Court Opinion

ID: 4485226
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:17:15.571989+00
Date Added: 2024-06-11T15:03:43.680582
License: Public Domain

Chabot, J., dissenting: Although I agree that it would be satisfying to decide this case for petitioner, I reluctantly conclude that the law is otherwise. Respectfully, I dissent. Regulation The first sentence of section 20.2031-5, Estate Tax Regs., requires "cash belonging to the decedent at the date of his death, whether in his possession or in the possession of another, or deposited with a bank, [to be] included in the decedent’s gross estate.” The second sentence of this regulation provides an exception from this rule in the case of outstanding checks subsequently honored by the bank, but only if the checks are "given in discharge of bona fide legal obligations of the decedent incurred for an adequate and full consideration in money or money’s worth”. The majority make this second sentence "the focal point of [their] inquiry in this case.” (Majority opinion p. 230.) They justify this second sentence because, if the amount of outstanding checks to which the second sentence of the regulation applies were included in the gross estate, then the same amount "would also be deductible under section 2053(a)(3) as claims against the estate, thus creating a 'wash’.” (Majority opinion p. 231.) So far, so good. It is what the majority do next that creates the problem. The majority create a second exception to the general rule of the first sentence, an exception for checks "issued in good faith” (Majority opinion p. 232.) to charitable donees. Firstly, if the majority mean what they say in note 9 of their opinion ("this case presents no occasion to in any way question the validity or even the reasonableness of the regulation”), then they must acknowledge that the first sentence of the regulation requires inclusion of the amount of the checks in the gross estate, and the second sentence’s exception does not apply to these checks.1  Secondly, the most the majority can say about checks to charitable donees is that "inclusion of these checks would at the very least create the possibility that they would qualify as section 2055 charitable deductions, again creating a wash.” (Majority opinion p. 232; emphasis added.) But if the checks here involved would be deductible under section 2055, then petitioner would win its case and we would not have to struggle with the regulation. The second sentence of the regulation merely avoids extra work. The majority’s additional exception actually changes the result, at least in the instant case.2  Thirdly, the majority write a second exception into the regulation (for checks "issued in good faith” to charitable donees) simply because they wish the regulation would have this second exception. We have authority to invalidate a regulation in whole or in part (e.g., BBS Associates, Inc. v. Commissioner, 74 T.C. 1118 (1980), affd. without opinion (3d Cir. 1981); Matheson v. Commissioner, 74 T.C. 836 (1980)), and to interpret regulations, even if contrary to respondent’s interpretation (e.g., Hunt v. Commissioner, 80 T.C. 1126 (1983)). However, we do not have authority to rewrite a regulation simply because we think a different policy is better. E.g., Fulman v. United States, 434 U.S. 528, 536 (1978).3  Estate of Spiegel The majority look to Estate of Spiegel v. Commissioner, 12 T.C. 524 (1949), as justification for their action in the instant case. In Estate of Spiegel, this Court applied the statutory word "payment”. The majority in Estate of Spiegel stressed the fact that the Congress had amended the law to insert that word, "payment”. (12 T.C. at 531-532.) The majority in Estate of Spiegel pointed out that, in Estate of Bradley v. Commissioner, 19 B.T.A. 49 (1930), affd. 56 F.2d 728 (6th Cir. 1932), we had held that a taxpayer was entitled to a deduction for "Taxes paid * * * within the taxable year” in the year in which the taxpayer’s check was delivered to the county tax official. (12 T.C. at 530.) The majority in Estate of Spiegel pointed out that, "both commercial usage and legal authority thereafter [i.e., after adoption of the Uniform Negotiable Instruments Law] considered a payment by check as at least 'conditional payment.’ ” (12 T.C. at 526.) The majority in Estate of Spiegel pointed to Federal court opinions of four Circuit Courts of Appeals, and opinions of State courts from North Carolina, New York, Minnesota, Utah, Pennsylvania, California, Texas, and Illinois indicating that in a variety of contexts, payment is treated as having been made at the time the payor’s check is delivered. (12 T.C. at 527-529.) Firstly, the statutory language in the instant case is different from what we faced in Estate of Spiegel-, the question before us is not whether decedent made "payment” of contributions before her death but rather it is whether she still had an "interest” in the full amount in her checking account at the time of her death. Secondly, Estate of Spiegel was an income tax itemized-deduction case in which we relied on Estate of Bradley, an earlier income tax itemized-deduction case interpreting the word "paid”. In the instant case, the majority do not point to a single instance of an estate tax case (or a gift tax case or, for that matter, an income tax case)4 dealing with when a person no longer has an "interest” in property. Thirdly, the majority in the instant case do not point to "commercial usage” or "legal authority” or Federal courts or State courts holding, or even stating, that the writer of a check no longer has an interest in the funds represented by that check. Indeed, writers of checks are permitted to stop payment on checks they have written. Conn. Gen. Stat. Ann. sec. 42a-4-403(i) (West 1960). Not only that, but the general rule is that an estate is permitted to recover the proceeds of a check given by a person as a gift, but which was not cashed until after the person’s death.5  Fourthly, as Judge Whitaker points out in his dissenting opinion, infra, even if the payments by the bank in January 1974 are treated as having depleted decedent’s account in December 1973, petitioner would then be obligated to include in the gross estate the value of its right to recover the proceeds of the checks. Conclusion The majority have determined what result they wish to reach. In order to reach that result, (1) they ignore the language of the statute, (2) they rewrite a regulation (all the while protesting that the regulation is reasonable and valid), and (3) they draw comfort from a closely reasoned and well-supported case while ignoring that case’s reasoning, and provide, in the instant case, absolutely nothing by way of support for their interpretation. The majority have taken what appears to be a hard case and have succeeded in making bad law. Since it does not appear that the amount of the checks, if includable in the gross estate, would be deductible under section 2055 or section 2053(a)(3), I cannot concur in the result and so must dissent. Parker, J., agrees with this dissent.  The majority have found (Majority opinion p. 229.) "None of the checks were contracted for, nor were any made for, an adequate and full consideration in money or money’s worth.” The majority have concluded (Majority opinion p. 231.) "it seems indisputable that no pledges were intended and therefore that the checks in question were not given in discharge of bona fide legal obligations of the decedent”. Accordingly, it is clear that the amount of the checks does not meet the requirements for exclusion from the gross estate under sec. 20.2031-5, Estate Tax Regs, (as promulgated by the Department of the Treasury); also this amount is not deductible under sec. 2053(a)(3) as a claim against the estate. See, e.g., United States v. Stapf 375 U.S. 118, 130-131 (1963); Estate of Theis v. Commissioner, 81 T.C. 741, 745 (1983); Estate of Greenberg v. Commissioner, 76 T.C. 680, 683 (1981).   In order to be allowed a deduction under sec. 2055, petitioner must show that, with respect to the facts as of the date of decedent’s death, the possibility of the charities’ not receiving and keeping the money represented by the checks is so remote as to be negligible. Estate of Kunkel v. United States, 689 F.2d 408, 414 (3d Cir. 1982); Connecticut Bank & Trust Co. v. United States, 439 F.2d 931, 935 (2d Cir. 1971); Estate of Woodworth v. Commissioner, 47 T.C. 193,196-197 (1966); sec. 20.2055-2(b), Estate Tax Regs. See Rand v. United States, 445 F.2d 1166 (2d Cir. 1971), discussed in the majority’s opinion (pp. 236-238 supra). Petitioner has failed to make the necessary showing.   "But, as we have indicated, the issue before us is not how we might resolve the statutory ambiguity in the first instance, but whether there is any reasonable basis for the resolution embodied in the Commissioner’s Regulation.” (Emphasis in original.) Since the majority agree that the regulation is valid and reasonable, we ought not modify the regulation to accord with our view of what might be even more reasonable.   See United States v. Davis, 370 U.S. 65, 69 n. 6 (1962), regarding the hazards of applying estate and gift tax law concepts to the interpretation of the income tax laws.   See note 4 in the dissenting opinion of Judge Whitaker, infra.