please the court my name is michael gillette i'm appearing on behalf of the dear insurer state in this charitable donation matter the court's questions to counsel in the earlier cases demonstrate that the court has read the briefing carefully and so i will try to avoid repeating what i've said in the brief and offer myself mostly to answer questions after this hopefully permissible introductory set of remarks the question here is whether the value of the bequest to the charities in this case is to be established as of the date to the death of the test state or or whether instead it is to be established at some later date the problem with the government's position is that while the government argues for a later date there is no principle basis that the government offers which would permit us to figure out what date that would be at least with respect to this to the precedent that we've cited which comes from most of the circuits in includes the probes and and other cases from this circuit  appraisals basically they came out within a day of each other appraising it completely differently i mean that's that's what you've got your i need to point out a truism here which doesn't it doesn't leap out at one but you need to recognise the appraisals were of the of the particular matters at two different times they came out essentially the same day because  well let's let's back up just a step from that and the the decision of the tax court part of which we lost but the decision of the tax court on the facts indicates that what was actually done eventually it was not part of the test h staters plan it was not something that had been written down ahead of time and indeed her death occurred several years after that the trust instrument had first been devised and then the decision was taken later for valid tax reasons as the trial court concluded to change to a subchapter s corporation the difference in the valuation may not be explainable but why that is attributable to the a state is what's missing in the government's argument eugene dear injure is the trustee yes it's the principle person across structured it did allow for mr for eugene derringer to accomplish what he did well first of all i don't know that what he accomplished was impressive bill but let me point out to you with respect your honor that that authority exists for every trustee there was nothing peculiar about eugene dear injures trustee authority under the trust instrument and he had only the powers that a trustee normally has under oregon law and the obligation he had was to preserve the value of the trust estate if he has failed in that regard there may be remedies both for the ultimate recipient of the bequest and there may even be remedies for the i r s in terms of trying to figure out what value he got out of that and treating that as income and and asking him to pay income tax on it but that doesn't that doesn't at all i respectfully submit change the fact that if this is an open  fact so was everybody else with respect to that choice with respect to the corporation yes if i understand your honour's yes well if you're just so he has different yeah different worlds that is i mean he was a trustee he was the key person in each one of these entities but he had separate sort of like duties each one of these interviews is that duties is the correct word not roles he was a trustee everywhere you know he did but he had separate duties but they all came down to the same thing they all came down to a requirement that he preserve that asset to the extent it was possible to do so for the benefit alternately of the charitable recipients of the bequest and if he made a mistake with respect to that as appeared to think that he did if he made a mistake with respect to that he may be responsible as i said to the beneficiaries but his was that was not an act of the estate so  if you have the value at the date of death which is how it's generally accepted to be in this case the stock was valued as a majority interest correct correct closely held corporations you take a bigger haircut because of the native of the holding of the stock but that just didn't happen here and so if the if it were determined that the data valuation should be the date of death has that ship passed on how the stock is valued you see what i'm saying i don't well if if it's determined that the dated death is the date of valuation is the valuation that was given what is firmly established now or is that still subject to attack by the i r s because it was a minority in majority interest and there wasn't a bigger haircut the i r s specifically conceded that there was no issue that i think my panel panel co panelists are kind of getting at is there's there does seem to be this lurking conflict or dealing here is the penalty for self dealing something analogy to say the estate has a house and six months later the heirs trashed the house but you still value the house as of the date of the death not as of the date that the house was trashed with respect your honor that's precisely the point if i morning your honor stud was running for the commissioner of internal revenue you know as the issue in this case is whether the state can take a charitable deduction for the value of a controlling stake in a company where the charity actually receives entirely different less valuable assets and more specifically as your honor so alluded to already this morning what happened here was that the estate valued the controlling stake in the company at over thirteen million dollars and transferred only seven million dollars and other assets to the charity meanwhile control of the company went to mr eugene derringer and his brothers at the time of course as judge paez was pointing out mr derringer was the executor of the state he was the trustee of the trust he was the trustee of the foundation and he was the president of the company wasn't the real problem the d p i redemption value of the stocks as a minority interest and that's undervalued the stock as opposed to the state over valuing the stock that is the key factual problem in the case your honor yes and part of the factual dispute below the main focus was on what caused this change in the valuation and so under your interpretation how far in the future do can we look five years down the road if they do something i mean if you don't cut it off at that as of the date of death what factors do you look at and how far when do you value we're just looking at when the charity received it at the time they received it and here that was when they  cases they're primarily talking about situations where you have a donation to a life beneficiary for example  widow a daughter or a son and then the remainder goes to the charity after they die so the question comes up how do you value these things and for those purposes the trust a lot of cases standpoint we're going to go with the da death it's a bright line rule it's clean easy to follow instead of second guessing things down the line at various points you could have but there's never a question in these cases of the charity not receiving the interest that it was supposed receive under the will it's always going to receive that residuary interest and on this point i think this court's decision in a state of sched really clarifie how this should apply here because it was in that case there's the deceiving state have claimed credit for tax and payments made by her husband's estate there was a change in the law the payment was refunded  seasons the state still tried to claim the credit and the commissioner disallowed it the decisions that the state argued that if the trust applied and they argued that the death freezes the state's tax obligation and any credit she was entitle to as of the date of her death should be allowed without regard to subsequent events this court rejected that argument it said if the can trust statements are not formulations  simply statements of the understanding of the courts that the general intention of congress is that the federal estate tax shall be computed on the basis of the state's value at the moment the taxable event i e death but congress did not intend to make events at the date of death invariably determinative in computing the federal or state tax obligation and when it appears that the intent of congress will be served by considering events subsequent to death for this purpose the courts have not hesitated to do so and we would submit that this is one of those instances your honor when you look at other cases such as sages est and amundsen which talk about the principle that you can't take a deduction for more than the charities actually receive one of the things that seems to really distinguish ahmanson is that the testamentary plan was what played out  reduce the value in here we don't have that we have a straight up donation so i can't really see that we can take and cases where actually the deceiving kind of set out an outline the plan the residue of his estate to a scottish lord for charitable purposes the widow then came in and contested the husband's will the lord then essentially the charity settled the claim after he received the money for those charitable purposes so it wasn't the state or executor coming in and settling it there and so and those circumstances even though the estate then claimed one hundred percent of the residue that went to the lord the commissioner said no you have to discount that twenty five percent in the third circuit agreed in that case and so sages a state and its progeny sand for the proposition that the amount to be deducted for testamentary charitable gifts must be computed on the basis of what the charity actually receives so it did take into consideration the events isn't that case also a little bit like ahmanson in that the testamentary plan permitted these various actions so it all kind of stems back to the testamentary plan and so that commission it would be justified in saying well we're going to not let that jigger the value of the deduction or the transfer and we just don't  plan was that everything was supposed to go to the scottish lord for the purposes of charity it was the lord or simply the charity then after the fact that went back and said ok we're going to cut a deal with the widow resulted in a treasury regulation that basically encapsulated that whole notion but that doesn't that treasury regulation is not really what applies here is that right we disagree with that your honor our  regulation does apply here twenty point five five yes your honor and so that regulation limits a charitable deduction if the trustees empowered to divert assets so the question here is whether the trustee has that power in the lead of these empowered to divert assets the way you would get that power would be from testamentary document isn't that it would be from the state plan which here wasn't just the trust agreement it was the fact that mr derringer was the executor of the will he was the trustee of the trust he's the trustee of the foundation he's the president of the company and if you look back at some of the documents in the record going back to his attorney's memo mr kirsten's from two thousand and said that the whole idea behind this estate plan was to allow mr derringer eugene to quote control the process and that's at excerpts of record to ninety so this is really a situation where it's not just that eugene geringer is worrying more than one hat he's wearing all the hats here iran are they really his his mother the deceit in gave him total control over this process so we ask you the question that i asked your colleague here if it were determined that the value is the date of death is there any option that the service still has a piece of the kind of the self dealing penalty and eugene or is that an option that's already been waived or otherwise you know thrown out it's possible ya know we don't really have that in the records in this case  but as a matter of statutory applicability would it be potentially applicable to him possibly fraud it does appear from the record we do have information saying that they were attempting to comply with those regulations by we have the is broader than effectively what you said was broader than just the document itself because he was in all these key positions sorry that you mean is that the essence of your point with yes he is he throughout all of this exactly your honor yes that's our point it's that you have to consider the fact that he had all these positions in the various documents that made up the estate planning and was already the president of the company and i see him over time most of your honors or have no question small restaurant brief the i r s it indicated it wasn't it wasn't claiming that the reg applied so i don't like them to at least be consistent about that beyond that the rest of the point is made by the last question put by by judge i as this situation is a commonplace in closely held corporations and you would wipe out an awful lot of permissible things if you say the mere fact that the person has always been in charge continues to be in charge with a legal obligation to preserve the race of the trust for the ultimate beneficiary if that fact opens up this discussion and will never be finished all right thank you thank both of you for the both the