The Hibernia Bank, Administrator With the Will Annexed of the Estate of Celia Tobin Clark, Deceased v. The United States of America

581 F.2d 741 78-2 USTC P 13,261 The HIBERNIA BANK, Administrator with the will Annexed of the Estate of Celia Tobin Clark, Deceased, Plaintiff-Appellant, v. The UNITED STATES of America, Defendant-Appellee. No. 76-1737. United States Court of Appeals, Ninth Circuit. Aug. 31, 1978. Rand L. Peebles (argued), of Tobin & Tobin, San Francisco, Cal., for plaintiff-appellant. Jonathon S. Cohen (argued), Dept. of Justice, Washington, D. C., for defendant-appellee. Appeal from the United States District Court for the Northern District of California. Before SMITH, * DUNIWAY and WALLACE, Circuit Judges. WALLACE, Circuit Judge: 1 The Hibernia Bank (Hibernia) appeals from a judgment of the district court denying its claim for a refund of federal estate taxes. This appeal squarely presents an important issue of estate tax law which has engendered a crisp conflict among the circuits. We affirm. 2 * In May 1965, Celia Tobin Clark died testate leaving an estate worth several million dollars. Mrs. Clark's will provided for several specific bequests of personal property. The will also directed that the residue, which included the bulk of the estate, be divided among four testamentary trusts. The…

The Hibernia Bank (Hibernia) appeals from a judgment of the district court denying its claim for a refund of federal estate *742 taxes. This appeal squarely presents an important issue of estate tax law which has engendered a crisp conflict among the circuits. We affirm.

I

In May 1965, Celia Tobin Clark died testate leaving an estate worth several million dollars. Mrs. Clark’s will provided for several specific bequests of personal property. The will also directed that the residue, which included the bulk of the estate, be divided among four testamentary trusts. The income of each trust was to be paid to one of Mrs. Clark’s children with the remainder to be divided equally among Mrs. Clark’s grandchildren. The residue of Mrs. Clark’s estate included two principal components: a mansion situated on 240 acres in Hillsborough, California, and approximately 10,000 common shares of Hibernia Bank stock.

Mrs. Clark’s will named Hibernia as trustee for the four testamentary trusts. The will also nominated two individuals to act as co-executors. These individuals declined to serve, however, and ultimately Hibernia was appointed administrator with the will annexed of the Clark estate.

On…

(concurring):

I concur. I write only to point out that there are sound practical reasons, in addition to those stated by Judge Wallace in his opinion, which require that we construe § 2053(a)(2) of the Internal Revenue Code as permitting the deduction of those expenditures only which are expenses of administration within the meaning of federal estate tax law.

First, in California, and I suspect in most other states, probate proceedings are essentially ex parte in character. While the Probate Code requires an executor or administrator wishing to borrow money to obtain an order of court authorizing the borrowing, see California Probate Code § 830, and while an executor or administrator must account to the court for all receipts and expenditures, see California Probate Code *748 §§ 921 and 922, there is no requirement that personal notice be given to any party interested in the estate. Notice is given by posting a notice by the clerk at the courthouse (Probate Code § 1200) and is required to be mailed to an interested party only if that party has filed a request for a special notice (Probate Code §§ 1200 and 1203). Publication in a newspaper of general circulation is also required…