Estate of Swanson v. United States

Sylvia Swanson was the trustee and beneficiary of a trust that her late husband created for her. When Swanson became legally blind in 1985, she had her nephew, Dean Stubblefield, take over her affairs. In 1990, as her health was declining, Swanson created a durable power of attorney, granting Stubblefield authority to dispose of her assets using his sole discretion. The power of attorney did not specifically authorize Stubblefield to make gifts. Leading up to Swanson’s death, Stubblefield make 38 gifts of $10,000 each to himself and 37 other recipients, claiming that the gifts were intended to reduce estate-tax liability. The Internal Revenue Service (IRS) (defendant) determined that the $380,000 was countable in Swanson's gross estate under § 2038 of the Internal Revenue Code, which provided that revocable transfers of property were countable in a decedent’s estate. The IRS claimed that Stubblefield’s gifts were revocable, and thus includable in the estate, because they were not authorized by the power of attorney. Swanson’s estate (plaintiff) paid the tax levied but claimed a refund, which the IRS denied. The estate then sued in the United States Court of Federal Claims, but that court found that the gifts were invalid under California law because the power of attorney did not expressly grant gifting authority, and therefore were revocable and countable in the gross estate. The estate appealed.