Source: https://openjurist.org/945/f2d/359
Timestamp: 2020-01-28 01:48:35
Document Index: 394945702

Matched Legal Cases: ['§ 2501', '§ 2503', '§ 25', '§ 25', '§ 25', '§ 55']

945 F. 2d 359 - Heyen v. United States
945 F2d 359 Heyen v. United States
945 F.2d 359
Mary Ann HEYEN, Executrix of the Estate of Jennie Owen,
We review the district court's decision denying a new trial for an abuse of discretion. Patty Precision Prods. Co. v. Brown & Sharpe Mfg. Co., 846 F.2d 1247, 1251 (10th Cir.1988). We will not "make a determination of the sufficiency or weight of the evidence...." Id.
A gift tax will be imposed on any transfers of property by gift. 26 U.S.C. § 2501(a)(1). The tax applies to any transfer, whether direct or indirect, if the gift value is greater than the statutory exclusion amount of $10,000.00. Id. at §§ 2503(b), 2511(a). The language of the gift tax statutes clearly provides that "transfers of property by gift, by whatever means effected, are subject to the federal gift tax." Dickman v. Commissioner, 465 U.S. 330, 334, 104 S.Ct. 1086, 1089, 79 L.Ed.2d 343 (1984); see also Estate of Lang v. Commissioner, 64 T.C. 404, 412 (1975) ("Congress intended to use the term 'gift' in its broadest and most comprehensive sense in the gift tax area."). In order for a gift to be complete, the donor must relinquish dominion and control over the property. 26 C.F.R. § 25.2511-2(b). When the property gifted is stock, the gift is completed when the stock is delivered or is transferred on the books of the corporation into the name of the donee. Id. at § 25.2511-2(h).
Although plaintiff does not dispute the general statutory and regulatory language regarding gifts, she cites to 26 C.F.R. § 25.2511-1(g)(1) as support for her contention that contrary to jury instructions 16 and 17, decedent's intent in making the stock transfers was irrelevant. Section 25.2511-1(g)(1) provides, in relevant part, that:
We agree with the district court's determination that the regulation does not preclude consideration of the decedent's donative intent and subjective motives in determining whether decedent made a gift subject to the gift tax. Heyen, 731 F.Supp. at 1490. Although an absence of proof of donative intent will not necessarily prevent a transfer from being subject to gift tax, Commissioner v. Wemyss, 324 U.S. 303, 306, 65 S.Ct. 652, 654, 89 L.Ed. 958 (1945), when donative intent is present, it suggests there has been a gift. Decedent's initial transfer of stock to nonfamily members is not determinative. Section 25.2511-1(g)(1) does not preclude consideration of decedent's actual intent to transfer the stock to family members, and section 2511(a) requires consideration of whether decedent made an indirect transfer. The evidence at trial indicated decedent intended to transfer the stock to her family rather than to the intermediate recipients. The intermediary recipients only received the stock certificates and signed them in blank so that the stock could be reissued to a member of decedent's family. Decedent merely used those recipients to create gift tax exclusions to avoid paying gift tax on indirect gifts to the actual family member beneficiaries.
Contrary to plaintiff's argument, substance over form analysis applies to gift tax, as well as to income tax, cases. See Chanin v. United States, 393 F.2d 972, 978-80, 183 Ct.Cl. 840 (1968); Vose v. Commissioner, 284 F.2d 65, 68-69 (1st Cir.1960). Actual donees of gift property must be identified, despite the naming by a donor of a beneficiary. See Helvering v. Hutchings, 312 U.S. 393, 61 S.Ct. 653, 85 L.Ed. 909 (1941) (annual gift tax exclusion applied to beneficiaries of trust, not trust); Schultz v. United States, 493 F.2d 1225 (4th Cir.1974) (gifts to children of reciprocal donors treated as gifts to children of donor); Johnson v. Commissioner, 86 F.2d 710 (2d Cir.1936) (intermediary "gift" rejected as sham). Accordingly, the district court did not erroneously instruct the jury.
The district court granted remittitur as to the two transfers only after holding that those two recipients had retained the shares transferred to them. Heyen v. United States, 731 F.Supp. at 1493. The district court did not determine that the other intermediate recipients also could have retained or did retain the stock.
The IRS's determination of value is presumptively correct. Hamm v. Commissioner, 325 F.2d 934, 937 (8th Cir.1963), cert. denied, 377 U.S. 993, 84 S.Ct. 1920, 12 L.Ed.2d 1046 (1964). Because valuation of stock is a question of fact, and not a matter of formula, this court has limited review of the fact findings. Id. at 938.
Because plaintiff failed to prove the deficiency assessment was incorrect, see Jones v. Commissioner, 903 F.2d 1301, 1303 (10th Cir.1990), we will not disturb the jury's verdict.
Section 6653(b) of the Internal Revenue Code permits a penalty for the fraudulent filing of a gift tax return. The IRS bears the burden of proving fraud by clear and convincing evidence. Zell v. Commissioner, 763 F.2d 1139, 1142 (10th Cir.1985). Fraud may never be presumed. Davis v. Commissioner, 184 F.2d 86, 87 (10th Cir.1950).
"Fraud implies bad faith, intentional wrong doing and a sinister motive." Id. "Fraud means 'actual, intentional wrongdoing, and the intent required is the specific purpose to evade a tax believed to be owing.' " Zell, 763 F.2d at 1142-43 (quoting Mitchell v. Commissioner, 118 F.2d 308, 310 (5th Cir.1941); Pavlic v. Commissioner, T.C. Memo. 1984-182). "The required state of mind is one which, 'if translated into action, is well calculated to cheat or deceive the government.' " Id. at 1143 (quoting 10 Mertens, Law of Federal Income Taxation § 55.10 at 46 (1984)). Fraud can be inferred from conduct which would likely have the effect of misleading or concealing. United States v. Walton, 909 F.2d 915, 926 (6th Cir.1990).
As a whole, the time and manner of the transfers and plaintiff's actions, along with her sophistication regarding the tax matters at issue, are consistent with a finding that she intended to evade taxes. See Laurins v. Commissioner, 889 F.2d 910, 913 (9th Cir.1989); Plunkett v. Commissioner, 465 F.2d 299, 303 (7th Cir.1972); Stoltzfus v. United States, 398 F.2d 1002, 1005 (3rd Cir.1968), cert. denied, 393 U.S. 1020, 89 S.Ct. 627, 21 L.Ed.2d 565 (1969). Furthermore, her implausible explanations are additional indications of fraud. See United States v. Walton, 909 F.2d at 926.
Plaintiff contends she is not liable for the fraud penalty because she, after allegedly disclosing everything to her attorney, merely relied on his advice regarding the gift tax return. Even if plaintiff relied on her attorney, the reliance is not a defense to fraud. Cf. United States v. Boyle, 469 U.S. 241, 250-52, 105 S.Ct. 687, 692-93, 83 L.Ed.2d 622 (1985) (taxpayer cannot rely on attorney if taxpayer is competent to determine there is error); Davis v. Commissioner, 184 F.2d at 88 (taxpayer not liable for fraud penalty when taxpayer was unaware return was false and taxpayer had fully disclosed all necessary information to tax expert). Plaintiff knew what she was doing, and any reliance on her attorney was not in good faith. See Heyen, 731 F.Supp. at 1493-94. The jury did not err in finding she was liable for the fraud penalty.