Ahmanson Foundation v. United States

Majority - WALLACE, Circuit Judge

1. Yes, the transfers of HFA stock to Ahmanco and Ahmanco to beneficiaries must be considered an integrated transfer at the moment of death for gross estate valuation purposes. The value is determined at the moment of death, taking into account pre-distribution transformations, such as Ahmanco acquiring the HFA shares. However, the valuation of property in the gross estate should not take into account the fact that a testator's unitary holding has become divided among two or more beneficiaries, as the estate tax is on the privilege of passing property, not receiving it. Allowing such a post-death division to diminish value would invite abuse by facilitating artificial tax-avoidance schemes. Therefore, the 100 shares of Ahmanco stock (representing the value of the 600 HFA shares) should be viewed as one block in the hands of the testator, undiminished by their subsequent partition. 2. No, the district court did not clearly err in finding that no control premium should be applied to the 600 HFA shares. Despite these shares constituting a controlling interest, expert testimony indicated that, due to the highly regulated nature of the savings and loan industry and the existing good management of the Ahmanson companies, a hypothetical buyer would not find sufficient economic benefit beyond that of owning an equal number of nonvoting shares to warrant paying a control premium. 3. No, a charitable deduction should not be reduced or denied due to the mere possibility of an unsound legal challenge to the testator’s dispositions or the probability of a settlement affecting the charitable gift. The court reasoned that penalizing an estate plan for the remote possibility of judicial error or potential settlement, however carefully drawn, would undermine Congress’s purpose in encouraging charitable bequests. An actual settlement that reduces the gift to charity will, however, reduce the charitable deduction accordingly. 4. No, the valuation of property for a charitable deduction is not necessarily the same as its valuation for inclusion in the gross estate. While the gross estate must value assets as a block, considering them as they were in the hands of the testator to prevent artificial valuation reductions, the charitable deduction must be computed based on what the charity actually receives. If the testamentary plan diminishes the value of the property to the charity, for example, by severing voting power from economic entitlement, the deduction must reflect this reduced value. The district court erred by not distinguishing between these two valuation purposes and applying the same method. 5. No, a payment to a surviving spouse in settlement of claims against the estate only qualifies for the marital deduction or community property exclusion if the spouse had an enforceable right to that property under state law, as correctly interpreted. A good faith, arm's-length settlement is not sufficient on its own to establish deductibility. The court relied on Commissioner v. Estate of Bosch, which held that federal courts are not bound by state trial court determinations on state law unless rendered by the state's highest court, and applied this principle to settlements, rejecting the idea that a bona fide settlement alone suffices. The matter was remanded to determine Mrs. Ahmanson's enforceable rights under California law. 6. Yes, in a tax refund suit, when the government asserts an equitable setoff defense, it bears a special, threshold burden of 'going forward' to show that its claim has sufficient substance and is made in good faith, not for improper purposes of deterrence or harassment. Once the government establishes this threshold, the burden of going forward and persuasion on the setoff amount shifts back to the taxpayer. The government met this burden in the present case by demonstrating a substantial issue regarding the marital deduction based on the Bosch case and the testamentary instruments.