Beryl P. Williamson v. Commissioner Internal Revenue Service

dissenting:

This is a difficult case. Tax statutes are notoriously complex, a fact that makes tax lawyers wealthy and the resolution of appeals of taxation issues exceptionally difficult. The quandary in which we find ourselves today is also at least partially the result of the fact that, as my colleagues acknowledge, the rules that govern such matters are often arbitrary and make little sense as applied to particular “cases and controversies”.

Harvey Williamson farmed the land at issue here prior to the death of Elizabeth Williamson, his grandmother. Upon her death, he continued to farm the land, although the land was now owned by Beryl Williamson, Elizabeth’s son and Harvey’s uncle. The same person farmed the land— and it remained a “family farm” — both before and after Elizabeth’s death. The “special use valuation” was enacted by Congress during our nation’s Bicentennial in order to keep the family farm, an all-too-rapidly-vanishing remnant of our nation’s rural past, alive and well in our complex modern economy. My colleagues now hold that this provision protects Harvey’s use of the land only while it is owned by his grandmother, not while it is owned by his grandmother’s…

Beryl Williamson inherited farm land from his mother in 1983. In the estate tax return, Williamson elected the special use valuation for the property provided by 26 *1527 U.S.C. § 2032A. Williamson subsequently leased the farm to his nephew for a fixed, semi-annual cash payment. In 1987, the Internal Revenue Service (“IRS”) issued a Notice of Deficiency to Williamson, asserting that the cash lease rendered the land ineligible for special use valuation. The Tax Court agreed with the IRS. Williamson appeals. We affirm.

BACKGROUND

A. Statutory Framework

Generally, for purposes of estate taxes, a decedent’s property is taxed at its fair market value at the time of death. See 26 U.S.C. § 2031 ; 26 C.F.R. § 20.2031-1 (b). 1 As a consequence, prior to 1976, heirs were often forced to sell family farms because the farm could not produce sufficient profits to finance the estate tax debt. See H.R.Rep. No. 1380, 94th Cong., 2d Sess. 22, reprinted in 1976 U.S.C.C.A.N. 2897, 3356, 3376 (“In some cases, the ... [fair market value] estate tax burden makes continuation of farming ... not feasible because the income potential from these activities is insufficient to service extended tax…

974 F.2d 1525 70 A.F.T.R.2d 92 -6244, 61 USLW 2201 , 92-2 USTC P 60,115 Beryl P. WILLIAMSON, Petitioner-Appellant, v. COMMISSIONER INTERNAL REVENUE SERVICE, Respondent-Appellee. No. 89-70506. United States Court of Appeals, Ninth Circuit. Argued and Submitted May 7, 1991. Decided Sept. 14, 1992. Robert K. Smith, Shannahan, Smith & Dailey, La Jolla, Cal., for petitioner-appellant. Bruce R. Ellisen, Tax Div., U.S. Dept. of Justice, Washington, D.C., for respondent-appellee. Appeal from a Decision of the United States Tax Court. Before: TANG, REINHARDT, and WIGGINS, Circuit Judges. TANG, Circuit Judge: 1 Beryl Williamson inherited farm land from his mother in 1983. In the estate tax return, Williamson elected the special use valuation for the property provided by 26 U.S.C. § 2032A. Williamson subsequently leased the farm to his nephew for a fixed, semi-annual cash payment. In 1987, the Internal Revenue Service ("IRS") issued a Notice of Deficiency to Williamson, asserting that the cash lease rendered the land ineligible for special use valuation. The Tax Court agreed with the IRS. Williamson appeals. We affirm. BACKGROUND A. Statutory Framework 2 Generally, for purposes of…