Estate of Shepherd v. Commissioner

1989 T.C. Memo. 610, 58 T.C.M. 671, 1989 Tax Ct. Memo LEXIS 610
CourtUnited States Tax Court
DecidedNovember 9, 1989
DocketDocket No. 8873-88
StatusUnpublished

This text of 1989 T.C. Memo. 610 (Estate of Shepherd v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Estate of Shepherd v. Commissioner, 1989 T.C. Memo. 610, 58 T.C.M. 671, 1989 Tax Ct. Memo LEXIS 610 (tax 1989).

Opinion

ESTATE OF CORINNE ALLEN SHEPHERD, DECEASED, CHARLES SHEPHERD, INDEPENDENT EXECUTOR, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Estate of Shepherd v. Commissioner
Docket No. 8873-88
United States Tax Court
T.C. Memo 1989-610; 1989 Tax Ct. Memo LEXIS 610; 58 T.C.M. (CCH) 671; T.C.M. (RIA) 89610;
November 9, 1989
Bryan Healer, for the petitioner.
Shelley D. Turner, for the respondent.

TANNENWALD

MEMORANDUM OPINION

TANNENWALD, Judge: Respondent determined a deficiency of $ 12,164.64 in the Federal estate taxes of the Estate of Corinne Allen Shepherd (decedent). After concessions, the sole issue for decision is whether the property interest passing to decedent's surviving spouse is a terminable interest and therefore does not qualify for the marital deduction.

All of the facts have been stipulated, and the stipulation of facts and the attached exhibits are incorporated herein by reference.

Decedent died testate on May 11, 1985, a resident of Texas. Decedent's will was filed with the County Clerk, Coleman County, Texas, on May 16, 1985, and was admitted to probate on May 28, 1985. She was survived by her*612 spouse, Charles Shepherd who was appointed independent executor by the will. Charles Shepherd maintained his legal residence in Coleman, Texas, at the time of the filing of the petition herein.

Decedent's will provided in part:

III

I do hereby give, devise and bequeath all of my property, both real, personal and mixed, community and separate and wherever located, unto my husband, Charles Shepherd, in fee simple.

IV

In the event that I should die in the same common accident or disaster with my husband, Charles Shepherd, or should the said Charles Shepherd predecease me or die before this will is admitted to probate, then in such events I give, devise, and bequeath all of my property, both real, personal and mixed, community and separate, and wherever located in equal shares as follows:

(a) To my daughter, Kathleen Ann Adams, an undivided one-half (1/2) interest.

(b) To my son, Charles Douglas Shepherd, an undivided one-half (1/2) interest.

It is only in the event that my husband should predecease me, or in the event that we should die in the same accident or disaster or in the further event that he should die before this will is admitted to probate, that I devise*613 any portion of my estate to anyone except my husband.

V

I appoint my husband, Charles Shepherd, as Independent Executor of this my last will and testament, and I direct that no bond or other form of security shall ever be required of him to act in such capacity.

In the event that my husband should predecease me or should he die before this will is admitted to probate, or should he fail to qualify or become unable to act as Executor, I appoint my son, Charles Douglas Shepherd, as Independent Executor, and my daughter, Kathleen Ann Adams, as Independent Executrix, of this my last will and testament and direct that no bond or other form of security shall ever be required of either of said parties to act in such capacity. [Emphasis supplied.]

A marital deduction of $ 504,317.60 was claimed on the Federal estate tax return. Respondent disallowed the deduction on the ground that the interest of Charles Shepherd, as the surviving spouse, is a terminable interest as defined in section 2056. 1 Under certain circumstances, section 2056 allows a deduction from the gross estate for the value of property passing to the surviving spouse. Sec. 2056(a). If the spouse's interest in*614 the property is a terminable interest, that is, it will terminate either on the lapse of time (for example, a life estate) or on the occurrence or nonoccurrence of a event, generally no deduction is allowed. Sec. 2056(b)(1). Section 2056(b)(3) provides an exception to the terminable interest rule if the interest passing to the surviving spouse is terminable only because the interest is conditioned on the spouse's survival for a period not to exceed 6 months from the date of decedent's death, or the survival of a common disaster, and the termination or failure does not in fact occur.

Qualification for the marital deduction must be determined as of the time of the death, Jackson v. United States, 376 U.S. 503, 508 (1964), subject to the exception provided by section 2056(b)(3). Thus, the fact that Charles Shepherd survived until the will was admitted to probate is not determinative of the question presented.

The nature of an interest in property is a matter*615 of State law, and therefore we look to Texas law to determine whether the disposition to Charles Shepherd under Article IV of decedent's will might have terminated or failed more than 6 months after the decedent's death. See Estate of Harmon v. Commissioner, 84 T.C. 329, 333 (1985). In making this determination, we are bound by the decisions of the Supreme Court of Texas with proper regard to relevant rulings of inferior courts of the State. Commissioner v. Estate of Bosch, 387 U.S. 456, 465 (1967).

Under Texas law, a will can be admitted to probate at anytime within 4 years after death. See Texas Probate Code Ann. sec. 73

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Related

Jackson v. United States
376 U.S. 503 (Supreme Court, 1964)
Commissioner v. Estate of Bosch
387 U.S. 456 (Supreme Court, 1967)
United States v. Robert L. Companion
545 F.2d 308 (Second Circuit, 1976)
Silvey v. United States
265 F. Supp. 235 (N.D. Alabama, 1966)
Rowe v. Palmer
277 S.W.2d 781 (Court of Appeals of Texas, 1955)
Corpus Christi Bank and Trust v. Alice National Bank
444 S.W.2d 632 (Texas Supreme Court, 1969)
Kelley v. Marlin
714 S.W.2d 303 (Texas Supreme Court, 1986)
Harper v. Swoveland
591 S.W.2d 629 (Court of Appeals of Texas, 1979)
Podgoursky v. Frost
394 S.W.2d 185 (Court of Appeals of Texas, 1965)
Jones v. Walter
436 S.W.2d 130 (Texas Supreme Court, 1968)
Faris v. Faris
138 S.W.2d 830 (Court of Appeals of Texas, 1940)
Estate of Fried v. Commissioner
54 T.C. 805 (U.S. Tax Court, 1970)
Estate of Mackie v. Commissioner
64 T.C. 308 (U.S. Tax Court, 1975)
Estate of Harmon v. Commissioner
84 T.C. No. 23 (U.S. Tax Court, 1985)
Meadows v. Russell
203 S.W.2d 647 (Court of Appeals of Texas, 1947)

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Bluebook (online)
1989 T.C. Memo. 610, 58 T.C.M. 671, 1989 Tax Ct. Memo LEXIS 610, Counsel Stack Legal Research, https://law.counselstack.com/opinion/estate-of-shepherd-v-commissioner-tax-1989.