Heyen v. United States

Jennie Owen wanted to give her family members over $250,000 in stock. However, if a donor transferred gifts to an individual that totaled more than $10,000 in a given year, federal law imposed gift taxes on any amount over the $10,000 threshold. In order to avoid paying gift taxes, Owen broke her gift into 29 stock bundles, each worth less than $10,000. Owen then gave one stock bundle to each of 29 nonfamily recipients. Owen intended for each of the 29 recipients to regift the stock to Owen’s family members. Although two of the initial recipients kept Owen’s stock gift, 27 recipients transferred their stock bundles to Owen’s family as expected. Under this arrangement, no donor ever directly gave any one recipient more than $10,000 in gifts. Owen died, and her daughter, Mary Ann Heyen (plaintiff), was the executor of Owen’s estate. Heyen filed a gift-tax return for the estate that did not pay taxes on any of the 29 stock transfers. The federal government (defendant) determined that Owen had indirectly transferred the stock as a gift to her family members and owed gift taxes. The government also found that Heyen had attempted to defraud the government out of gift taxes when she filed the gift-tax return and assessed a civil fraud penalty against her. Heyen filed a lawsuit in federal district court, seeking a refund of the gift taxes and objecting to the fraud penalty. A jury returned a verdict for the government, and Heyen appealed.