Estate of Cherry v. United States
United States District Court for the Western District of Kentucky
133 F. Supp. 2d 949 (2001)
- Written by Joe Cox, JD
Facts
Wendell Cherry created a trust in 1968 that became irrevocable upon his death. Cherry married Dorothy Morton (plaintiff, as executrix of the estate of Cherry) in 1977 and was married to her until Cherry died in 1991. Morton and the trust were beneficiaries of Cherry’s estate. Cherry had deferred benefits totaling nearly $7 million that were payable only by virtue of his death, and these payments were agreed to be income in respect of a decedent (IRD). Both the estate and the government (defendant) also agreed that the amount Morton could deduct was to be determined by comparing the actual estate tax to tax on an estate that did not include the IRD. The actual estate tax paid was over $9.5 million. Morton argued that the calculation should be made with the IRD amount subtracted from the gross estate and the estate tax then calculated without adjusting the marital deduction. Morton argued that another calculation should then be made to adjust for the residuary marital deduction, because to rule otherwise would place the estate in a marginal tax bracket in excess of 100% on preresiduary bequests. However, the government argued that Morton failed to remove IRD from the gross estate, which led to an inflated marital deduction and yielded a result that the deduction was greater than the IRD amount itself.
Rule of Law
Issue
Holding and Reasoning (Simpson, C.J.)
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