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First Victoria Nat'l Bank v. United States - 620 F.2d 1096 (5th Cir. 1980)

Rule:

Rice acreage history is not only devisable and descendible, but also transferable inter vivos. When an interest possesses these attributes, there can be no doubt that its value must be included in the owner's estate, for the focus of the estate tax is on the passage of an interest at death.

Facts:

Defendant-appellant federal government asserted that the gross estate of decedent, J. Babb, included the Babb's interests in a rice allotment program. Plaintiff-appellee First Victoria National Bank, which served as the executor of Babb's estate, paid, under protest, a tax deficiency. In its claim to recover the deficiency, the Bank asserted the rice allotment system created no "property" possessed by decedent on the date of his death, and, alternatively, that if any such "property" was includable in the estate, the "property" had no market value on the date of his death. The claim was denied, and this suit was filed by appellee in federal district court, which granted appellee's motion for summary judgment. The government challenged the judgment, contending that the interests in the rice allotment program were property within the meaning of the relevant tax statutes.

Issue:

Does "rice history acreage" interests under the system of rice allotments established by sections 351 to 356 of the Agricultural Adjustment Act of 1938 constitute "property" includable in a decedent's gross estate under the Internal Revenue Code of 1954?

Answer:

Yes

Conclusion:

The case presented a question of first impression: whether "rice history acreage" interests under the system of rice allotments established by sections 351 to 356 of the Agricultural Adjustment Act of 1938 constitute "property" includable in a decedent's gross estate under the Internal Revenue Code of 1954. Looking to historical treatment of the concept, the United States Court of Appeals noted that "property" evolves over time. It can be described as the bundle of rights, attached to things conferred by law or custom, or as everything of value which a person owns that is or may be the subject of sale or exchange. The Court found that "rice history acreage" was property includable in a decedent's estate. The Court agreed with defendant-appellant government's contentions, finding that the allotment was taxable because it was devisable, descendible, and transferable inter vivos. Further, the interest in the rice allotment was "property" within the meaning of estate tax provisions because possession of the interests were retainable by Babb’s heirs by filing requisite documentation and because Babb’s heirs also could have sold the allotment. Accordingly, the Court reversed the judgment of the trial court.

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