Keller, et al v. United States, No. 10-41311 (5th Cir. 2012)Annotate this Case
Maude Williams passed away in May 2000, leaving behind both a substantial fortune and incomplete estate-planning documents. Originally believing this omission precluded transfer of the relevant estate property to a limited partnership, her Estate paid over $147 million in federal taxes. The Estate later discovered Texas state authorities supporting that Williams sufficiently capitalized the limited partnership before her death, entitling the Estate to a substantial refund. In this refund suit, the Estate claimed a further substantial deduction for interest on the initial payment, which it retroactively characterized as a loan from the limited partnership to the Estate for payment of estate taxes. The district court upheld both the Estate's contentions. The court affirmed, holding that the district court correctly concluded that Williams' intent on forming the partnership was sufficient under Texas law to transfer ownership of the Community Property bonds to the partnership. The district court also correctly concluded that the post hoc restructuring of the transfer as a loan from the partnership back to the Estate for tax purposes was a necessarily incurred administrative expense; the Estate retained substantial illiquid land and mineral assets that justified the loan, and the loan did not constitute an "indirect use" of the Community Property bonds.