Kennedy v. Commissioner
United States Court of Appeals for the Seventh Circuit
804 F.2d 1332 (1986)
- Written by Daniel Clark, JD
Facts
In 1953, Frank Kennedy gifted his wife, Pearl Kennedy (plaintiff), a one-half interest in a joint tenancy with a right of survivorship. Frank was the other joint tenant, and he also had a right of survivorship. Under state property law, each joint tenant had a unilateral right to partition the property. If either Pearl or Frank had exercised that power, the rights of survivorship would have terminated. Frank died in 1978. Pearl disclaimed her right of survivorship, and Frank’s one-half interest passed to the couple’s daughter, Marsha. The Internal Revenue Service (IRS) (defendant) treated the passing of Frank’s one-half interest to Marsha as a taxable gift from Pearl. According to the IRS, Pearl had received her right of survivorship as a gift in 1953. The IRS determined that Pearl’s disclaimer 25 years later was not timely. Pearl challenged the IRS’s determination, arguing that she did not receive the interest that passed to Marsha until Frank’s death. According to Pearl, her power to disclaim her gift of that interest did not begin until Frank died. So, Pearl argued, her disclaimer was timely, and Marsha’s interest should have been treated as having come directly from Frank. The tax court agreed with the IRS’s analysis, and Pearl appealed.
Rule of Law
Issue
Holding and Reasoning (Easterbrook, J.)
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