Estate of Flandreau v. Commissioner
United States Court of Appeals for the Second Circuit
994 F.2d 91 (1993)
- Written by Joe Cox, JD
Facts
Lulu Flandreau made $102,000 worth of gifts to her two sons and their wives from 1970 through 1972. She paid only $126 in federal gift taxes, as all but two transfers were made under the annual gift-tax exclusion then in effect. But each recipient transferred the money back to Flandreau in exchange for promissory notes for the amount just gifted. The notes were payable in 1995 or on Flandreau’s death. When she died in 1986, Flandreau had not repaid any of the money due under the notes. Her estate (plaintiff) claimed a tax deduction of $102,000, asserting that the notes were bona fide claims against the estate. The government (defendant) disagreed, arguing that the debts were not bona fide debts for adequate and full consideration but were just circular transfers of money between the children and Flandreau. Given a familial relationship, the onus was on the estate to establish a legitimate expectation of repayment and intent to enforce the debt in question. The tax court ruled for the government, and the estate appealed.
Rule of Law
Issue
Holding and Reasoning (Loken, J.)
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