78 percent of his assets to trust; trustee made substantial distributions to debtor and did not refuse requests for distributions; debtor filed bankruptcy in early 2011 and trustee moved to set aside trust as invalid and transfers to trust as fraudulent transfers; AK law allowed self-settled trusts, but WA did not; based on numerous factors, court determined that WA law applied to trust; as such, transfers to trust void as matter of law and were fraudulent under 11 U.S.C. Sec. 548(e)(1) (sufficient badges of fraud present) and WA Uniform Fraudulent Transfers Act; court's opinion follows Kilker v. Stillman, No. G045813, 2012 Cal. App. Unpub. LEXIS 8542 (Cal. Ct. App. Nov. 26, 2012), and Rush University Medical Center v. Sessions, 980 N.E.2d 45 (Ill. 2012); cases illustrate how difficult it can be for non-resident to use that state's self-settled spendthrift trust statute when settlor sued in domiciliary state).
(trial court admitted will to probate over objection that will not offered within four-year time period as required by state (TX) probate code; decedent's surviving spouse met with lawyer shortly after spouse's death and told she had option to probate will or execute affidavit of heirship; spouse believed that either option resulted in her inheriting all of decedent's property; affidavit prepared; at time of death decedent owned two tracts of land as his separate property; surviving spouse had dispute with son who kept livestock on property and he was asked to remove his livestock so the property could be leased; surviving spouse then notified that TX intestate succession law specifies that when surviving children are present (as for property that is not community property), the surviving spouse is entitled to life estate in one-third of land of decedent, with remainder to children; will filed more than four years after decedent's date of death; surviving spouse found not to be in default of four-year rule; spouse elderly at time issue arose and had no training in legal matters and honestly believed that affidavit transferred all property to her as would decedent's will; question of "default" under statute is question of fact and not question of law; trial court's determination allowing admission of will to probate upheld).
(trial court admitted will to probate over objection that will not offered within four-year time period as required by state (TX) probate code; decedent’s surviving spouse met with lawyer shortly after spouse's death and told she had option to probate will or execute affidavit of heirship; spouse believed that either option resulted in her inheriting all of decedent's property; affidavit prepared; at time of death decedent owned two tracts of land as his separate property; surviving spouse had dispute with son who kept livestock on property and he was asked to remove his livestock so the property could be leased; surviving spouse then notified that TX intestate succession law specifies that when surviving children are present (as for property that is not community property), the surviving spouse is entitled to life estate in one-third of land of decedent, with remainder to children; will filed more than four years after decedent's date of death; surviving spouse found not be in default of four-year rule; spouse elderly at time issue arose and had no training in legal matters and honestly believed that affidavit transferred all property to her as would decedent's will; question of "default" under statute is question of fact and not question of law; trial court's determination allowing admission of will to probate upheld).
(petitioner had alternative medicine practice and established trusts purportedly in furtherance of medical practice and asset protection; petitioner's corporation made payments to trusts and claimed deductions for such payments; deductions denied on basis that trusts where shams; trusts lacked independent trustee, taxpayer's relationship to trust property not materially changed after property transferred to trusts, no economic interest in trusts passed to other beneficiaries (except for minor instance), no meaningful restrictions imposed on petitioner, and trusts paid petitioner's personal expenses; trusts disregarded as shams for tax purposes).
(two trusts each owned an interest in an S corporation with the balance of the interests in the S corporation owned by taxpayer; S corporation owned another corporation which was a qualified S subsidiary which the individual was the president and was directly involved in daily operations; trusts had income from their interests in the S corporation; individual, spouse, children and grandchildren are beneficiaries of trusts and taxpayer was special trustee of trusts and controlled all decisions regarding disposition of S corporation stock and voting of that stock; taxpayer not able to distinguish between time spent conducting business as corporate president and time spent as special trustee; IRS took position that trusts did not materially participate in S corporation business and, as a result, trusts' share of research or experimental expenses incurred by the S corporation had to be amortized over 10 years by the trusts; IRS claimed that only participation of trustee of trusts in fiduciary capacity counts toward material participation test; IRS ignored interrelated role of taxpayer as special trustee and corporate president for purposes of material participation test; Treasury has never promulgated regulations for trusts for purposes of the material participation test and has lost the only court decision addressing how a trust establishes material participation for purposes of I.R.C. Sec. 469; litigation on issue currently pending in the U.S. Tax Court).
(decedent's will, executed pre-Sept. 25, 1985, providing for decedent's property to pass to surviving spouse, children and grandchildren and charity; decedent later declared incompetent until death; beneficiaries battled over will interpretation and petitioner court for construction and reformation of will; parties enter into court-approved settlement specifying that amounts distributed pursuant to settlement not subject to GSTT and estate entitled to charitable deduction for amount passing to charity; IRS determined that no GSTT applied because of decedent's mental incompetency (Treas. Reg. Sec. 26.2601-1(b)(3)(i); charitable deduction allowed for amount passing to charity in accordance with Rev. Rul. 89-31, 1989-1 C.B. 277).
(decedent and spouse married in Michigan in 1984, and moved to PA; in 2003, husband underwent gender reassignment to have female genitalia installed; husband's conduct destroyed marriage relationship with wife and wife taken back to MI in 2005 to live with daughter; children, as mother's guardian, filed for divorce on mother's behalf because she was suffering from dementia (age 79); husband filed motion for summary judgment on basis that children had no authority to file divorce on behalf of incapacitated ward; trial court disagreed and denied husband's motion; husband filed second motion for summary judgment on basis that trial court lacked jurisdiction to grant divorce because husband's conduct made him a "woman" which severed the marital relationship because of MI's constitutional and statutory ban on homosexual marriage; trial court denied husband's second motion; on appeal, court affirmed on both points; nothing in state statutory law or caselaw bars a guardian or conservator from filing complaint for divorce on behalf of incompetent spouse; parties entered into lawful marriage contract at time of marriage that they cannot mutually or unilaterally sever; marriage is more than a civil contract and only a court can terminate the relationship by decree of divorce; in any event, court noted that gender reassignment surgery has no effect in changing gender of person involved because chromosome makeup when person created not impacted and can never be altered).
(inherited property used to purchase farmland that was sold after the marriage and proceeds used to purchase marital home with remainder used for household expenses; home was only asset of the parties and so court found inequitable to keep inherited property separate; court ordered equalization payment of half of value; on appeal, court held husband’s wise investment of inheritance allowed couple to live in home debt free; court found equitable distribution to be three-quarters to disabled husband and one-quarter to wife; dissent filed arguing house was purchased for wife and husband intended to sell it anyway and continue to live in farmhouse, so district court order should be affirmed).
(in 1972, petitioner transferred stock in family corporation to other family members pursuant to settlement of family dispute; no gift tax return filed, and IRS now asserting $1.1 million in unpaid gift tax on basis that transfer constituted gift; petitioner claims that transfers were nontaxable settlement payments; interest on purported gifts anticipated to exceed $1 million; because no gift tax return filed in 1972, statute of limitations for asserting tax never commenced and all tax years remain open).
(decedent died in late 2007 and estate tax return filed in early 2009 with "estimated" denoted at top of form; return reported gross estate of $13,810,000, tentative deductions of $550,000 and tentative tax listed as "unknown"; return indicated that litigation was pending between decedent's estate and decedent's surviving spouse that had been purportedly disinherited under decedent's will which impacted the amount, if any, of the marital deduction and, consequently, the estate tax due; IRS assessed over $5 million of estate tax against estate and estate objected noting the pending litigation barred computation of estate tax due; litigation settled in mid-2009 and estate filed two amended returns both reporting no tax due; IRS determined that over $2 million in estate tax due; estate sought IRS issuance of notice of deficiency so that alleged deficiency could be litigated; IRS issued notice of deficiency in late 2011 and estate filed Tax Court petition in early 2012 and IRS moved to dismiss for lack of jurisdiction on the basis that a prior assessment of estate tax eliminates any "deficiency" over which the court has jurisdiction; IRS also claimed its notice of deficiency issued as protective measure if prior assessment found invalid; estate moved for summary judgment on basis that statute of limitations barred issuance of revised notice of deficiency ; court rejected IRS' motion to dismiss, finding that prior assessment was invalid, but determined that notice of deficiency was valid because it had been timely issued and complied with I.R.C. Sec. 6212 and did not violate I.R.C. Sec. 7522; court has jurisdiction and case to proceed to trial).
Gruber v. PPL Retirement Plan, et al., No. 12-2123, 2013 U.S. App. LEXIS 7149 (3d Cir. Apr. 9, 2013)
(plaintiff and spouse divorced in 2005 and entered into QDRO designating plaintiff as alternate payee under ex-spouse's qualified retirement plan; QDRO provided that plaintiff to receive 53 percent of ex-spouse's accrued benefit as of 12/20/04, and if payments to plaintiff began while ex-spouse still employed payments to be computed as if ex-spouse had retired on date on which payments to plaintiff began, not accounting for value of play subsidy for early retirement benefits; if ex-spouse retired before age 65, plaintiff's benefit to be recalculated to include 53 percent of any employer subsidy for early retirement; plaintiff elected to begin receiving benefits when ex-spouse turned 55; three years later ex-spouse terminated due to company-wide workforce reduction which made ex-spouse eligible for early retirement benefit equal to 80.7 percent of normal benefit; because purpose of separation benefit to enhance early retirement benefits and because ex-spouse eligible for early retirement, such amount was subsidy for early retirement and was within meaning of "early subsidy for early retirement" as defined by QDRO; plaintiff entitled to 53 percent of early retirement benefit).
(decedent, before death, created LLC and transferred funds to LLC derived from sale of stock in decedent's closely-held business which was undergoing buy-out from Pepsi, Corp.; LLC worth $317.9 million (primarily cash) in net asset value; decedent's children redeemed their interests in LLC before decedent's death resulting in decedent's estate holding 70.42 percent voting interest and 70.9 percent equity in LLC; decedent's estate had liquid assets of over $19 million; anticipated estate and GSTT tax was $26 million, and estate borrowed $10.75 million from LLC in return for installment note with initial payment deferred until 2024 (18 years) with interest set at 9.5 percent (at time when long-term AFR was 4.61 percent); estate claimed discount for decedent's LLC interest of 31.7 percent which court rejected and allowed 7.5 percent discount that IRS conceded - estate's expert based analysis on companies that derived profits primarily from active business operations, unlike decedent's LLC; court noted that while estate tax deduction for estate administration expenses is allowed, prior decision in Estate of Gilman v. Comr., T.C. Memo. 2004-286 which allowed estate tax deduction for interest if loan necessary to raise money to pay estate tax without liquidating estate assets at forced-sale prices inapplicable; in present case, court noted that LLC was cash-rich and that estate had power to require LLC to make pro-rata distribution to members, thus eliminating need to sell assets; court also noted that loan would deplete company's cash similar to distribution; $71.4 million interest deduction disallowed; case also unlike Estate of Duncan v. Comr., T.C. Memo. 2011-255 and Estate of Kahanic, T.C. Memo. 2012-81 in which deduction was allowed in cases where estates were much less liquid).
(decedent executed a deed transferring several hundred acres to himself and his son as joint tenants with rights of survivorship during a period when his son was acting as the decedent’s medical power of attorney; after decedent’s death, the executor expended funds to investigate whether the son exercised undue influence; the investigation was insufficient; the son petitioned the court to order the estate to expend no further funds in its investigation, which the court granted; the executor appealed and further review was made in which the issue of fiduciary duties under a healthcare power of attorney were reviewed; the question was certified to the state appellate court; on the certified question, the court held under the facts there was no fiduciary duty created because no evidence existed that son accepted agency on healthcare power of attorney; in general fiduciary duty would be limited to scope of the power of attorney and not to matters outside the scope of health care decisions; by itself, the healthcare power of attorney does not create a presumption of undue influence).
(decedent's spouse was U.S. resident but citizen of Bolivia; under I.R.C. Sec. 2056, non-U.S. citizenship of surviving spouse bars decedent's estate from receiving marital deduction for property passive to surviving spouse unless U.S. citizenship obtained before estate tax return filed; executor's legal counsel advised late filing of return could be undertaken without incurring penalty to permit surviving spouse to obtain U.S. citizenship; estate tax timely paid in amount due if marital deduction inapplicable, but return filed late (even after receiving six month extension); IRS imposed penalty on late-filed return and estate sought refund; refund disallowed and IRS position upheld; Treas. Reg. Sec. 20.2056A-1(b) allows a marital deduction for resident alien spouse who becomes U.S. citizen before late return is filed, but does not grant relief from late filing penalty; legal counsel's advice was not interpretation of substantive tax law and could not constitute reasonable cause for delay in filing estate tax return beyond time of surviving spouse becoming naturalized citizen; estate tax return actually filed nine months after surviving spouse became naturalized U.S. citizen - maximum late-filing penalty imposed).
(will contest case; while will being contested, state (WA) legislature amended slayer statutes to disinherit persons who financially abuse vulnerable adults; estate administrator sought trial court determination concerning disinheritance of decedent's second wife whom he married in 1997 when he was 85 (decedent remarried after first wife died in 1993); second wife 50 years younger than decedent; decedent agreed before marriage to pay second wife $100,000 toward her education and another $300,000 to $350,000 as a "nest egg"; decedent's will left entire probate estate to second wife except for $55,000; decedent's children given right of first refusal to certain real estate if second wife decided to sell it; decedent also named second wife as a personal representative and amended his trust for second wife's benefit and transferred securities to her along with large cash gifts to her family members and transferring funds from couple's joint checking account to second wife's personal account; record unclear as to whether decedent suffered dementia at time will signed in 2006 (at age 94); decedent's children challenged will on testamentary capacity grounds; trial court invalidated will as product of undue influence; appellate court affirmed; slayer statute then amended (approximately one year after decedent's death) and trial court refused to apply the changes retroactively; that finding reversed on appeal and case remanded to determine whether trial court's findings of financial exploitation sufficient to determine if second wife abuser under statute; issue in present case is whether second wife is financial abuser under statute and not entitled to benefit under decedent's will; statute effective in July of 2009, but purpose of statute is to bar distribution of property to financial abuser; triggering event of application of statute is attempt by abuser to receive property or benefit from estate of abused person; before probate, second wife did not have vested right to inheritance so no retroactive effect of statute because second wife's interests only vested upon completion of probate; no violation of ex post facto clause of U.S. Constitution; dissent believed intent of legislature in amending slayer statute was to bar elder abuse rather than disinherit unworthy heirs).
(decedent owned fractional interests in artwork at time of death that had been placed in GRIT, but had signed an agreement waiving his right to file partition action; decedent survived 10-year term of GRIT with decedent's undivided interest passing equally to decedent's three children with each child receiving 16.67 percent interest in artworks; decedent's spouse died before end of GRIT with her undivided 50 percent interest in the artwork passing to decedent; decedent disclaimed sufficient amount of interest in artwork to optimize use of unified credit so as to pass disclaimed portion to children without estate tax; decedent then entered into agreement with children giving up his right to partition; waiver of such right disregarded for valuation purposes under I.R.C. Sec. 2703(a)(2) - provision states that property value to be determined without regard to any restriction on right to sell or use property; exception from I.R.C. Sec. 2703(a)(2) contained in I.R.C. Sec. 2703(b) held inapplicable; court applied 10 percent discount to pro-rata value of artworks due to uncertainties concerning their value associated with children's intentions concerning the artwork).
(decedent died with a gross estate of almost $39.5 million; her estate paid estate and inheritance taxes of almost $22 million; suit was brought against attorney who drafted estate documents for malpractice; court held that claim did not arise until after decedent’s death; because it did not accrue until after decedent’s death, claim not viable under state’s survival statute; suit dismissed).
(decedent, a surviving spouse, was beneficiary of several trusts, four of which were at issue; of those four, two were QTIP trusts, one was a marital deduction trust and one was a revocable trust; in 2001, QTIP trusts and marital deduction trust liquidated and assets (family partnership (FP) interests) transferred to existing revocable trust; decedent, at age 74 terminated trust and all assets (including FP interests) sold to children for 10-year deferred private annuity; under annuity, if decedent died within 10 years, significant cash was removed from decedent's estate; decedent received doctor's note that she was in reasonably good health at time annuity purchased, but doctor did not testify at trial and IRS viewed annuity as sham transaction (disguised gift for which decedent didn't receive adequate consideration) when decedent died slightly over 3 years later (but before any payments received); decedent and children used I.R.C. Sec. 7520 tables to value annuity properly, but IRS argued tables not appropriate for valuation because of decedent's health issues at time annuity purchased and lack of security for annuity (IRS bears burden of proof to use something other than tables to value annuity); court ruled for decedent (no disguised gift on transfer of FP interests for annuity) - doctor wrote that she had a greater than 50 percent chance of living for more than 18 months (thus, not terminally ill); IRS did not challenge doctor's letter, but relied on decedent's 24-hour home health care as argument that decedent would die within 10 years; court determined that home health care not dispositive of terminal illness or incurable disease, but that she was wealthy and could afford such care; annuity transaction not illusory; decedent did not retain indirect interest in FLP interests to cause inclusion in estate under I.R.C. Sec. 2036; but, decedent triggered gift tax under I.R.C. Sec. 2519 on value of QTIP trust assets (minus the value of decedent's qualifying income interest in QTIP trusts) because court determined that termination of QTIP trust was part of simultaneous transfer of assets in the QTIP trusts to decedent immediately followed by transfer of those assets to the decedent's children in a single transaction; NOTE: court's finding that decedent had disposed of her income interest in QTIP trust in private annuity sale thereby triggering gift tax under I.R.C. Sec. 2519 on value of remainder interest in QTIP incorrect; (1) court's ignoring of initial transfer to decedent resulted in sale by the trust of trust assets for annuity which is not an I.R.C. Sec. 2519 disposition (income interest merely continues in newly acquired asset; (2) I.R.C. Sec. 2519 inapplicable to principal distributions to surviving spouse from QTIP trust - under court's holding, decedent would have been hit with double taxation if it weren't for the annuity properly excluding the value of the assets from decedent's estate; (3) raises questions as to when a sale will be deemed to be sufficiently beyond distribution date to avoid I.R.C. Sec. 2519; (4) under facts of case, distributions of QTIP trust assets made to decedent's family members four years before QTIP trusts liquidated and were reported for gift tax purposes which should have triggered I.R.C. Sec. 2519 at that time and would have prevented it from applying in 2001).
(plaintiff sued lawyer for malpractice with respect to clerical error in will; plaintiff was not a client of the lawyer; original will contained the clerical error that was corrected in later will that named plaintiff as prospective beneficiary in handwritten provision; second will was signed but not witnessed or notarized even though lawyer advised decedent that it needed to be in order to be valid; first will (which did not name plaintiff as beneficiary) admitted to probate; plaintiff claimed that lawyer owed plaintiff duty of care to ensure execution of later will; court rejected plaintiff's claim on basis that imposition of such duty would create conflict of interest by imposing simultaneous duty on lawyer owed to both decedent (client) and plaintiff (non-client)).
(court-ordered sale of property by conservator to support incompetent ward does not completely adeem specific bequest or devise to beneficiary of ward's trust; bequest or devise is adeemed only to extent sale proceeds used to support ward or pay estate expenses, and after ward's death, balance of identifiable proceeds passes to beneficiary).
(decedent's will gave residue of estate to trust for surviving spouse; trust split into two trusts with one trust to pay surviving spouse income for life then to spouse's estate upon death with trust terminating and remaining balance passing to Family Trust that would pay to daughter for life and then to daughter's issue; estate tax return timely filed and estate elected to treat trust property as QTIP, but did not indicate trust was to be severed into exempt and non-exempt trust; no reverse QTIP election made; IRS granted 120 days to sever trust into exempt and non-exempt trust and make reverse QTIP election).
(decedent died on 8/14/08 and estate tax return due on 5/14/09, but estate filed request for extension of time to file and pay tax which was granted and filing deadline extended to 11/14/09 with tax payment due 5/14/10; estate made partial payment of $760,000 on 5/14/09 and second payment of $2,200,000 on 8/31/09 which satisfied balance of estate's tax liability as estimated at time request for extension of time to file made; during summer of 2009, estate's property values plummeted and appraisals believed to exceed FMV of properties at that time; as of 11/14/09, estate could either file timely return with appraised values followed by amended return upon sale of estate properties. or wait until properties sold followed by filing single return; even though first option would result in filing of late return, estate believed that no penalties would result because estate had already paid more than eventual tax liability; return filed on 2/15/10 and IRS assessed late filing penalty of $259,325.85 plus $20,774.30 of interest; court determined that estate lacked reasonable cause for late filing - advice on avoiding audits not reasonable cause; estate had obligation to timely file with best information available at time for filing return; willfull neglect of timely filing present; summary judgment for government granted; note that estate fully paid its estimated tax liability by extended payment deadline, but not by original payment deadline).
(plaintiff’s grandparents established trust naming his uncle and mother as beneficiaries; plaintiff’s mother died in 1992 when he was eight years old, but plaintiff was not made aware of trust until his grandmother’s death in 2008; plaintiff alleged, shortly after mother’s death, that trustee sold farmland in trust and used proceeds to benefit trustee rather than plaintiff; trial court ruled that all claims, except a constructive fraud claim were time-barred and on appeal the parties agree this is correct, so court left only with determining whether constructive fraud claim was well-plead; trial court held that constructive fraud claim not adequately pled and dismissed claim; court of appeals affirmed; plaintiff sought further review; supreme court held trust established was not discretionary trust as determined by trial court, but support trust for the health, education, care, or maintenance of the plaintiff’s mother and uncle, so uncle as trustee did not have discretion to pay income or invade the principal for any benefit to himself; court also held confidential relationship existed between trustee and plaintiff and trustee could not appropriate assets for his own use, which constituted a breach of trust worthy of constructive fraud claim sufficiently pled; court also held facts pled established claim brought within 2 years of discovering alleged fraud and 10 year statute of repose does not apply to fraud claims; case remanded for resolution of constructive fraud claim).
(buy-sell agreement entered into before Oct. 8, 1990, not subject to valuation restrictions of I.R.C. Sec. 2703; such agreements not subject to I.R.C. Sec. 2703 if not substantially modified after Oct. 8, 1990; here, agreement modified to extend repayment term and IRS viewed extension as merely de minimis change to quality, timing or value of rights of parties to agreement because agreement required reasonable interest rate to be paid; agreement also modified to specify that "prime rate" is rate to be adjusted semiannually, and this was also not substantial modification because resulting payments would more closely approximate fair market value; requirements of Treas. Reg. Sec. 20.2031-2(h) must still be satisfied to control valuation issues at death).
(case involves plaintiff's motion to appoint counsel for himself and two estates and a trust; while plaintiff can proceed pro se on his own behalf, he cannot do so when an estate or trust has beneficiaries other than the plaintiff because doing so would constitute the unauthorized practice of law; court cannot appoint counsel in civil cases; plaintiff given until Jan. 29, 2013 to retain counsel).
(married couple gifted membership units in LLC to children and grandchildren; transfers made in accordance with dollar value of gifts and were determined by a fraction (numerator was state dollar amount and denominator was value of entire company as determined by IRS or court); IRS claimed gifts were of fixed fractional interests in LLC and, as a result, LLC unit value understated; court determined that defined value clause reallocated LLC membership units among parties in conformance with formula in which unit value as of transfer date was "unknown constant"; Proctor (142 F.2d 824 (4th Cir. 1944) not controlling; McCord (5th Cir.), Christiansen (8th Cir.) and Petter (9th Cir.) controlling, each of which involved use of a defined value clause providing that any amount later determined to exceed the stated gift value passed to charity; case appealable to 10th Cir. and notice of appeal filed in the Tax Court on August 29, 2012). Further note - On November 9, 2012, the IRS issued a non-acquiescence in the case. AOD 2012-46 IRB.