Commissioner v. Estate Of Bosch

387 U.S. 456 (1967)

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Nature of the Case

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Facts

In Bosch, the Court of Appeals for the Second Circuit held that since the state trial court had 'authoritatively determined' the rights of the parties, it was not required to delve into the correctness of that state court decree. In 1930, the Decedent, a resident of New York, created a revocable trust, as amended in 1931. It provided that the income from the corpus was to be paid to his wife during her lifetime. The instrument gave her a general power of appointment, in default of which it provided that half of the corpus was to go to his heirs and the remaining half was to go to those of his wife. In 1951 the wife executed an instrument purporting to release the general power of appointment and convert it into a special power. Upon the decedent's death in 1957, the Estate, in paying federal estate taxes, claimed a marital deduction for the value of the widow's trust. The Commissioner held that the trust corpus did not qualify for the deduction under § 2056 (b)(5) and levied a deficiency. The estate then filed a petition for redetermination in the Tax Court. The issue was whether the release was valid. While the Tax Court proceeding was pending, Estate filed a petition in the Supreme Court of New York for settlement of the trustee's account; it also sought a determination as to the validity of the release under state law. The Tax Court abstained from making its decision pending the outcome of the state court action. The state court held the release to be a nullity. the Tax Court then accepted the state court judgment as being an 'authoritative exposition of New York law and adjudication of the property rights involved,' and permitted the deduction. The Court of Appeals affirmed. It held that the 'New York judgment, rendered by a court which had jurisdiction over parties and subject matter, authoritatively settled the rights of the parties, not only for New York, but also for purposes of the application to those rights of the relevant provisions of federal tax law.' Certiorari was granted along with another case with the opposite conclusion.