dissenting: In the resolution of Federal tax controversies involving income, estate, and gift taxes, there is always the potential for an interplay between Federal tax law and State law. The case at bar is an apt example, as the majority seems to realize and certainly cannot deny.1 The composition of the estate is first a matter of State law, i.e., the decedent’s ownership of assets. Inclusion or exclusion of those assets for Federal estate tax purposes is a Federal tax question.2 In Estate of Spiegel v. Commissionei', 12 T.C. 524 (1949), we accepted well-established State law principles that until presentment and payment, a check is a conditional payment, only, but upon payment by the drawee bank, the check is deemed to have constituted payment as of the date of delivery of the check. We applied those principles to hold that a charitable donation by check was deemed paid upon the date of delivery of the check, provided the condition of honoring the check was met.
The majority in this case appears to view as the issue before us the determination of the amount of decedent’s cash on deposit at the date of death. On the authority of our decision in Estate of Spiegel, the majority correctly concludes that upon the presentation and payment by the drawee bank of the 36 checks payable to various charities, the payments related back to the dates of the checks, all prior to the date of decedent’s death. Somewhat simplistically, the majority then concludes that the amounts of the checks should be excluded from the gross estate under sections 2031(a) and 2033.
I agree with the majority that decedent’s cash was depleted as of the date of death by the aggregate amount of these checks given by her to charities upon payment by the drawee bank.3 However, the majority chooses to ignore another facet of State law which directly affects the size of the gross estate. Although I have located no Connecticut case precisely in point, it is widely accepted that an estate has the power to recover the proceeds of a check reflecting a gift by a decedent where the check is not cashed until after the decedent’s death.4 I have found no Connecticut case or statute which tends to suggest that Connecticut law is to the contrary. This right of recovery clearly constitutes an asset of decedent’s estate for purposes of section 2031(a), includable at its fair market value, unless, in some fashion, the asset was rendered worthless. Here, the executors took no affirmative action to enforce this right. Whether or not they were aware of its existence prior to trial is unclear. By statute, the State of Connecticut recognizes the power of a person, including the executor of an estate, to disclaim an interest or asset to which the estate otherwise would be entitled.5 Under this statute, petitioner, acting through the executors, had a clear right to file a notice of disclaimer with the probate court, but there is nothing in the facts to indicate that this privilege was exercised.6
Petitioner has argued that the failure by the executors to exercise this right to require the charitable recipients of the checks to reimburse the estate would create some kind of an estoppel, precluding the executors from doing so after the filing of the Federal estate tax return. I have searched without success under the laws of Connecticut as well as the common law for some support for the proposition that failure to pursue this right of reimbursement prior to the filing of the Federal estate tax return would create estoppel or waiver or constitute a common law disclaimer. Such a proposition would allow us either to conclude that the asset was valueless, or perhaps that, for purposes of section 2055, payment of the checks was a transfer to charity subject to a condition or power, the occurrence or exercise of which was so remote as to be negligible within the meaning of sec. 20.2055-2(b), Estate Tax Reg. Unfortunately, in the absence of a disclaimer or a basis for waiver or estoppel, this estate includes as an asset the right to require the charities to return the amounts of the checks. That asset must be valued and accounted for as part of the gross estate.
The majority’s strongest argument for its "practical result” is the Supreme Court’s admonishment in Commissioner v. Duberstein, 363 U.S. 278, 287 (1960), as well as our own comments in Spiegel, but a "practical result” cannot be manufactured out of thin air. We do not have here as we had in Spiegel a basis under State law upon which to work. Without State law support, the majority has simply embarked upon a legislative gambol. That the result is eminently practical does not support the majority’s opinion.
See Morgan v. Commissioner, 309 U.S. 78, 80 (1940); Benedict v. Commissioner, 82 T.C. 573, 577 (1984).
In Benedict v. Commissioner, 82 T.C. 573, 577 (1984), we quoted from Morgan v. Commissioner, supra, that:
"In Morgan, the Supreme Court articulated the rule that State law creates the legal interests and rights of the parties, and the Federal revenue acts designate what interests or rights, so created, are to be taxed.”
The majority correctly concludes that petitioner’s right to stop payment on the checks was at best illusory. This is especially true under Connecticut law which expressly provides that the drawee bank may continue to honor checks for a period of 10 days after receiving knowledge of the customer’s death. Conn. Gen. Stat. Ann. sec. 42a-4-405 (West 1960) provides:
Sec. 42a-4-405. Death or incompetence of customer
(1) * * * Neither death nor incompetence of a customer revokes such authority to accept, pay, collect or account until the bank knows of the fact of death or of an adjudication of incompetence and has reasonable opportunity to act on it.
(2) Even with knowledge a bank may for ten days after the date of death pay or certify checks drawn on or prior to that date unless ordered to stop payment by a person claiming an interest in the account. * * *
See Conn. Gen. Stat. Ann. sec. 42a-4-405, U.C.C. comment 3 (West 1960) that provides:
"This section does not prevent an executor or administrator from recovering the payment from the holder of the check. It is not intended to affect the validity of any gift causa mortis or other transfer in contemplation of death, but merely to relieve the bank of liability for the payment.”
See, e.g., Black v. Hart, 301 So. 2d 787 (Fla. App. 1974); Gilder v. First National Bank of Greenville, 214 So. 2d 681 (Miss. 1968); Bridewell v. Clay, 185 S.W.2d 170 (Tex. App. 1944); Weiss v. Fenwick, 111 N.J. Eq. 385, 162 A. 6099 (1932); Burrows v. Burrows, 240 Mass. 485, 137 N.E. 923 (1922); Annot., 38 A.L.R. 2d 594 (1954).
Conn. Gen. Stat. Ann. sec. 42a-45-300(b) provides in part that an executor, if he deems it in the best interests of the beneficiaries and the estate, may with the approval of the probate court, file a disclaimer on behalf of the estate within the time and in the manner prescribed. Under sec. 42a-45-302 (as then in effect), the disclaimer shall relate back for all purposes to the decedent’s date of death.
I presume that no disclaimer was filed. The majority complains that the executor could disclaim "only with the approval of all of the beneficiaries of the estate.” Whether this is a requirement of Connecticut law is unstated, but we note, in any event, that the residuary beneficiaries were decedent’s grandchildren, whose parents were among the coexecutors. I further invite the attention of the majority to the fact that it is not this Court which would be imposing on the executors the burden of a disclaimer; rather it is the law of the State of Connecticut which we (the majority included) are bound to apply.