dissenting: I think this Court was correct in its interpretation of section 2056(b)(7) and correctly held that the surviving spouse does not have a “qualifying income interest for life” where passage of such income interest in the property. to the surviving spouse is contingent upon the executor’s making the QTIP election as to such property and therefore subject to the executor’s power to appoint the property to someone other than the surviving spouse. Thus such property is not “qualified terminable interest property” even though the executor ultimately makes the QTIP election. Accordingly, I think this Court should continue to follow its opinions in Estate of Clayton v. Commissioner, 97 T.C. 327 (1991), revd. 976 F.2d 1486 (5th Cir. 1992); Estate of Robertson v. Commissioner, 98 T.C. 678 (1992), revd. 15 F.3d 779 (8th Cir. 1994); and Estate of Spencer v. Commissioner, T.C. Memo. 1992-579, revd. 43 F.3d 226 (6th Cir. 1995).
However, I agree with petitioner that if ah appeal in this case would lie to the U:S. Court of Appeals for the Eighth Circuit, this Court would be bound under the Golsen rule to follow the opinion of the Eighth Circuit in Estate of Robertson v. Commissioner, supra. Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir. 1971). For that reason, I think this Court must address the venue issue, and under this Court’s special venue statute I would conclude that any appeal in this case would lie to the U.S. Court of Appeals for the Seventh Circuit, which has not yet spoken on this particular QTIP issue.
I. QTIP Issue
Section 2056(b)(7)(A) provides that for purposes of the marital deduction, in the case of “qualified terminable interest property”, the entire property is treated as passing to the surviving spouse and no part of the property is treated as passing to any person other than the surviving spouse. Thus, for qualified terminable interest property, the decedent’s estate may deduct as a marital deduction the value of the entire property, not just the surviving spouse’s “qualifying income interest for life” in that property.
Section 2056(b)(7)(B) defines “qualified terminable interest property”.' Section 2056(b)(7)(B)(i) sets out the three general requirements — that it be property (1) which passes from the decedent, (2) in which the surviving spouse has a qualifying income interest for life, and (3) to which an election under this paragraph applies. Section 2056(b)(7)(B)(ii) then defines “qualifying income interest for life”. Section 2056(b)(7)(B)(iii), (iv), and (v) sets out other definitions or requirements of qualified terminable interest property. I agree that all of section 2056(b)(7)(B) defines qualified terminable interest property and must be read as a whole. This Court in its Clayton-Robertson-Spencer opinions concluded, and I continue to think properly so, that the election provision of section 2056(b)(7)(B)(v), while a critical part of the definition of “qualified terminable interest property”, is not part of the definition of “qualifying income interest for life” in section 2056(b)(7)(B)(ii). If Congress had intended the election by the executor to cure all other defects, I think it would have said so. While an election is necessary for QTIP, I think the election can only be made as to property in which the surviving spouse otherwise possesses a “qualifying income interest for life”. The executor can elect whether or not the property in which the surviving spouse has a qualifying income interest for life is going to be taxable in the decedent’s estate (no qtip election) or deducted from his estate and later taxed in the surviving spouse’s estate (qtip election). An election under this paragraph cannot apply unless the property is otherwise qualifying; namely property passing from the decedent and property in which the surviving spouse has a qualifying income interest for life.
Section 2056(b)(7)(B)(ii) defines the term “qualifying income interest for life” as follows:
(ii) Qualifying income interest for life. — The surviving spouse has a qualifying income interest for life if—
(I) the surviving spouse is entitled to all the income from the property, payable annually or at more frequent intervals, * * * and
(II) no person has a power to appoint any part of the property to any person other than the surviving spouse.
Subclause (II) shall not apply to a power exercisable only at or after the death of the surviving spouse. To the extent provided in regulations, an annuity shall be treated in a manner similar to an income interest in property (regardless of whether the property from which the annuity is payable can be separately identified).
We concluded in Estate of Clayton v. Commissioner, supra, that, when the surviving spouse’s income interest in the property is contingent upon the executor’s making a QTIP election, the executor possesses the ability to control and to direct the assets to someone other than the surviving spouse. We held that the executor’s ability to control and direct the assets was tantamount to a power to appoint the property to someone other than the surviving spouse. The statute expressly provides that no person can have the power to appoint the property to anyone other than the surviving spouse. Sec. 2056(bX7)(B)(ii)(II). The only exception to that prohibition is that it “shall not apply to a power exercisable only at or after the death of the surviving spouse.” Sec. 2056(b)(7)(B)(ii)(II) (flush language). Congress did not include within that exception a power exercisable by the executor or a power exercisable prior to the executor’s making the election on the estate tax return.
I see no distinction between the situation in which the executor is given such power during the period prior to the filing of the estate tax return and the situation in which an individual who is not the executor is given such power during that period. The testator’s coupling the power with the executor’s making of the QTIP election does not diminish the power.
The Court of Appeals for the Fifth Circuit attempts to circumvent the prohibition against the executor’s having such a power during the period prior to making the election by applying a relation-back legal fiction. The Fifth Circuit stated:
although the effect of the election is tested as of the instant of the testator’s death, the definitional eligibility of the separate terminable interest under examination is tested as though QTIP election had already been made. [Estate of Clayton v. Commissioner, 976 F.2d at 1497.]
“The ¡question is not when those determinations are made or when those acts are performed but whether their effects relate back, ab initio, to the moment of death.” Id. at 1498. “[L]ike other estate tax elections (and other exceptions to the terminable interest rules), the effect of the QTIP election is retroactive to the instant of death, irrespective of when it is actually made.” Id. at 1495. Thus, the Fifth Circuit ignores the power of appointment vested in the executor during the period from the date of the decedent’s death to the date of making of the election by creating a “relation-back” legal fiction.
The Court of Appeals for the Fifth Circuit likened the QTIP election to a qualified disclaimer by the surviving spouse and stated:
For example, a qualified disclaimer by the Surviving Spouse has precisely the effect of the QTIP election here: Both are volitional acts; both can be made only after the death of the testator; both relate back, ab initio, to the date of death of the testator; and both have the effect of causing estate property which would otherwise pass to the Surviving Spouse to pass instead directly to or for the benefit of other parties. * * * [Id. at 1498.]
However, the point there, and in the present case, is that, absent the executor’s election, the property is not “estate property which would otherwise pass to the Surviving Spouse”.
In the case of qualified disclaimers, moreover, section 2518 specifically provides that
if a person makes a qualified disclaimer with respect to any interest in property, this subtitle shall apply with respect to such interest as if the interest had never been transferred to such person.
Thus, the statute specifically mandates the relation-back effect of a qualified disclaimer. There is no such statutory provision applicable to an executor’s power to appoint property away from the surviving spouse coupled with the power to make a QTIP election. Furthermore, section 2056(b)(7)(B)(ii)(II) (and flush language) specifically precludes applying this relation-back fiction to the power to appoint the property to someone other than the surviving spouse by specifically prohibiting anyone from having such a power at any time prior to the death of the surviving spouse. I think the Court of Appeals for the Fifth Circuit’s judicially created exception is contrary to the express language of the statute.
The only means of ignoring an executor’s power to appoint the property to someone other than the surviving spouse (exercisable by the executor’s not making the QTIP election) would be to adopt the test applied by the Court of Appeals for the Sixth Circuit in Estate of Spencer v. Commissioner, 43 F.3d 226 (6th Cir. 1995), revg. T.C. Memo. 1992-579, that the date for determining whether property qualifies is the date the QTIP election is made.
However, the holding of the Court of Appeals for the Sixth Circuit, if pursued to its logical conclusion, would prohibit QTIP treatment for any qualifying income interest granted to a surviving spouse if the surviving spouse dies prior to the executor’s making the QTIP election. In such a situation, if the date for determining whether property qualifies as QTIP is the date the election is made, then the executor of the first spouse to die cannot make the election to treat any property interest as QTIP. This is because, at the time the executor makes the election, the surviving spouse has died and no longer has any interest in the property; the property has passed to the remainder interest. In that situation, at the time the executor makes the election, the surviving spouse does not have a qualifying income interest for life, and the second essential element for QTIP treatment cannot be met. In such situation, the spouses could lose the benefit of the surviving spouse’s unified credit.1 I do not think that the date of making the election is the proper date for determining whethei the surviving spouse has a qualifying income interest for life in the property.
I agree that the election under sectiop 2056(b)(7)(B)(v), like any other election that an executor makes under the estate tax provisions, must be made after the date of death of the decedent. However, I think the election can be made only as to an otherwise qualifying income interest in the property and that the election itself cannot qualify otherwise nonqualifying property. The definition of an interest in property in section 2056(b)(7)(B)(iii), the definition of a specific portion of property in section 2056(b)(7)(B)(iv), and the phrase “any property” in the definition of an election in section 2056(b)(7)(B)(v) do not change that result. Whatever the nature of the property, whatever the interest in the property, or whatever the specific portion of the property, the statute requires the surviving spouse to have a “qualifying income interest for life” in that “property”.
The term “property * * * to which an election under this paragraph applies” under section 2056(b)(7)(B)(i)(III) means something different from property for which an election “has been made”. I think the term refers to property that meets the two preceding requirements; namely, property “which passes from the decedent” (sec. 2056(b)(7)(B)(i)(I)) and property “in which the surviving spouse has a qualifying income interest for life” (sec. 2056(b)(7)(B)(i)(II)). I think the surviving spouse must first have a qualifying income interest for life in the property before the executor can make the QTIP election as to all or any part of that property.
The Court of Appeals for the Fifth Circuit held that the requirement that the property be an interest to which an election under this paragraph applies is satisfied if “the property being tested for eligibility is the same property to which the election made by the * * * [executor] applies.” Estate of Clayton v. Commissioner, 976 F.2d at 1496. In reversing this Court, however, the Fifth Circuit stated:
the Tax Court [insists] that the “property” here under examination is the entire residue of testator’s estate, being the maximum amount of property and interests in property with which * * * [the marital trust] could be handed were a total QTIP election to be made. * * * [Id.2]
With all due respect to the Court of Appeals for the Fifth Circuit, I think that statement mischaracterizes the focus of this Court. Contrary to such characterization, this Court applies thé standard espoused by the Fifth Circuit; the property being tested for qtip eligibility is the same property to which the election made by the executor applies.
During the period from the testator’s death to the time of making the election, the executor possessed the power to appoint the property for which the election was made to someone other than the surviving spouse. The fact that the executor made the election and, thus, did not in fact appoint the property to someone other than the surviving spouse does not negate the fact that, prior to making the election, the executor had the power to appoint the property to someone other than the surviving spouse. With all due respect to the Court of Appeals for the Fifth Circuit, I do not think that this Court’s Estate of Clayton opinion turned on the fact that the executor made a partial election as opposed to a full election. This Court’s opinions in Estate of Robertson and Estate of Spencer and indeed the present case involve a full election. Nor can policy concerns about eliminating the need for testators to risk predicting the future and providing flexibility and opportunity for post mortem estate planning provide a principled basis for disregarding the language actually used by Congress in section 2056(b)(7).
I do not think that, by requiring the executor to make the election for QTIP treatment, Congress intended to permit such expansive post mortem estate planning. Congress intended that the executor have the ability to determine whether property in which the testator grants the surviving spouse a qualifying income interest for life should be taxed in the estate of the first to die or, to the extent not consumed or earlier disposed of by the surviving spouse, in the estate of the surviving spouse. Additionally, Congress provided for a partial election in order to permit the executor to elect to have a portion of such otherwise qualifying property taxed in the estate of each spouse. In the Economic Recovery Tax Act of 1981, Pub. L. 97-34, 95 Stat. 172, Congress had already liberalized the marital deduction provisions, allowing an unlimited estate tax marital deduction and an unlimited gift tax marital deduction. The QTIP provisions for estate tax (section 2056(b)(7)) and the QTIP provisions for gift tax (section 2523(f)) were designed to permit a decedent (or donor spouse) to make a lifetime gift or a testamentary bequest to his spouse of an income interest for life in property but still control the disposition of that property at the death of the surviving spouse or donee spouse. Congress did not intend to vest the executor with the power to determine the disposition of the decedent’s property; i.e., whether the surviving spouse would ultimately receive a qualifying income interest for life in the property or whether some other heir or heirs would receive that interest. To the contrary, the legislative history makes clear that “tax consequences should not control an individual’s disposition of property.” H. Rept. 97-201, at 160 (1981), 1981-2 C.B. 352, 378.
In summary, I think this Court was right in its analysis of the QTIP provisions in its Clayton-Robertson-Spencer opinions; the Court of Appeals opinions are inconsistent as to when the surviving spouse’s “qualifying income interest for life” in property is to be determined and whether the surviving spouse must have a qualifying income interest for life in property separate and apart from and independent of the fact that the executor ultimately makes a QTIP election. For these reasons, I think this Court should not, in the majority’s words, “accede to the decisions of the Courts of Appeals that have reversed our decisions on the issue before us”. Majority op. p. 141. This Court should not so accede, particularly without any analysis of those circuit decisions and without some explanation as to why we are departing from our prior decisions. Although this Court is only a trial court, it is a trial court with national jurisdiction. The tax bar, the Internal Revenue Service, and the taxpayers, particularly those residing in the other nine circuits to which Tax Court decisions can be appealed, are entitled to a reasoned, principled explanation of our change of position. The majority not only declines to address the differences in our analyses in our prior cases and those of the Courts of Appeals that have reversed us, but throws out a hint that the result might be different under the recently published regulations, which are effective for the estates of decedents dying after ¡.March 1, 1994. Sec. 20.2056(b)-7(d)(3), Estate Tax Regs. This Court’s prior decisions are consistent with and support the validity of those regulations.
II. Venue Issue
This is an appropriate case in which to continue to follow our prior opinions since, under the Tax Court’s special venue statute, any appeal would lie to the U.S. Court of Appeals for the Seventh Circuit, which has not yet addressed this particular QTIP issue.
Although the reviewing court will undoubtedly make its own determination, I think it is appropriate for this Court to address the issue of venue. Brewin v. Commissioner, 72 T.C. 1055, 1059 (1979), revd. and remanded on another issue 639 F.2d 805 (D.C. Cir. 1981).3 This venue issue arises under a specific Internal Revenue Code provision applicable only to the Tax Court and appears to be an issue of first impression.
Section 7482(b)(1) provides with respect to review of decisions of the Tax Court:
SEC. 7482(b). Venue.—
(1) In general. — Except as otherwise provided in paragraphs (2) and (3), such decisions may be reviewed by the United States court of appeals for the circuit in which is located—
(A) in the case of a petitioner seeking redetermination of tax liability other than a corporation, the legal residence of the petitioner,
(B) in the case of a corporation seeking redetermination of tax liability, the principal place of business or principal office or agency of the corporation, or, if it has no principal place of business or principal office or agency in any judicial circuit, then the office to which was made the return of the tax in respect of which the liability arises,
(C) in the case of a person seeking a declaratory decision under section 7476, the principal place of business, or principal office or agency of the employer,
(D) in the case of an organization seeking a declaratory decision under section 7428, the principal office or agency of the organization, or
(E) in the case of a petition under section 6226 or 6228(a), the principal place of business of the partnership.
If for any reason no subparagraph of the preceding sentence applies, then such decisions may be reviewed by the Court of Appeals for the District of Columbia. For purposes of this paragraph, the legal residence, principal place of business, or principal office or agency referred to herein shall be determined as of the time the petition seeking redetermination of tax liability was filed with the Tax Court or as of the time the petition seeking a declaratory decision under section 7428 or 7476, or the petition under section 6226 or 6228(a), was filed with the Tax Court.
Section 7482(b)(1)(A) and (B) is the relevant provision for this venue inquiry.
In estate tax cases in the Tax Court, sometimes the estate is referred to as the petitioner and sometimes the executor is referred to as the petitioner.4 However, this Court has never squarely addressed whether the estate or the executor is the petitioner or the real party in interest, or, stated another way, whether the residence (or principal place of business) of the executor at the time the petition is filed, or the residence of the decedent at the time of his death, is determinative for purposes of venue under section 7482(b)(1). That issue does not turn upon how a case is captioned in this Court.5 Cf. Estate of Turner v. Helvering, 68 F.2d 759, 760 (D.C. Cir. 1934). That issue does not turn upon how the capacity of fiduciaries or other representatives to litigate in this Court is to be determined.6 No issue has been raised in this Court as to the capacity of Richard E. Clack and the Marshall & Ilsley Trust Co. to litigate in this Court. Their capacity to litigate in this Court is to be determined, and presumably has been determined, under Arkansas law.7 In any event, their capacity to litigate in the Tax Court does not mean that the State that appointed them determines the proper venue for any appeal from a decision of this Court. See Mecom v. Fitzsimmons Drilling Co., 284 U.S. 183, 186, 190 (1931) (venue in Federal diversity case); Buchheit v. United Air Lines, Inc., 202 F. Supp. 811 (S.D.N.Y. 1962) (venue under Federal Tort Claims Act). These venue cases suggest that the personal residence of an executor or administrator is controlling, and that the residence of the decedent at the time of his death and the place of appointment of the executor or administrator are immaterial.
Petitioner does not dispute that the “legal residences” of the coexecutors determine the proper venue for an appeal in this case. Rather, petitioner argues that because decedent was domiciled in Arkansas at the time of his death, the coexecutors should be deemed to reside in Arkansas. Petitioner suggests, that the standard applied for establishing diversity jurisdiction of . Federal courts under 28 U.S.C. sec. 1332 (1994) and removal under 28 U.S.C. sec. 1441 (1994) should apply for purposes of determining venue under section 7482(b)(1). Petitioner argues that “In the related field of diversity jurisdiction, courts have demonstrated a willingness to look behind the individual residence of the executor when determining the citizenship of parties.” The Judicial Improvements and Access to Justice Act of 1988, Pub. L. 100-702, sec. 202(a), 102 Stat. 4646, added 28 U.S.C. sec. 1332(c), which provides:
(c) For the purposes of this section and section 1441 of this title—
í-c Hí ❖ Jfc ❖ ij: Jfc
(2) the legal representative of the estate of a decedent shall be deemed to be a citizen only of the same State as the decedent,'and the legal representative of an infant or incompetent shall be deemed to be a citizen only of the same State as the infant or incompetent.
As acknowledged by petitioner, 28 U.S.C. sec. 1332, by its express terms, applies only to that section and to 28 U.S.C. sec. 1441. This provision does not mention the Tax Court’s venue statute, which had been in the law for 22 years at that time. I think that this 1988 provision “overrules” neither the cases on which I rely nor this Court’s specific venue statute.
Proper venue in a Federal tax case is a question of Federal law and is to be determined by examining the Federal venue provisions, any relevant legislative history, and any case law construing them. I have not found any case construing section 7482(b)(1). Accordingly, I look to the various predecessor venue statutes for this Court leading up to the present section 7482(b)(1), the reasons for adoption of section 7482(b)(1), and any cases construing similar provisions in Federal tax refund cases.
The Board of Tax Appeals, the predecessor of this Court, was established in 1924. Revenue Act of 1924, ch. 234, sec. 900, 43 Stat. 253, 336. Two years later the law was expanded to provide appellate review by a Circuit Court of Appeals or the Court of Appeals for the District of Columbia. Revenue Act of 1926, ch. 27, sec. 1001, 44 Stat. 9, 109. Venue for such appeals was set forth in section 1002 of the Revenue Act of 1926. Section 1002(a) of the act provided review for “an individual” by the circuit “whereof he is an inhabitant”. Section 1002(b) of the act provided review for “a person (other than an individual)” by the circuit in which is located the office of the collector where the tax return was filed. The term “person (other than an individual)” was defined to include an estate. See Ayer v. Commissioner, 63 F.2d 231 (2d Cir. 1933), dismissing appeal from 26 B.T.A. 9 (1932). Because of the definition of “person (other than an individual)” to include an estate and confusion as to where returns were to be filed,8 the cases construing section 1002 of the Revenue Act of 1926 are not on point or particularly helpful in the present inquiry. See Estate of Turner v. Helvering, 68 F.2d 759 (D.C. Cir. 1934); Ayer v. Commissioner, supra; Matheson v. Commissioner, 54 F.2d 537 (2d Cir. 1931), affg. 18 B.T.A. 674 (1930); Rusk v. Commissioner, 53 F.2d 428 (7th Cir. 1931), affg. 20 B.T.A. 138 (1930).
In 1934 the venue provision for the Board of Tax Appeals was changed to make venue depend entirely upon where the tax return was filed. Section 519 of the Revenue Act of 1934, ch. 277, 48 Stat. 680, 760, amended section 1002 of the Revenue Act of 1926 to read as follows:
(a) Except as provided in subdivision (b), such decision may .be reviewed by the Circuit Court of Appeals for the circuit in which is located the collector’s office to which was made the return of the tax in respect of which the liability arises or, if no return was made,.then by the Court of Appeals of the District of Columbia.
(b) Notwithstanding the provisions of subsection (a), such decision may be reviewed by any Circuit Court of Appeals, or the Court of Appeals of the District of Columbia, which may be designated by the Commissioner and the taxpayer by stipulation in writing.
That version of the venue statute making venue, absent a stipulation to the contrary, depend entirely upon where the tax return was filed became section 1141(b) of the 1939 Internal Revenue Code and then substantially unchanged became section 7482 of the 1954 Internal Revenue Code. In the meantime the Board of Tax Appeals became the Tax Court of the United States and then the U.S. Tax Court. That 1934 provision remained the venue statute for appeal from Tax Court decisions until the current version of section 7482(b)(1) was enacted in 1966.
In connection with the Internal Revenue Service’s then conversion from manual to automatic data processing of tax returns, the Act of Nov. 2,. 1966, provided for tax returns to be filed with Internal Revenue Service Centers rather than with the offices of the collectors. The 1966 Act abolished all tax refund suits against collectors, retaining only tax refund suits against the United States in U.S. District Courts or in the U.S. Court of Claims (later Claims Court and now Court of Federal Claims). The 1966 Act made significant changes in the Tax Court’s venue statute. Pub. L. 89-713, sec. 3(c), 80 Stat. 1107, 1109.
As. amended in 1966 to its current form, section 7482(b)(1) was part of a change in venue for both criminal tax and Tax Court cases. The general purpose of the change was to better disperse the appeals among the various circuits and to model venue for Tax Court appeals after the provision of existing law prescribing venue for tax refund suits in the U.S. District Courts. S. Rept. 1625, 89th Cong. 2d Sess. (1966), 1966-2 C.B. 803, 808.
So what is the proper venue for tax refund suits after which the Tax Court’s venue statute is modeled? Section 1346(a)(1) of title 28 places original jurisdiction in the U.S. District Courts or the U.S. Court of Federal Claims for any suit against the United States for refund of Federal taxes.9 Section 1402(a)(1) of title 28 provides that proper venue for such a suit is only in the judicial district in which the individual “plaintiff’ resides.10 Section 1402(a)(2) of title 28 provides that venue for a corporate plaintiff is the judicial district in which is located its principal place of business or principal office or agency. In the present case the individual executor resides in Wisconsin, and the corporate executor has its principal place of business in Wisconsin.
Suits for refund of Federal taxes may be brought only against the United States, and if the plaintiff is an individual, venue is proper only in the judicial district where that individual resides. Caleshu v. Wangelin, 549 F.2d 93 (8th Cir. 1977); Scott v. United States, 449 F.2d 1291 (8th Cir. 1971); Noonis v. United States, 539 F. Supp. 404 (S.D. Cal. 1982). And if the plaintiff is an individual, the venue may not be transferred to another judicial district, even though the events occurred in another state and even though most of the records are in the other state. Caleshu v. Wangelin, supra at 95-96 and n.4.
For a refund of Federal estate taxes, the executor is the proper person to bring the refund suit. Hofheinz v. United States, 511 F.2d 661 (5th Cir. 1975). The Court of Appeals for the Fifth Circuit pointed out that the executor actually paid the estate tax (sec. 2002) and was the proper plaintiff-taxpayer for purposes of the refund suit. Similarly, the proper venue for a suit brought by an executor for refund of estate taxes is the judicial district where the executor resides. Kruskal v. United States, 178 F.2d 738 (2d Cir. 1950).
In the Kruskal case the executors of the estate were residents Of New York. At the time of the decedent’s death, he was a resident of Connecticut. The letters testamentary were issued to the executors by the Probate Court for the District of Roxbury, Connecticut, the district of last residence of the decedent. Without obtaining ancillary letters in New York, the executors sued in the U.S. District Court for the Southern District of New York to recover the Federal estate tax they had paid. The Government moved to dismiss on the ground, that venue would be only in the District Court for Connecticut and on the further ground that capacity to sue under rule 17(b) of the Federal Rules of Civil Procedure depended on New York law, and that New York law did not permit foreign executors to sue in the courts of New York in a representative capacity. The District Court for the Southern District of New York did not address the first ground but granted the motion on the basis of the executors’ lack of capacity to sue under New York law. The Court of Appeals for the Second Circuit reversed the lower court, upholding venue in New York and disagreeing with the argument as to the lack of ancillary letters.
As to the lack of ancillary letters in New York, the Court of Appeals for the Second Circuit held that
the claim of the executors is technically in their own right, for it is to recover monies which they paid and to right an error which they, under governmental compulsion, committed. Wherever the transaction giving rise to a right of recovery occurs after the death of a testator, suit to enforce the right must be brought by the executors as individuals, rather than as representatives. * * * [Kruskal v. United States, 178 F.2d at 740.]
The Court of Appeals for the Second Circuit also concluded that proper venue was in the Southern District of New York where the” executors resided. Citing 28 U.S.C. sec. 14'02(á) that refund suits may be prosecuted only in the judicial district where the plaintiff resides, the court stated:
Since there is nothing to suggest departure from the usual rule that residence of the individual plaintiffs, rather than the situs of their estate, controls questions of federal jurisdiction, Mecom v. Fitzsimmons Drilling Co., 284 U.S. 183, * * *; Greenough v. Tax Assessors of City of Newport, 331 U.S. 486, 495, * * *, we think the plaintiffs have chosen the correct venue for their action. * * * [Id. at 739.]
In summary, I have found few cases addressing venue for tax refund suits and none addressing venue for appeal of a Tax Court decision in an estate tax case. However, the above review of the venue statute, its legislative history, and cases involving tax refund suits leads me to the conclusion that the residence of the executor (or the principal place of business in the case of a corporate executor) is controlling under section 7482(b)(1).
I conclude that an appeal in this case would properly lie to the Court of Appeals for the Seventh Circuit. Therefore, I think this Court is not bound by the Golsen rule to follow the opinion of the Court of Appeals for the Eighth Circuit in Estate of Robertson v. Commissioner, supra, on the QTIP issue in this case.
Cohen, J., agrees with this dissent.For example, assume husband is the first to die and leaves wife a qualifying income interest in his entire estate, which estate is valued at $1.2 million. Assume further that wife dies 8 months after husband and her income interest in husband’s estate is the only property in which she has any interest. If the executor of husband’s estate files the estate tax return before wife dies and elects on the return to treat one-half of the property as QTIP, husband’s estate will get a marital deduction for $600,000 leaving $600,000 in his estate. Wife’s estate will include the $600,000 QTIP property. Neither estate will be subject to tax (sheltered by husband’s and wife’s respective unified credit). If, on the other hand, husband’s executor does not file the estate tax return until after wife’s death, no QTIP election may be made, $600,000 of husband’s estate is taxable,, and wife’s unified credit is wasted.
The Court of Appeals for the Fifth Circuit also focused on this Court’s language that the executor has the power to direct the assets of Trust B (marital trust) to Trust A (children’s trust). The Fifth Circuit stated:
First, the QTIP election cannot vest the executor with control over “trust assets” before they become trust assets! The undivided interests in the * * * [property] for which the election is made are estate assets but they do not become trust assets until the trust is funded, even though the economic effect of funding is retroactive to the instant of death. Assets used to fund each testamentary trust get there by virtue of the provisions of the Will and the administration of the estate. * * * [Estate of Clayton v. Commissioner, 976 F.2d 1486, 1499 (5th Cir. 1992), revg. 97 T.C. 327 (1991).]
I agree that the assets of the estate are the proper focus of the determination. It is those assets, however, over which the executor had the prohibited power.
See also Peat Oil & Gas Associates v. Commissioner, T.C. Memo. 1993-130, appeal dismissed without published opinion for improper venue 12 F.3d 214 (6th Cir. 1993).
That sec. 7482(b)(1)(A) uses the term “petitioner” rather than “taxpayer” is not particularly relevant to our inquiry. Various provisions of the Internal Revenue Code refer to “the taxpayer” whether in the context of deficiency cases in the Tax Court (sec. 6212 — notice of deficiency; sec. 6213 — restrictions applicable to deficiencies; petition to Tax Court) or in the context of tax refund cases in the U.S. District Courts (sec. 7422 — civil actions for refund). However, when it comes to venue provisions, sec. 7482(b)(1)(A) uses the term “petitioner” for the party filing a deficiency case in the Tax Court, and 28 U.S.C. sec. 1402(a)(1) (1994) uses the term “plaintiff” for the party filing a tax refund suit.
Rule 23(a)(1) provides that “The name of an estate or trust or other person for whom a fiduciary acts shall precede the fiduciary’s name and title, as for example ‘Estate of Mary Doe, deceased, Richard Roe, Executor.’”
RuIe 60(c) provides that “The capacity of a fiduciary or other representative to litigate in the Court shall be determined in accordance with the law of the jurisdiction from which such person’s authority is derived.”
The Probate Court of Benton County, Arkansas, issued letters testamentary to Richard E. Clack and the Marshall & Ilsley Trust Co., authorizing them to act as coexecutors of decedent’s estate. That Mr. Clack is a resident of Wisconsin and that the Trust Co. has its principal place of business in Wisconsin did not disqualify them to be authorized to act as coexecutors of dececent’s estate and hence authorized to represent decedent’s estate and litigate in this Court.
Under Arkansas law, a nonresident natural person is authorized to act as executor so long as an in-state agent is appointed for service of process. Ark. Code Ann. secs. 2848 — 101(a), 28-48-101(b)(6) (Michie 1987). Under Arkansas law, a foreign corporation is not disqualified to act as a fiduciary so long as its home jurisdiction (here Wisconsin) grants authorization to Arkansas companies to act in a similar capacity. Ark. Code Ann. secs. 28-48-101(a), 28-48-101<b)(4) (Michie 1987); Ark. Code Ann. sec.'4-27-203 (Michie 1987). Wisconsin law essentially tracks that of Arkansas in this regard. Wis. Stat. Ann. secs. 856.21, 856.23 (West 1991); sec. 223.12(1), (4) (West 1957 & Supp. 1981).
The estate income tax return was filed with the office of the collector for the district where the fiduciary resided; the estate tax return was filed in the office of the collector for the district where the decedent resided at the time of his death. Revenue Act of 1924, ch. 234, secs. 225(b), 300. 304. 43 Stat. 253. 280. 303, 307. ' '
28 U.S.C. sec. 1346(a)(1) (1994)-provides:
(a) The district courts shall have original jurisdiction concurrent with the United States Court of Federal Claims, of:
(1) Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been excessive or in any manner wrongfully collected under the internal-revenue laws;
28 U.S.C. sec. 1402(al (1994) provides:
(a) Any civil action in a district court against the United States under subsection (a) of section 1346 of this title may be prosecuted only: : S
(1) Except as provided in paragraph (2), in the judicial district where the plaintiff resides;
(2) In the case of a civil action by a corporation under paragraph (1) of subsection (a) of section 1346, in the judicial district in which is located the principal place of business or principal office or agency of the corporation; or if it has no principal place of business or principal office or agency in any judicial district (A) in the judicial district in which is located the office to which was made the return of the tax in respect of which the claim is made, or (B) if no return was made, in the judicial district in which lies the District of Columbia. Notwithstanding the foregoing provisions of this paragraph a district court, for the convenience of the parties and witnesses, in the interest of justice, may transfer any such action to any other district or division.
We note that the transfer provision of the last sentence of 28 U.S.C. sec. 1402(a)(2) applies only to corporations. Caleshu v. Wangelin, 549 F.2d 93, 95 (8th Cir. 1977).