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Estate of Goree v. Commissioner

68 T.C.M. 123 (1994)

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Estate of Goree v. Commissioner

United States Tax Court

68 T.C.M. 123 (1994)

Facts

Robert Goree died intestate, i.e., without a will. Under Alabama state law, half of Goree’s multimillion-dollar assets would go to his wife, and half would be divided among his three minor children. Under federal estate-tax law, the transfers to Goree’s wife qualified for the marital deduction and were tax-free. However, only $600,000 of the transfers to Goree’s children were deductible, and the estate (plaintiff) would have to pay a significant estate tax on the children’s remaining inheritance. In order to avoid paying this tax and preserve more assets for the family’s care, the wife petitioned a state probate court for permission to allow the minor children to disclaim, i.e., renounce, any of their inheritance above the tax-free $600,000 amount. Any validly disclaimed amounts would go to the estate’s residuary and then pass to the wife tax-free. The probate court appointed a guardian ad litem for the children. The guardian initially opposed the disclaimers but withdrew his opposition after (1) Goree’s wife testified that the disclaimed money would allow her to take better care of the children and (2) Goree’s father testified that the children were scheduled to receive other family inheritance money in the future. The probate court found that the disclaimers were in the children’s best interests and allowed them. However, the commissioner of the Internal Revenue Service (commissioner) (defendant) determined that the disclaimers were invalid and that Goree’s estate owed estate taxes on the full amounts that the children should have received. The estate petitioned the United States Tax Court, asking it to affirm the state probate court’s ruling that the disclaimers were valid. In response, the commissioner argued that the state court’s ruling (1) should be reviewed de novo and (2) overturned because the disclaimers helped the estate get more money but left the children with less money, which was not in their best interests.

Rule of Law

Issue

Holding and Reasoning (Wells, J.)

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