Estate of Burgess v. Commissioner

Grafton Burgess received several parcels of property from his mother. In his will, Burgess left his mother a life interest in some of those same parcels, with the remainder interest in the properties going to two churches after the mother’s death. Burgess died while his mother was still alive. After Burgess’s death, his brother filed a lawsuit contesting the validity of the initial parcel transfers from their mother to Burgess. The lawsuit settled with the parties agreeing to redistribute the parcels’ property interests, including transferring fee-simple ownership of some parcels directly to the two churches. In its federal estate tax return, Burgess’s estate (plaintiff) claimed that the fee-simple property transfers to the churches were deductible charitable transfers. The federal government (defendant) determined that the transfers were not deductible because the estate could not claim the tax benefits of a transfer that was not an inheritance. Although a fee-simple transfer to churches could be a deductible transfer if it happened as part of an inheritance, the estate’s transfer to the churches occurred due to a dispute about a matter that predated the will, not through an inheritance from Burgess. The estate petitioned for a new determination. The district court ruled that the deductions were not allowed, and the estate appealed to the Fourth Circuit.