T.C. Memo. 2001-206
UNITED STATES TAX COURT
ESTATE OF MARY CATHERINE IX GAYNOR, DECEASED, PAUL GAYNOR,
ADMINISTRATOR d.b.n.c.t.a., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1640-00. Filed August 6, 2001.
Patrick J. Corcoran, for petitioner.
Michael P. Breton, for respondent.
MEMORANDUM OPINION
SWIFT, Judge: Respondent determined a deficiency of
$600,513 in petitioner’s Federal estate tax.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect as of the date of decedent’s
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death, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
After settlement of some issues, the issue remaining for
decision is whether predeath transfers of decedent’s property
with a value of $144,400 and made for no consideration were
revocable under Connecticut law and includable in decedent’s
gross estate under section 2038(a)(1).
Background
This case was submitted fully stipulated under Rule 122.
On June 1, 1996, Mary Catherine IX Gaynor, decedent, died a
resident of Branford, Connecticut.
On October 7, 1986, approximately 10 years prior to
decedent’s death, decedent executed a general power of attorney
(POA) under the Connecticut Statutory Short Form Power of
Attorney Act (the Act), Conn. Gen. Stat. Ann. secs. 1-42 to 1-56
(West 2000). In the POA, decedent appointed an attorney and
decedent’s son, Gerald Gaynor, as attorneys-in-fact to act in
decedent’s stead.
The POA consisted of a standard form POA under Connecticut
law and explicitly authorized decedent’s attorneys-in-fact to act
in decedent’s stead with respect to decedent’s ownership
interests in real estate, chattels and goods, stocks and bonds,
banking, insurance, claims and litigation, personal relationships
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and affairs, military pensions, records, reports and statements,
and “all other matters”.
The POA did not explicitly authorize decedent’s attorneys-
in-fact to make gifts of decedent’s property.
Under the Act, attorneys-in-fact are not explicitly
authorized to make, or prohibited from making, gifts of a
principal’s property.
Section 1-55 of the Act provides that the words “all other
matters” in a POA indicate that the principal authorized “the
agent to act as an alter ego of the principal with respect to any
matters and affairs not enumerated in sections 1-44 to 1-54a,
inclusive, and which the principal can do through an agent.”
In 1995 and 1996, decedent’s attorneys-in-fact made for no
consideration transfers of decedent’s property with a value of
$144,400. The evidence does not indicate to whom the transfers
were made.
As stated, on June 1, 1996, decedent died.
On February 28, 1997, decedent’s Federal estate tax return
was filed by the administrator of the estate, a resident of
Connecticut. On the return, the $144,400 value of the
transferred property was not included in decedent’s gross estate.
Respondent determined that the above transfers of decedent’s
property constituted revocable transfers under Connecticut law
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and that the $144,400 value of the property should be included in
decedent’s gross estate.
Discussion
For Federal estate tax purposes, all interests in property
that a decedent possesses at the time of death are includable in
the gross estate. Sec. 2033; Estate of Jalkut v. Commissioner,
96 T.C. 675, 678 (1991).
Also, the value of property transferred by a decedent prior
to death without consideration and with respect to which a
decedent retains a power to revoke the transfer is includable in
the decedent’s gross estate. Sec. 2038(a)(1); Estate of Swanson
v. United States, 46 Fed. Cl. 388, 391 (2000).
The legal effect of gifts of property made under a POA is
controlled by State law. Morgan v. Commissioner, 309 U.S. 78, 80
(1940); Estate of Swanson v. United States, supra. In the
absence of a decision or interpretation of State law by a State’s
highest court, we look to lower State court rulings and holdings.
Commissioner v. Estate of Bosch, 387 U.S. 456, 465 (1967).
The Supreme Court of Connecticut has not addressed whether
attorneys-in-fact are authorized under the Act to make gifts of
their principal’s property without express language in the POA
authorizing gifts to be made. This issue, however, has been
involved in three opinions of the Connecticut Superior Court,
Judicial District of Hartford-New Britain.
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In Wosczyna v. Estate of Antone, 1994 WL 411298, at *2
(Conn. Super. Ct. July 26, 1994), in a declaratory judgment
action to quiet title to an interest in real property (on motion
for summary judgment to void a transfer made for no consideration
by an attorney-in-fact), the court quoted the following language
of the Act:
“In a statutory short form power of attorney, the
language conferring general authority with respect to
real estate transactions shall be construed to mean
that the principal authorizes the agent: * * * (2) to
sell, to exchange, to convey either with or without
covenants, to quit claim, * * * or otherwise to dispose
of, any estate or interest in land * * *”
With no further analysis, the Connecticut Superior Court
summarily concluded that attorneys-in fact in Connecticut were
not prohibited from making gifts of their principal’s property
and denied the motion for summary judgment. Id. at *3.
In Estate of Antone v. Staphos, 1994 WL 669694, at *2 (Conn.
Super. Ct. Nov. 17, 1994), a subsequent case involving the same
underlying facts as those involved in Wosczyna, the Connecticut
Superior Court acknowledged that the Act might be interpreted to
authorize attorneys-in-fact to make gifts of their principal’s
property. Upon further consideration, however, the Connecticut
Superior Court specifically concluded that, absent express
language in a POA to the contrary, the Act does not authorize
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attorneys-in-fact to make gifts of their principal’s property.
Id. at *3.
The Connecticut Superior Court noted that most courts that
have considered this issue have concluded that under general POAs
attorneys-in-fact do not have the authority to make gifts of
their principal’s property. Id. at *2; see also King v. Bankerd,
492 A.2d 608, 612 (Md. 1985) (and the numerous cases from Alaska
to Utah cited therein); 3 Am. Jur. 2d, Agency, sec. 31 (Supp.
2000).
In discussing the extensive case authority on this issue,
the Connecticut Superior Court emphasized the following policy
considerations that have been recognized: An attorney-in-fact
owes to the principal the highest duty of loyalty; gifts of a
principal’s property generally will be adverse to the interests
of the principal; and, if a principal wished to make a gift of
property, the principal could do so on his or her own. Estate of
Antone v. Staphos, supra at *3; King v. Bankerd, supra at 613.
In Estate of Antone, the Connecticut Superior Court noted
expressly that the broad, “catchall” language in the Act (such as
“otherwise to dispose of”) should not be interpreted to convey a
power to make gifts of a principal’s property. See also Aiello
v. Clark, 680 P.2d 1162, 1165-1166 (Alaska 1984).
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As a result of the above legal analysis, the Connecticut
Superior Court in Estate of Antone, denied a motion for summary
judgment.
Thereafter, the above cases were consolidated for trial and
opinion on the legal issue as to whether attorneys-in-fact were
authorized to make gifts under the Act and on the factual issue
as to whether the attorney-in-fact violated his fiduciary duty to
his principal by making the gifts. Wosczyna v. Estate of Antone,
1996 WL 434261 (Conn. Super. Ct. July 17, 1996). In its opinion,
the Connecticut Superior Court did not decide the legal issue and
simply held that the attorney-in-fact had acted in his own self-
interest, had violated his fiduciary duty of loyalty to his
principal, and that the gift was revocable. Id. at *4.
Petitioner contends that since the broad language of the Act
authorizes attorneys-in-fact to act as “alter egos” of their
principals, decedent’s attorneys-in-fact herein were implicitly
authorized under the Act to make gifts on decedent’s behalf, and
therefore that the $144,400 value of decedent’s transferred
property need not be included in decedent’s gross estate.
Respondent contends that the Act and the POA neither
explicitly nor implicitly authorize decedent’s attorneys-in-fact
to make gifts on decedent’s behalf, and respondent contends that
until decedent’s death the transfers of decedent’s property were
revocable by decedent.
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Absent express language in a POA providing otherwise and
particularly in light of Estate of Antone v. Staphos, supra, and
the persuasive analysis contained therein, we believe that the
Supreme Court of Connecticut would conclude that under the Act a
general POA does not include the power to make an irrevocable
transfer of a principal’s property without consideration.
On brief, petitioner alleges that decedent expressly
authorized and intended decedent’s attorneys-in-fact to make
gifts of decedent’s property and that under Estate of Pruitt v.
Commissioner, T.C. Memo. 2000-287, and Estate of Bronston v.
Commissioner, T.C. Memo. 1988-510, the transfers made by
decedent’s attorneys-in-fact should be treated as irrevocable
gifts.
In Estate of Pruitt and Estate of Bronston, we concluded
that Oregon and New Jersey law, respectively, did not necessarily
prohibit attorneys-in-fact from making gifts in appropriate
circumstances, and we held that the POAs in those cases contained
express language broad enough to authorize the attorneys-in-fact
to make irrevocable gifts. In those cases, the taxpayers also
established that the decedents intended for their attorneys-in-
fact to continue with a pattern of gift giving that had been
established by the taxpayer and that the attorneys-in-fact had
not committed fraud, abuse, or self-dealing with respect to the
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gifts. Estate of Pruitt v. Commissioner, supra; Estate of
Bronston v. Commissioner, supra.
Even if our interpretation of Connecticut law is mistaken
and the Supreme Court of Connecticut would allow under general
POAs gifts to be made by attorneys-in-fact, the evidence in the
instant case does not indicate that decedent herein had
established a pattern of gift giving or that decedent intended to
give a POA that included the power to transfer decedent’s
property without consideration.
We conclude that prior to her death decedent retained the
power under Connecticut law to revoke the transfers of the
property with a value of $144,400. Under section 2038(a)(1), the
value of that property is to be included in decedent’s estate.
To reflect the foregoing,
Decision will be entered
under Rule 155.