Law School Case Brief
Commissioner v. Estate of Bosch - 387 U.S. 456
Where the federal estate tax liability turns upon the character of a property interest held and transferred by the decedent under state law, federal authorities are not bound by the determination made of such property interest by a state trial court.
The controversy involved two different cases in which different panels of the same court of appeals had decided the cases differently. In No. 673, the Tax Court of the United States, in proceedings for the determination of the question whether the trust corpus involved qualified for marital deduction, accepted a determination of a New York state trial court that the widow's release of her general power of appointment was a nullity, as authoritative exposition of New York law, and permitted the deduction. (43 T Ct 120.) The Court of Appeals for the Second Circuit affirmed on the ground that the New York judgment authoritatively settled the rights of the parties. In No. 240, an executor's action in the United States District Court for the District of Connecticut for refund of estate taxes, which also involved the marital deduction, the decisive question of state law was the effectiveness of a provision in the decedent's will that the provisions of any state proration statute should be without effect in the settlement of his estate. Upon the executor's application, a Connecticut state probate court found that the decedent's will did not negate the application of the state proration statute. The district court entered summary judgment in favor of the executor on the question of proration of estate taxes (222 F Supp 446), but another panel of the Court of Appeals for the Second Circuit reversed (351 F2d 489), agreeing, however, with the district court that the judgment of the state probate court was not binding on the federal court.
Was the federal government in an estate tax controversy conclusively bound by a state trial court adjudication of property rights, when the United States was not made a party to the proceeding?
The Supreme Court of the United States concluded that, where the federal estate tax liability turned upon the character of a property interest held and transferred by the decedent under state law, federal authorities were not bound by the determination made of that property interest by a state trial court. The problem of what effect must be given a state trial court decree where the matter decided there was determinative of federal estate tax consequences had long burdened the bar and the courts. The Court had not addressed itself to the problem for nearly a third of a century. In Freuler v. Helvering, 291 U.S. 35 (1934), the Court declined to find collusion between the parties on the record as presented there, held that a prior in personam judgment in the state court to which the United States was not made a party, "obviously . . . had not the effect of res judicata, and could not furnish the basis for invocation of the full faith and credit clause.” When the application of a federal statute was involved, the decision of a state trial court as to an underlying issue of state law should a fortiori not be controlling. The Court reversed the judgment below in No. 673, and affirmed in No. 240.
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