Source: https://casetext.com/case/greene-v-united-states-22
Timestamp: 2019-06-16 12:56:35
Document Index: 448368275

Matched Legal Cases: ['§ 2056', '§ 313', '§ 863', '§ 313', '§ 238', '§ 313', '§ 313']

Greene v. United States, 476 F.2d 116 | Casetext
476 F.2d 116 (7th Cir. 1973)
Greenev.United States
United States Court of Appeals, Seventh CircuitApr 5, 1973
Scott P. Crampton, Asst. Atty. Gen., Dennis M. Donohue, Atty., Tax Div., Dept. of Justice, Washington, D.C., David J. Cannon, U.S. Atty., Milwaukee, Wis., for defendant-appellee.
Frances Greene, the widow of and executrix under the will of Carl W. Greene, has appealed from the denial of her claim for a refund of a portion of the federal tax paid on her husband's estate, 336 F. Supp. 464 (E.D.Wis. 1971). At issue on this appeal is whether the Commissioner of Internal Revenue correctly determined that the estate taxes on the estate of Carl W. Greene should be paid out of the property passing to his widow.
In resolving the first issue, and in determining whether the estate shall realize a lower marital deduction under 26 U.S.C. § 2056(b)(4)(A) because the estate tax, debts, and administration expenses are subtracted from the gross estate before the marital deduction is computed, we must look to Wisconsin law. Congress has determined that state law should decide upon whom the burden of the federal estate tax should fall, and, consequently, the amount of the marital deduction allowed to a widow taking property through her husband's will. Riggs v. Del Drago, 317 U.S. 95, 97, 63 S.Ct. 109, 87 L.Ed. 106 (1942), Will of Uihlein, 264 Wis. 362, 371-372, 59 N.W.2d 641, 646 (1953).
A person executing a will in Wisconsin has two general options in determining which of his heirs shall bear the burden of the taxes levied against his estate. First, he may provide through his will that certain property shall be utilized for the payment of the taxes. See Wis.Stat. § 313.26 (1969) (This statute, in effect prior to April 1, 1971, has subsequently been amended.). Secondly, he can make no provision for payment and let the tax liability be determined through application of certain statutory and common law rules. See, e.g., Wis.Stat. § 863.11 (1971) (amended version of §§ 313.26-313.28), Estate of Joas, 16 Wis.2d 489, 114 N.W.2d 831 (1962), Estate of Esch, 4 Wis.2d 577, 91 N.W.2d 233 (1958), McGonigal v. Colter, 32 Wis. 614 (1873). Appellant argues that Carl W. Greene in effect made no provisions in his will that any property was to be used to pay the estate taxes. She argues that the property she renounced should therefore be treated as intestate property under Wis.Stat. § 238.135, and that this property should be used first to pay the debts and expenses of the estate under § 313.27 because, in the words of that statute, "the provisions made by will are not sufficient to pay the debt. . . ."
On its face, the first clause of the will appears to be a provision making all of the estate property available for the payment of the estate tax and other debts. We read the direction that the debts be paid "as soon as conveniently may be" as a command that the executrix use whatever property is necessary to pay the estate tax before disposing of the residue of the estate. Wisconsin law makes no distinction between state taxes and the other debts of a decedent. Will of Uihlein, 264 Wis. 362, 376, 59 N.W.2d 641, 648 (1953), cf. Re Doerfler's Estate, 348 Ill. App. 347, 109 N.E.2d 230 (1952). Nor can we ignore the fact that Mr. Greene provided that his wife was to receive all his property after the payment of debts and expenses unless she predeceased him or failed to survive him by 60 days. It is only logical to assume that Mr. Greene realized that his wife would have to pay the estate taxes out of the property passing to her. Will of Cudahy, 251 Wis. 116, 119, 28 N.W.2d 340, 341 (1947). Conversely, the will contains no indication that Mr. Greene contemplated a shift in the estate tax burden should his wife renounce a portion of the property given her under the will.
Appellant has attempted to establish that, despite its appearance, the first clause of the will was mere surplusage without legal effect. See, e. g., Estate of Koebel, 225 Wis. 342, 345, 274 N.W. 262, 264 (1937). We read the cases cited by appellant as merely adhering to the common law rule that the personal property in an estate is to be charged with the payment of debts before the real property is charged, and holding that language similar to that contained in the first clause of Carl Greene's will is insufficient to change this rule. These cases do nothing to undermine the efficacy of a general direction that all the property of a testator be liable for the payment of taxes. In fact, the Wisconsin Supreme Court has recently held that such a general direction is legally effective as a means of directing the payment of estate debts. Estate of Pfaff, 41 Wis.2d 159, 161-162, 163 N.W.2d 140, 141 (1968). We find no reason not to give effect to Mr. Greene's direction for the payment of his debts before the distribution of his property.
We are also cognizant of the provisions of Wis.Stat. § 313.26 which before its 1971 amendment allowed a testitor to designate which property passing under his will should be assessed for the payment of his estate tax. The statute provided:
It follows here then, that when the application of a federal statute is involved, the decision of a state trial court as to an underlying issue of state law should not be controlling . . . If there be no decision by . . . [the highest court of the State] then federal authorities must apply what they find to be the state law after giving "proper regard" to relevant rulings of other courts of the State. In this respect, it may be said to be, in effect, sitting as a state court.