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Estate of Ralph D. Cowser v. Commissioner of Internal Revenue

June 13, 1984

ESTATE OF RALPH D. COWSER, DECEASED, PATRICIA ANN TUCKER, EXECUTOR, PETITIONER-APPELLANT,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT-APPELLEE



On Appeal from the Decision of the United States Tax Court.

Bauer, Wood, and Coffey, Circuit Judges.

Author: Wood

WOOD, Circuit Judge.

Ralph D. Cowser died on March 15, 1978, leaving no surviving descendants. He devised his family farm to his deceased wife's grandniece and her husband, Patricia and Hartley Tucker. Patricia Tucker, as executrix of Ralph Cowser's estte, attempted to invoke the special use valuation provisions of section 2032A of the Internal Revenue Code, 26 U.S.C. § 2032A (1976). The Internal Revenue Service found that the grandniece was not a qualified heir, and assessed a $71,430.88 federal estate tax deficiency. The Tax Court upheld the determination of the IRS. Patricia Tucker now appeals this decision, claiming: (1) that the Tuckers should be considered "qualified heirs" under the statute; and (2) that if they do not qualify under the statute, then the statute as applied violates the due process clause of the fifth amendment. In other words, appellant argues that the language and purpose of section 2032A, along with the due process clause of the fifth amendment, requires that "qualified heirs" include not only the lineal descendants of a decedent's grandparents, but also the lineal descendants of a decedent's spouse's grandparents. Although we appreciate the Tuckers' viewpoint, we must affirm.

I. Interpretation of the Statute

The federal estate tax on real property is normally determined by valuing the property at its highest and best use. To pay these taxes, the devisees of family farms and closely-held businesses were frequently forced to sell their newly-inherited property. As a means of preventing these forced conversions, Congress adopted section 2032A as part of the Tax Reform Act of 1976, Pub. L. 94-455, § 2003(a), 90 Stat. 1525, 1856 (1976). S. Rep. No. 938, pt. 2, 94th Cong., 2d Sess. 15 (1976); H.R. Rep. No. 1380, 94th Cong., 2d Sess. 21-22 (1976). Under section 2032A, certain real property used in family farming and closely-held businesses may be valued on the basis of the property's actual use at the time of the decedent's death, rather than on the basis of its highest and best use. See also Estate of Geiger v. Commissioner, 80 T.C. 484, 487-88 (1983).

To qualify for the special use valuation of section 2032A, the real property must pass to a "qualified heir" of the decedent. 26 U.S.C. § 2032A(b)(1). Section 2032A(e)(1) defines "qualified heir" as "a member of the decedent's family who acquired such property (or to whom such property passed) from the decedent." Section 2032A(e)(2), as in effect at the time of Ralph Cowser's death, defined a member of a decedent's family as follows:

The term "member of the family" means, with respect to any individual, only such individual's ancestor or lineal descendant, a lineal descendant of a grandparent of such individual, the spouse of such individual, or the spouse of any such descendant.*fn1

Appellant argues tht the phrase "lineal descendant of a grandparent of such individual" and "spouse of such individual" must be read in conjunction with one another, and that the latter phrase modifies the former so that the language translates to mean "a lineal descendant of a grandparent of such individual and a lineal descendant of a grandparent of such individual's spouse." We do not agree. Read in the context of the statute, "such individual" clearly refers to the decedent, and the phrases "such individual's ancestor or lineal descendant, a lineal descendant of a grandparent of such individual, the spouse of such individual, or the spouse of any such descendant" stand by themselves separately identifying different qualified members of a family.

If Patricia Tucker had been the grandniece of the decedent, she would be a qualified heir. But she was the grandniece of the decedent's wife. Consequently, under the plain language of section 203A, Patricia Tucker is not a qualified heir: she is not an ancestor or lineal descendant of the decedent, a lineal descendant of a grandparent of the decedent, or the spouse of the decedent or of another qualified descendant. Patricia's husband, the other devisee of the land, similarly fails to qualify as a qualified heir. Contrary to appellant's contention, there exists no ambiguity in the language defining "qualified heir" and "member of family."

Appellant argues, however, that even if the technical language of section 2032A is construed as not including the Tuckers, this court should still allow them to take advantage of the section 2032A special valuation provision because the Tuckers are "a prime example of the people Congress intended to benefit by enacting Section 2032A." Appellant asserts that Congress sought to encourage the continued existence of the family farm by allowing the owner of a family farm to transfer the farm to other members of the family who could then value it for estate tax purposes at less than its true fair market value, and that "family" should include the family of either spouse.

It is a common rule of statutory construction that when the plain language of a statute is clear, courts need look no farther than those words in interpreting the statute. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 201, 47 L. Ed. 2d 668, 96 S. Ct. 1375 (1976); United States v. Oregon, 366 U.S. 643, 648, 6 L. Ed. 2d 575, 81 S. Ct. 1278 (1961). It is true that in a small number of cases where the words of a statute are "'plainly at variance with the policy of the legislation as a whole'" courts may look beyond those words to interpret the statute in a way more truly consistent with the intent of Congress. United States v. American Trucking Associations, Inc., 310 U.S. 534, 543, 84 L. Ed. 1345, 60 S. Ct. 1059 (1940) (quoting Ozawa v. United States, 260 U.S. 178, 194, 67 L. Ed. 199, 43 S. Ct. 65 (1922)); see also Perry v. Commerce Loan Co., 383 U.S. 392, 399-400, 15 L. Ed. 2d 827, 86 S. Ct. 852 (1966); Helvering v. New York Trust Co., 292 U.S. 455, 464-65, 78 L. Ed. 1361, 54 S. Ct. 806 (1934). Although allowing people like the Tuckers to take advantage of the special valuation provisions of section 2032A may help save more family farms, we do not believe that adhering to the precise language of the statute (and thereby excluding persons who might otherwise be considered "family" as that term is used in everyday parlance) is so plainly at variance with congressional intent that we should presume Congress did not mean what it said when it defined "qualified heir."

Tax relief designed to induce a certain type of behavior generally involves a tradeoff of lost revenue for the federal treasury. It is the elected members of Congress and not the members of this court that must decide where to strike the appropriate balance.*fn2 See Regan v. Taxation with Representation of Washington, 461 U.S. 540, 103 S. Ct. 1997, 2003, 76 L. Ed. 2d 129 (1983). We may not agree with where the line is drawn, but we are not in a position to move it. We may only interpret and enforce the laws Congress gives us; we may not rewirte or amend them as we see fit. If Congress intended to let a broader group of persons qualify as "members of the family" than the plain language of section 2032A indicates, then Congress may rewrite the statute. We may not. Badaracco v. Commissioner, 464 U.S. 386, 78 L. Ed. 2d 549, 104 S. Ct. 756, 52 U.S.L.W. 4081, 4085, 4086 (1984); see also Corn Products Refining Co. v. Commissioner, 350 U.S. 46, 52, 100 L. Ed. 29, 76 S. Ct. 20 (1955) (when a statute grants relief from the full rate of taxation, doubts in construing the statute must be resolved against the taxpayer).

Even looking to the legislative history, we find no support for the appellant's interpretation of section 2032A. Both the House and the Senate reports on the Tax Reform Act of 1976, of which section 2032A is a part, explain that "the term 'qualified heir' means a member of the decedent's family, including his spouse, lineal descendants, parents, grandparents, and aunts and uncles of the decedent and their descendants." S. Rep. No. 938, 94th Cong., pt. 2, 2d Sess. 15 (1976) (emphasis added); see also H.R. Rep. No. 1380, 94th Cong., 2d Sess. 23 (1976). Under normal rules of sentence construction, "lineal ...


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