Delaune v. United States

1997 WL 33625148 (5th Cir.)

United States Court of Appeals, Fifth Circuit.

Sammie Barman DELAUNE, Estate; Denise Loveless, Co-Executors and Transferees of the Estate of Sammie Barman Delaune; Mae Acy Amedee, Co-Executors and Transferees of Estate of Sammie Barman Delaune; William R Smith, Jr, Transferees of the Estate of Sammie Barman Delaune; Phyllis Robira Zapp, Transferees of the Estate of Sammie Barman Delaune; Bertha Thomas, Transferees of the Estate of Sammie Barman Delaune; Jane Lee Van Reenen, Transferees of the Estate of Sammie Barman Delaune; Peggy Ann Geiler, Transferees of the Estate of Sammie Barman Delaune; Samuel Buckmaster, Jr, Transferees of the Estate of Sammie Barman Delaune Plaintiffs-Appellants,

UNITED STATES OF AMERICA, Defendant-Appellee.

No. 97-30385.

December 10, 1997.

ON APPEAL FROM THE JUDGMENT OF THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF LOUISIANA

Brief for the Appellee

Of Counsel:, L.j. Hyml, United States Attorney

Loretta C. Argrett, Assistant Attorney General, Jonathan S. Cohen (202) 514-2970, John A. Nolet (202) 514-2935, Attorneys, Tax Division, Department of Justice, Post Office Box 502, Washington, D.C. 20044

*i STATEMENT REGARDING ORAL ARGUMENT

Pursuant to Local Rule 28.2.4 of this Court, counsel for the United States, the appellee herein, hereby respectfully inform the Court that they believe that oral argument would be helpful to the Court in considering this appeal.

*ii TABLE OF CASES

Statement regarding oral argument ... i

Table of contents ... ii

Statement of jurisdiction ... 1

Statement of issues ... 3

Statement of the case ... 4

1. Course of proceedings and disposition in court below ... 4

2. Statement of facts ... 5

Summary of argument ... 11

Argument:

I. The District Court correctly decided that the decedent did not make a qualified disclaimer of any interest in the legacy devised to her by her husband's will, so that no amount of the inheritance was excludible from her gross estate for federal estate tax purposes under I.R.C. §§ 2046 and 2518 ... 15

A. Introduction ... 15

B. The purported disclaimer was ineffective under Louisiana law and thus does not satisfy Section 2518 of the Code ... 18

C. Decedent accepted benefits of her purportedly disclaimed interest and therefore could not have made a qualified disclaimer under federal estate tax law ... 23

II. The District Court correctly decided that the estate was not entitled to a deduction under I.R.C. § 2053 for a claim against the estate in the amount paid to Jack's heirs pursuant to the agreed judgment ... 26

III. Even if a refund of an overpayment were due to plaintiffs, the amount of any such refund would be limited to the total of the amounts paid by each such claimant ... 35

Conclusion ... 39

*iii CITATIONS

Cases:

Arsht v. Davis, 561 So. 2d 58 (La. 1990) ... 19, 20

Bank of New York v. United States, 526 F.2d 1012 (3d Cir. 1975) ... 32, 33

Bartley v. United States, 123 F.3d 466 (7th Cir. 1997) ... 38

Estate of Bennett v. Commissioner, 100 T.C. 42 (1993) ... 18

Breaux v. Breaux, 51 So. 2d 73 (La. 1951) ... 29, 30

Carney v. Benz, 90 F.2d 747 (1st Cir. 1937) ... 32

Carter v. Fowler, 33 La. Ann. 100 (La. 1881) ... 20

Cindy's. Inc. v. United States, 740 F.2d 851 (llth Cir. 1984) ... 37

Commissioner v. Bosch, 387 U.S. 456 (1966) ... 21

Estate of Fleming v. Commissioner, 974 F.2d 894 (7th Cir. 1992) ... 16

Flora v. United States, 362 U.S. 145 (1960) ... 38

Estate of Goree, 68 T.C.M. (CCH) 123 (1994) ... 18

Estate of Gray v. Commissioner, 44 B.T.A. 545 (1941) ... 33

Gray v. United States, 541 F.2d 228 (9th Cir. 1976) ... 31

Estate of Hartshorne, 402 F.2d 592 (2d Cir. 1968) ... 32, 33

Helvering v. Robinette, 129 F.2d 832 (3d Cir. 1942), aff'd, 318 U.S. 184 (1943) ... 33

Estate of Labombarde v. Commissioner, 58 T.C. 745 (1972), aff'd per curiam, 502 F.2d 1158 (1st Cir. 1973) ... 27, 33

Latty v. Commissioner, 62 F.2d 952 (6th Cir. 1933) ... 33

Estate of Lazar v. Commissioner, 58 T.C. 543 (1972) ... 33, 34

Lyeth v. Hoey, 305 U.S. 188 (1938) ... 35

Estate of Monroe v. Commissioner, 124 F.3d 699 (5th Cir. 1997) ... 17, 23, 24

Phillips v. Gnichtel, 27 F.2d 662 (3d Cir. 1928) ... 33

Estate of Pollard v. Commissioner, 52 T.C. 741 (1969) ... 32, 33

In re Sage's Estate, 122 F.2d 480 (3d Cir. 1941) ... 35

Sorensen v. United States, 475 U.S. 851 (1986) ... 37

Succession of Breeland, 383 So. 2d 423 (La. App. 1980) ... 25

Succession of Gumbel, 56 So. 2d 418 (La. 1951) ... 31

Succession of Harrison, 444 So. 2d 1191 (La. 1984) ... 29, 30

Succession of Helwick, 622 So. 2d 823 (La. App. 1993) ... 19

Succession of Tertrou, 47 So. 2d 681 (1950) ... 20

Sunbeam Products. Inc. v. The West Bend Company, 123 F.3d 246 ... 15, 26, 35

Taft v. Commissioner, 304 U.S. 351 (1938) ... 27

Union National Bank v. Choppin, 15 So. 304 (La. 1894) ... 20

United States v. Stapf, 375 U.S. 118 (19.63) ... 33

Estate of Warren v. Commissioner, 981 F.2d 776 (5th Cir. 1993) ... 21

Young v. United States, 559 F.2d 695 (D.C. Cir. 1977) ... 34

*iv Statutes:

Internal Revenue Code of 1986 (U.S.C.):

§ 2001 ... 15, 26

§ 2031 ... 15-16

§ 2046 ... 3, 4, 9, 15, 16

§ 2051 ... 26

§ 2053 ... 4, 9, 10, 13, 14, 26, 27, 28, 31, 32

§ 2518 ... 3, 4, 8, 9, 10, 13, 16, 17, 18, 23, 24, 25, 27

§ 6402 ... 2, 14, 37

§ 6532 ... 2, 39

§ 6901 ... 36

§ 7422 ... 2, 38

§ 6511 ... 2, 38

§ 6532 ... 38

28 U.S.C.:

§ 1291 ... 3

§ 1331 ... 2

§ 1340 ... 2

§ 1346 ... 2

§ 2107 ... 3

Louisiana Civil Code:

articles 894-901 ... 20, 23

article 1017 ... 12, 19

article 1018 ... 21

article 1760 ... 29

article 1761 ... 29

article 1762 ... 29

Miscellaneous:

Tax Reform Act of 1976, Pub. L. No. 94-455, 90 Stat. 1520, § 2009(b)(1) ... 16

Federal Rules of Appellate Procedure, Rule 4 ... 3

H.R. Rep. No. 1380, 94th Cong., 2d Sess ... 16

*v H.R. Rep. No. 201, 97th Cong., 1st Sess ... 18

H. Rep. No. 2333, 77th Cong., 2d Sess ... 34

S. Rep. No. 1631, 77th Cong., 2d Sess ... 34

Treasury Regulations (26 C.F.R.):

§ 25.2518-2 ... 16, 24

§ 20.2053-4 ... 26

§ 20.2053-1 ... 34

Rev. Rul. 73-185, 1973-1 C.B. 602 ... 37

5 B. Bittker and L. Lckken, Federal Taxation of Income, Estates and Gifts. ¶ 121.7.6, p ... 18

M. Garbis, P. Junghans, and S. Struntz, Federal Tax Litigation. ¶ 16.03(4)(C)(1985) ... 38

Stephens, Maxfield, Lind and Calfee, Federal Estate and Gift Taxation, p. 5- 26, (6th ed. 1991) ... 32

*1 STATEMENT OF JURISDICTION

Following an audit, the Internal Revenue Service (IRS) determined a tax deficiency with respect to the federal estate tax return (Form 706) filed by the Estate of Sammie Barman Delaune (the estate). (R. 162.) [FN1] The estate and fourteen *2 transferees of the estate's assets paid the amount of the assessed tax deficiency, plus accrued interest, (a total of $146, 728) on November 28, 1990. (R. 162.) The estate and nine of its transferees (collectively referred to as "plaintiffs") filed an administrative claim for refund and request for abatement (Form 843) with the IRS on November 20, 1992. (R. 163.) The claim for refund was made within the time required by Section 6511(a) of the Internal Revenue Code of 1986 (26 U.S.C.) ("the Code" or "I.R.C."). The IRS denied the claim for refund on July 23, 1993. (Ibid.)

FN1. "R." references are to the original record on appeal as repaginated by the Clerk of the District Court and transmitted to this Court. "Tr." references are to the official transcript of the trial proceeding. "Ex." references are the trial exhibits admitted into evidence and made a part of the official record on appeal.

On April 26, 1994, plaintiffs commenced the instant refund suit against the Government in the United States District Court for the Middle District of Louisiana. (R. 353-374.) The refund suit was timely brought pursuant to I.R.C. § 6532(a). The Government waived its sovereign immunity for this refund action under 28 U.S.C. § 1346(a)(l) and I.R.C. § 7422(a). [FN2] Subject matter jurisdiction in the District Court rested upon 28 U.S.C. §§ 1331and 1340.

FN2. To the extent that plaintiffs in this case seek a refund of an overpayment of taxes paid by transferee/taxpayers who did not join in this

suit, the Government has not waived its sovereign immunity. The Government is not authorized under the Code to make a refund to persons who did not make the overpayment. I.R.C. § 6402(a). See Argument III, infra.

Following a bench trial, the District Court issued written Findings of Fact and Conclusions of Law (R. 6-13), holding in favor of the Government and concluding (1) that there had been no *3 qualified disclaimer of the decedent's inheritance from her husband pursuant to Code § 2518, so that the amount of the inheritance was not excludible under Code § 2046 from the value of the gross estate, and (2) that the estate was not entitled, in the alternative, to a deduction for a claim against the estate under Code § 2053 in the amount paid to the decedent's husband's heirs pursuant to an agreed judgment entered in a Louisiana probate court proceeding. The District Court entered judgment in favor of the Government on March 10, 1997. (R. 5.)

The District Court's judgment disposed of all of the claims of all of the parties. [FN3] Plaintiffs timely filed a notice of appeal to this Court on April 9, 1997, within the 60-day time for noting an appeal under Rule 4(a) of the Federal Rules of Appellate Procedure and 28 U.S.C. § 2107. (R. 1-4.) This Court has jurisdiction over the appeal under 28 U.S.C. § 1291.

FN3. As explained infra, p. 37, given its holding that plaintiffs were not

entitled to any refund, the District Court had no need to address, and did not address, the Government's claim that any refund should be limited to the amounts paid by those parties who had actually filed refund claims and joined in the suit.

STATEMENT OF THE ISSUES

1. Whether the District Court correctly decided that the decedent did not make a qualified disclaimer of interest in the legacy devised to her by her husband's will, so that the amount of that property interest was not excludible from the value of her gross estate under I.R.C. §§ 2046 and 2518.

2. Whether the District Court correctly decided that the estate was not, in the alternative, entitled to a deduction for a *4 claim against the estate under I.R.C. § 2053 for the amount paid to the decedent's husband's heirs pursuant to an agreed judgment entered in a Louisiana probate court proceeding.

3. Whether, even if a refund were found to be due, the amount of any such refund would be limited to the total of the amounts each plaintiff paid towards the tax liability at issue.

STATEMENT OF THE CASE

(1) Course of proceeding's and disposition in court below

The estate (through its co-executors), and certain transferees of the estate (collectively, "plaintiffs"), brought this action in the District Court against the Government, seeking a refund of a tax deficiency assessed against the estate by the IRS and paid by the estate and fourteen of its transferees. (R. 353-374.) Plaintiffs filed a motion for summary judgment (R. 259-266), which the District Court denied (R. 123-131). Following a trial, the District Court issued its written findings of fact and conclusions of law (R. 6-13), in which it held that the decedent had not made, pursuant to I.R.C. § 2518, a qualified disclaimer of a portion of the interest in property devised to her by her husband's will, so that such interest could not be excluded from the value of her gross estate under I.R.C. § 2046. The court further held that the estate was not, in the alternative, entitled to a deduction under I.R.C. § 2053 for a claim against the estate in the amount paid to the decedent's husband's heirs pursuant to an agreed judgment entered in a Louisiana probate court proceeding.

*5 The District Court entered a judgment in favor of the Government (R. 5), and plaintiffs now appeal (R. 1-4).

(2) Statement of facts

Sammie Barman Delaune (decedent) and Joseph N. Delaune (Jack) were married until Jack died on May 31, 1986. They had no children. (R. 162.) Under Jack's will, his entire estate (other than $3,000 in special bequests) was devised to decedent. (R. 162; Ex. D.) Decedent and Jack had been living in a nursing home. After Jack died, decedent continued to reside in the nursing home until the time of her death on January 26, 1987. (Tr. 194-196.) Jack's brother, William Delaune, had been handling Jack's affairs under a power of attorney for some time before Jack died, and he wrote checks for Jack's and decedent's expenses from a bank account in which were deposited community funds belonging to Jack and decedent. (Tr. 177-197.)

After Jack died, and while decedent was still alive, William continued to write checks from the account to pay for decedent's expenses (e.g., nursing home and hospital expenses). (Tr. 181-183.) On January 15, 1987, decedent signed a check for $100,000, which was drawn on another of Jack's and decedent's bank accounts and which was deposited to the account from which William Delaune paid decedent's expenses. (Tr. 183, 198.) In addition, according to a letter to an IRS agent written by the attorney for decedent's estate, Alton Bayard, the income earned by Jack's estate during 1986 was paid to and received by decedent. (R. 205-208.) The preparer of the joint federal income tax return *6 filed on behalf of Jack and decedent for 1986 reported that decedent received the income of her husband's estate. (R. 205; Tr. 138.)

Decedent's will provided that her entire estate (other than $3,000 of special bequests) would be left to Jack. (R. 162; Ex. M.) On January 14, 1987, after decedent fell ill and was hospitalized, she met in her hospital room with attorneys Miriam Attaya and Fred Palmer. (Tr. 31-33; Ex. I at 8-9.) The attorneys discussed with decedent the fact that, as things stood under decedent's and Jack's respective wills, their combined estates would pass only to decedent's heirs upon her death, and no portion would be inherited by Jack's heirs. (Ibid.; Ex. F.) The attorneys explained that, because Jack had predeceased decedent, decedent's legacy to Jack had lapsed and the residuary of the combined estates would, at her death, pass to decedent's descendants. (Tr. 32-35; Exs. E, F.)

Attaya and Palmer presented options to decedent for achieving a distribution of the combined estates upon her death to both Jack's and decedent's heirs. The options included redrafting decedent's will to provide a portion of decedent's estate to Jack's heirs, or executing a renunciation [FN4] by decedent of Jack's legacy to her, so that it would pass to Jack's heirs rather than to her. (Tr. 33.) It was pointed out to *7 decedent that the latter option would result in significant federal estate tax benefits. (Tr. 32-35; Ex. F.) Decedent decided to follow the recommendation to renounce her interest in Jack's legacy and instructed the attorneys to prepare the paperwork. (Tr. 34-35; Exs. E, F.) The attorneys began preparing the necessary written renunciation documents, but before the papers could be executed, decedent lapsed into a coma and died on January 26, 1987. (Exs. E, F; Tr. 35-36; R. 162.)

FN4. The term "renunciation" is used under Louisiana law to signify a heir's refusal to accept an inheritance. It is interchangeable with the

term "disclaimer" used in the Internal Revenue Code for federal gift and estate tax purposes.

On February 6, 1997, Jack's brother, William Delaune, as an heir of Jack, filed a petition for Rule to Show Cause in Louisiana State Court (Twenty-Third Judicial District), contending that decedent's decision to make a renunciation before she died created a legally enforceable obligation in favor of Jack's heirs. (R. 162; Ex. H.)

Attorneys representing various interested parties and a number of decedent's family members and heirs met on February 23, 1997. (Tr. 79.) They discussed, inter alia, the possibilities of achieving a distribution of the property of the combined estates to both lines of heirs. The legality of an attempted renunciation on behalf of decedent was also discussed. (Ibid.)

A hearing on the Rule to Show Cause was held on February 27, 1997, at which time an agreed judgment, signed by attorneys representing Jack's estate and heirs and decedent's heirs (but not decedent's estate) was approved and signed by the Louisiana probate court judge. (Ex. N.) Under the agreed judgment entered by the Louisiana court, decedent purportedly renounced, through *8 the agreement made on her behalf, a portion of the bequest from Jack equal to two-sevenths of the combined net estates of Jack and decedent. The court-approved agreement effectively distributed a portion of the combined estates to Jack's heirs in contravention of the terms of Jack's and decedent's wills, allegedly to carry out the true testamentary intentions of Jack and decedent.

On October 26, 1987, a United States Estate Tax Return (Form 706) was filed by decedent's estate. (R. 163.) Thereon, a portion of Jack's bequest to decedent was excluded from decedent's gross estate on the basis that there had been a qualified disclaimer (renunciation) under I.R.C. § 2518. On May 16, 1988, decedent's estate filed an amended Form 706 correcting an error on the original return, unrelated to the disclaimer, and claiming a refund of an overpayment of tax in the amount of $11,453.63. (R. 163.)

The IRS conducted an audit examination of the federal estate tax returns filed by decedent's estate. The IRS accepted the correction made on the amended return, but determined that no amount of Jack's legacy devised to decedent should have been excluded from the gross estate reported on the original return, because a qualified disclaimer had not be made by the decedent. (Ibid.) As a result, the IRS assessed against decedent's estate a net tax deficiency, with interest, of $146,728, and issued notices of transferee liability to its transferees. The total *9 assessment was paid on November 28, 1990, by the co-executors of decedent's estate and fourteen of its transferees. (Ibid.)

On November 20, 1992, plaintiffs herein, i.e., the estate, through its co-executors, and nine of the fourteen transferees, brought this tax refund suit in the District Court. (R. 353-374.) Plaintiffs alleged that a qualified disclaimer under I.R.C. § 2518 had been effectuated on behalf of decedent, so that the amount of the disclaimer was excludible under I.R.C. § 2046 from the value of the decedent's gross estate. They further alleged, in the alternative, that an equal amount was deductible from the taxable estate under I.R.C. § 2053(a)(3), as a claim against the estate.

The Government argued that no qualified disclaimer had been made by or on behalf of decedent. It contended that a valid renunciation (disclaimer) under Louisiana law had not been made, and, at any event, decedent had accepted benefits of her inheritance from Jack, so that any disclaimer allegedly made could not qualify because it failed to satisfy the requirement of I.R.C. § 2518(b)(3). (R. 55-66.) Next, the Government argued that there was no deductible claim against the estate. It argued that the purported oral promise by decedent to renounce her legacy from Jack, and the purported oral agreement between decedent and Jack to divide their property among their heirs upon the death of the survivor, did not, as alleged by plaintiffs, create an enforceable obligation of the estate under Louisiana law. It also argued that, at any event, any such promise or *10 agreement was not contracted bona fide for consideration in money or money's worth as required by I.R.C. § 2053 (c) (1). (R. 66-72a.) Lastly, the Government pointed out that even if plaintiffs were entitled to a refund, they were, at most, entitled to a refund of the amounts they paid toward the deficiency and interest, and could not obtain a refund for amounts paid by others who did not join as plaintiffs in the suit. (R. 72a-73.)

Following a trial, the District Court issued its written Findings of Fact and Conclusions of Law. (R. 6-13.) The court decided in favor of the Government, holding that a qualified disclaimer had not been made on behalf of decedent, because under Louisiana law a valid renunciation of an inheritance cannot be made on behalf of a deceased person, and because decedent failed to satisfy the requirement of Section 2518(b)(3) that the disclaimant not accept any benefits of the inheritance. The court further held that there was no deductible claim against the estate under Section 2053, because there had been no oral agreement giving rise to an enforceable obligation of the estate under Louisiana law.

Plaintiffs now appeal. (R. 1-4.)

*11 SUMMARY OF ARGUMENT

This is a federal estate tax refund action brought against the Government by the Estate of Sammie Barman Delaune (the estate), through its co-executors, and by certain of the estate's transferees. The IRS determined that the decedent had not made a qualified disclaimer of the inheritance devised to her by her late husband, and that the full amount of the inheritance was therefore includible in her gross estate. The resulting tax deficiency (and interest) was paid by the estate and fourteen of its transferees. Following the IRS's denial of an administrative claim for refund, the estate and nine of the transferees commenced the instant suit in the District Court.

The District Court ruled in favor of the Government, holding that plaintiffs were not entitled to a refund. That holding was correct.

1. A "qualified disclaimer" of an interest in property results in the property's being excluded from the value of the gross estate. The term "qualified disclaimer" means "an irrevocable and unqualified refusal by a person to accept an interest in property," but only if (1) the refusal is in writing; (2) the refusal is within nine months after the day on which the transfer creating the interest was made; (3) the disclaimant has not accepted the interest or any of its benefits; and (4) as a result of the disclaimer, the interest passes without any direction by the disclaimant to a person other than the

*12 The requirement that the disclaimed interest must pass to another person assumes that a qualified disclaimer must be valid under local law, here that of Louisiana. Under Louisiana law, "[t]he renunciation of a succession is not presumed, it must be made expressly by public act. before a notary, in presence of two witnesses." La. Civ. Code, art. 1017.

The record establishes that decedent never made an express, written renunciation of her inheritance in Jack's estate before a notary and in the presence of two witnesses. Thus, no valid renunication, or disclaimer, was made in accordance with the Louisiana Civil Code or the Internal Revenue Code. Plaintiffs nevertheless argue that an agreed judgment entered by a Louisiana probate court, after decedent's death and.in favor of Jack's heirs, was an effective renunciation under Louisiana law made on behalf of decedent. Plaintiffs rely upon Louisiana cases holding that an in-court declaration by a person renouncing an inheritance is a valid "judicial renunciation," even though it is not in strict compliance with article 1017 of the Louisiana Civil Code. Nothing in those cases, however, supports the proposition that a valid renunciation, through entry of a court-approved settlement, can be made on behalf of a deceased individual.

Plaintiffs also argue that under Louisiana law a renunciation can be made by estate representatives on behalf of the decedent, and that they did so here by means of the agreed judgment entered by the Louisiana court. By all accounts, Louisiana law recognizes a renunciation only if expressly made by *13 a living person on his own behalf, or through a person specially appointed to renounce on his behalf. Since the purported disclaimer was not valid under Louisiana law, it was not a qualified disclaimer under Code Section 2518.

Moreover, the record supports the findings of the District Court that decedent received and accepted benefits of the inheritance bequeathed to her by Jack before she died. Her expenses were paid after Jack's death from community funds that had been owned jointly by Jack and decedent. An undivided one-half interest in those funds belonged to Jack's estate. Her acceptance of these benefits of the inheritance rendered any alleged disclaimer unqualified pursuant to Code Section 2518(b) (3).

2. Plaintiffs argue, in the alternative, that the amount paid to Jack's heirs pursuant to the agreed judgment entered in the Louisiana probate court proceeding was a personal obligation of decedent existing at the time of her death and therefore represents a deductible claim against the estate under Section 2053(a)(3) of the Code. An amount is deductible under I.R.C. § 2053(a)(3) as a claim against the estate if (1) the claim is allowable against the estate under the laws of the jurisdiction where the estate is being administered, (2) the claim represented a personal obligation of the decedent existing at the time of the decedent's death, and (3) if based on a promise or agreement, the claim was contracted bona fide and for an adequate and full consideration in money or money's worth.

*14 Plaintiffs contend that under the circumstances of this case decedent had an enforceable "natural obligation" under Louisiana law to make a testamentary disposition to Jack's heirs. Their contention in this regard is unpersuasive and lacks support in the Louisiana Civil Code and case law. And no deduction is allowable as a claim against the estate under I.R.C. § 2053, because any such claim was not "contracted bona fide for full and adequate consideration in money or money's worth," The obligation paid to Jacks's heirs was of a donative character and was in the nature of a testamentary disposition or settlement of a will contest claim. Federal case law establishes that such obligations are not supported by adequate consideration for purposes of I.R.C. § 2053.

3. Even if a refund of an overpayment of tax were owed to plaintiffs in this case, the amount of any such refund would be limited to the total of the amounts each such claimant/taxpayer paid towards the assessed estate tax liability (and interest) at issue. The estate, through its co-executors, and only nine of the fourteen transferee/taxpayers joined in the instant suit against the Government, seeking a refund of the entire amount of the alleged overpayment of the estate's tax liability. The Code authorizes credits or refunds of overpayments of tax only to the taxpayers who bore the tax liability and made the overpayments. I.R.C. § 6402(a). The Government did not waive its sovereign immunity to the extent plaintiffs here seek a refund of amounts they did not pay. Moreover, they lack standing to claim a refund *15 of amounts paid by the five other transferees who did not join in this action.

The judgment of the District Court should be affirmed.

ARGUMENT

THE DISTRICT COURT CORRECTLY DECIDED THAT THE DECEDENT DID NOT MAKE A QUALIFIED

DISCLAIMER OF ANY INTEREST IN THE LEGACY DEVISED TO HER BY HER HUSBAND'S WILL,

SO THAT NO AMOUNT OF THE INHERITANCE WAS EXCLUDIBLE FROM HER GROSS ESTATE FOR

FEDERAL ESTATE TAX PURPOSES UNDER I.R.C. §§ 2046AND 2518

Standard of Review

Whether the decedent made a qualified disclaimer of any interest in the legacy devised to her by her husband's will is a mixed question of fact and law. Factual questions are reviewable by this Court under the clearly erroneous standard and questions of law are reviewable de novo, and the clearly erroneous standard is inapplicable to the trial court's application of the facts to the legal standards. Sunbeam Products, Ing. v. The West Bend Company. 123 F.3d 246, 250 and n.2 (5th Cir. 1997).

A. Introduction

The federal estate tax is imposed on "the transfer of the taxable estate." I.R.C. § 2001(a). To reach the decedent's taxable estate for purposes of Section 2001, the executor must ascertain the value of the decedent's "gross estate." The "gross estate" is "the value at the time of death of all property, real or personal, tangible or intangible, wherever situated." I.R.C. *16 § 2031(a). A "qualified disclaimer" of an interest in property is excludible from the value of the gross estate. I.R.C. §§ 2046, 2518.

Prior to the enactment of I.R.C. § 2518, Appendix, infra, by the Tax Reform Act of 1976, Pub. L. No. 94-455, 90 Stat. 1520, § 2009(b)(1), the federal tax consequences of disclaimers largely depended on local law. Section 2518 was enacted to provide definitive rules concerning disclaimers and thereby to achieve national uniformity. H.R. Rep. No. 1380, 94th Cong., 2d Sess. at 66 (1976-3 C.B. (Vol. 3) 735, 800). Although Section 2518 is a gift tax provision, Section 2046 of the Code makes its rules applicable for estate tax purposes as well.

Section 2518 defines the term "qualified disclaimer" as "an irrevocable and unqualified refusal by a person to accept an interest in property," but only if four requirements are satisfied. I.R.C. § 2518(b). Insofar as relevant here, these are: (1) the refusal must be in writing; (2) it must be within nine months after the day on which the transfer creating the interest was made; [FN5] . (3) the disclaimant must not have "accepted the interest or any of its benefits"; and (4) as a result of the disclaimer, the interest must pass without any direction on the part of the disclaimant to either the decedent's spouse or to a *17 person other than the disclaimant. I.R.C. § 2518(b) (l)-(4); Estate of Monroe v. Commissioner, 124 F.3d 699, 703 (5th Cir. 1997).

FN5. In the case of transferred interests at death, the date of death of the decedent is the date triggering the nine-month period. Treas. Reg. (26 C.F.R.) § 25.2518-2(c) (3); Estate of Fleming v. Commissioner,

974 F.2d 894, 896 (7th Cir. 1992). Here, Jack Delaune died on May 31, 1986. The nine-month period for making a qualified disclaimer expired on February 28, 1987,

At issue here is whether a "qualified disclaimer" was made by or on behalf of the decedent. The validity of the disclaimer is significant because "if a person makes a qualified disclaimer with respect to any interest in property, this subtitle shall apply with respect to such interest as if the interest had never been transferred to such person." I.R.C. § 2518(a). Thus, if the disclaimer is qualified the value of the interest in Jack's estate disclaimed by decedent would be excludible from her gross estate. If no qualified disclaimer was made, all of the inheritance from Jack's estate is includible in the value of decedent's gross estate.

The existence of a qualified disclaimer turns on the resolution of two narrower questions. The first is whether decedent made an irrevocable and unqualified refusal to accept the inheritance devised to her under Jack's will, where the only writing evidencing such a refusal was executed after her death by attorneys who purportedly signed the renunciation on her behalf. The District Court framed this question as whether, under Louisiana law, "a person must be alive at the time a renunciation of a succession is made." (Tr. 199.) If that question is answered in the affirmative, tht ends the matter; there is no qualified disclaimer here. It it is answered in the negative, however, the second question must be addressed, viz., whether *18 decedent received and accepted benefits of the inheritance. If she did, there could be no "qualified disclaimer" for purposes of the federal estate tax provisions. See I.R.C. § 2518(b)(3).

B. The purported disclaimer was ineffective under Louisiana law and thus does not satisfy Section 2518 of the Code

For there to be a qualified disclaimer, Section 2518(b) of the Code requires not only an "irrevocable and unqualified refusal" to accept an interest in property, but also requires, as a result of such refusal (§ 2518(b) (4)), that the interest pass directly to another without any direction by the disclaimant. Since state law determines the manner in which an interest in property passes upon the death of a decedent, one first must look to Louisiana law to ascertain whether the disclaimer was effective in passing the property to a person other than the disclaimant. See Estate of Bennett v. Commissioner. 100 T.C. 42, 67 (1993); Estate of Goree, 68 T.C.M. (CCH) 123, 125-126 (1994); see also H.R. Rep. No. 201, 97th Cong., 1st Sess. 191 (1981) ("Section 2518 requires, among other conditions, that the disclaimer be effective under local law to pass title"); 5 B. Bittker and L. Lokken, Federal Taxation of Income. Estates and Gifts, ¶ 121.7.6, p. 121-62 (2d ed. 1993) ("[t]he requirement that the disclaimed interest pass to another ... effectively demands that a qualified disclaimer be valid under local law").

It is undisputed that decedent's estate was administered in Louisiana and that Louisiana law is applicable here. Under Louisiana law, an heir is considered to be seized of the right in *19 his inheritance "as long as he does not manifest the will to divest himself of that right by renouncing the succession." La. Civ. Code, art. 1014. Moreover, "[n]o one can be compelled to accept a succession ... [h]e may therefore accept or renounce it." La. Civ. Code, art, 977. "The renunciation of a succession is not presumed, it must be made expressly by public act before a notary, in presence of two witnesses." La. Civ. Code, art. 1017; Arsht v. Davis, 561 So. 2d 58, 60 (La. 1990); Succession of Helwick, 622 So. 2d 823, 825 (La. App. 1993). Under the plain text of the Louisiana Civil Code, it is clear that decedent did not make a valid renunciation of her right to the estate left her by Jack's will; she never made an express, written renunciation of her inheritance in Jack's estate before a notary and in the presence of two witnesses and died before making a renunciation pursuant to article 1017 of the Louisiana Civil Code.

Nevertheless, plaintiffs argue (Br. 5-12) that a valid renunciation may be found in the consent judgment rendered in the Louisiana probate court proceeding initiated by William Delaune, Jack's heir, after decedent died. They argue that the agreed judgment entered by the Louisiana probate court constituted a "judicial renunciation" under Louisiana law. They argue, in addition, that the agreement approved by the Louisiana probate court was a valid renunciation made on behalf of decedent by the representatives of her estate. These arguments should be rejected.

*20 Both arguments assume that a valid renunciation can be made on behalf of a deceased person. To the contrary, the District Court correctly concluded (R. 11\} that neither the estate's representatives nor the heirs of decedent's estate [FN6] had the authority under Louisiana law to renounce (disclaim) an interest in property on behalf of decedent, after her death. Plaintiffs correctly point out that Louisiana courts recognize the concept of a "judicial renunciation." Under that concept, a person's declaration in a court proceeding, which can be reasonably interpreted as a renunciation, will be effective as a valid renunciation, even though not in technical compliance with article 1017 of the Louisiana Civil Code. See Arsht v. Davis, 561 So. 2d at 60; Succession of Tertrou, 47 So. 2d 681 (1950). The concept has been applied rarely by the Louisiana courts and finds its origin in very old cases. E.g., Union National Bank v. ChoPPin, 15 So. 304 (La. 1894); Carter v. Fowler, 33 La. Ann. 100 (La. 1881). But the concept of a judicial renunciation does not go so far as to establish that an after-death renunciation can be validly made on the decedent's behalf through entry of a judgment *21 agreed to by the decedent's estate executors or heirs. Thus, nothing in the above cases supports plaintiffs' proposition that a valid renunciation, through entry of the court-approved settlement here, was made on behalf of decedent after her death.

FN6. Plaintiffs have apparently abandoned on appeal the argument they made below that the heirs of decedent were authorized by Louisiana law to make an after-death renunciation on her behalf. In the District Court they relied on article 1007 of the Louisiana Civil Code for this proposition. It provides that: "Not only the person who is entitled to an inheritance may accept it, but if he dies before having expressly or tacitly accepted or rejected it, his heir shall have a right to accept it under him." This provision, however, merely provides the heir with his own personal right to accept the inheritance in representation of the deceased. See, e.g., La. Civ. Code, arts. 894-901. It provides no right to renounce on behalf of the deceased.

Plainly, the Louisiana probate court, in approving the agreement among the heirs, did not make a judicial determination that there had been a valid renunciation. Rather, it merely entered its judgment pursuant to the parties' settlement agreement with respect to the distribution of decedent's estate. In Commissioner v. Bosch, 387 U.S. 456 (1966), the Supreme Court held that, if the federal estate tax liability depends on the character of a property interest under state law, federal authorities are not bound by a state trial court's determination. Instead, if the state's highest court has not passed on the issue, federal authorities must apply what they determine to be the state law after giving "proper regard" to relevant rulings of other courts of the state. Bosch, 387 U.S. at 462-466. The United States was not a party to the Louisiana probate court action and is not bound by the judgment. Estate of Warren v. Commissioner. 981 F.2d 776, 780 (5th Cir. 1993).

Other provisions in the Louisiana Civil Code lend support to our position that a valid renunciation can only be made by a living person. Article 1018 of the Louisiana Civil Code provides: "He to whose share an inheritance falls, may refuse it, provided he be capable of alienating; for the renunciation of an inheritance is, in all respects, assimilated to an *22 alienation." A deceased person would not be capable of alienating property, nor would he be capable of renouncing an inheritance. Thus, a purported renunciation by a deceased person through his estate representatives is ineffective. The only provision which permits renunciation through an agent acting on one's behalf appears at article 1020 of the Louisiana Civil Code. It speaks strictly in the present tense (i.e., during one's lifetime) and provides that an heir may renounce through an attorney-in-fact, provided the attorney is specially appointed to that effect. It does not suggest that an agent, even an estate representative, may renounce on behalf of a deceased individual. Nothing in the record supports a finding that decedent specially appointed an attorney-in-fact to execute a valid renunciation before she died.

Lastly, plaintiffs' contention that a renunciation was made on behalf of decedent by the representatives of her estate must be rejected for the additional reason that no purported renunciation, even an invalid one, was executed by decedent's estate representatives, The agreed judgment (Ex. N), which plaintiffs contend constitutes a valid renunciation, was signed and executed by attorneys representing the Estate of Jack Delaune and Jack's heirs, and by attorneys representing a number of decedent's heirs. Decedent's estate, by its executors or representatives, was not a party to the agreement.

*23 C. Decedent accepted benefits of her purportedly disclaimed interest and therefore could not have made a qualified disclaimer under federal estate tax law

Under I.R.C. § 2518(b)(3), a qualified disclaimer cannot be made in a property interest if the disclaimant received any part of the interest or its benefits. Estate of Monroe v. Commissioner, 124 F.3d at 703. In the instant case, decedent received funds from Jack's estate from the date of Jack's death until the time of her death.

The record establishes that Jack and decedent had two checking accounts at the time of Jack's death. Under Louisiana law, both Jack and decedent had an undivided one-half community property interest in these funds and the income generated thereon. La. Civ. Code, arts. 2356, 2338. The funds in one of these accounts was used by William Delaune, apparently in his capacity as executor of Jack's estate, to pay decedent's ongoing expenses. On January 15, 1987, decedent signed a check for $100,000 drawn on the other account, which was deposited in the account used by William Delaune to pay decedent's expenses.

In addition, there is a letter in evidence (R. 205-208) written to the IRS by the estate's former counsel, Alton Bayard, containing an admission that all income earned by Jack's estate from the time of his death through the end of 1986 was paid to and received by decedent. The preparer of the joint federal income tax return filed on Jack's and decedent's behalf for 1986 reported that decedent received the income of her husband's estate during 1986. (R. 205; Tr. 138.)

*24 Regulations under I.R.C. § 2518(b) state that: "Acceptance [of benefits] is manifested by an affirmative act which is consistent with ownership of the interest in property. Acts indicative of acceptance include using the property or the interest in property; accepting dividends, interest, or rents from property ...." Treas. Reg. (26 C.F.R.) 25.2518-2(d). On this record, the District Court could fairly find and conclude, as it did (R. 9, 11- 12), that decedent received and accepted benefits of Jack's residuary estate bequeathed to her, so that she was unable to make a qualified disclaimer of that interest under I.R.C. § 2518. Cf. Estate of Monroe.v. Commissioner, 124 F.3d at 708-711 (disclaimer exercised by legatees in exchange for expectation of future benefit was not an acceptance by disclaimants of interest or benefits of property disclaimed so as to render the disclaimers "unqualified" under Code § 2518).

Plaintiffs argue (Br. 12-18) that decedent made no affirmative act to accept the benefits because the executor of Jack's estate, William Delaune, made the payments on her behalf. This argument is unavailing. Decedent signed a check to transfer $100,000 of community property funds into the account used by William to pay her expenses. In addition, as plaintiffs appear to acknowledge (Br. 15- 16), during the time that Jack's estate was under administration, decedent lacked the power to disburse the community funds on her own behalf to pay her bills.

*25 In this regard, moreover, the receipt of benefits by an heir, as a result of the estate representative's payment of the heir's expenses, is deemed an acceptance by the heir consistent with an ownership interest; it is not a mere act of administration of the estate, as plaintiffs appear to contend (Br. 16). See Succession of Breeland, 383 So. 2d 423, 424 (La. App. 1980).

Lastly, plaintiffs contend (Br. 17-18) that the amount of funds used to pay decedent's expenses was less than her undivided one-half community property share and less than the portion of her interest in Jack's estate that was not disclaimed. They argue, therefore, that the funds expended for decedent from the joint accounts could be allocated to her undivided one-half interest or to the undisclaimed portion of her inherited interest. In answer to this we submit, as the District Court concluded, that no contemporaneous allocation or accounting was made to establish that community funds were segregated and paid to decedent. Accordingly, out of each dollar expended to pay her expenses, fifty cents represented her one-half community interest and fifty cents represented the one-half interest that remained in Jack's estate and that was bequeathed to her.

Furthermore, decedent did not even consider disclaiming her undivided interest in Jack's estate until January 1987, so that the acceptance of any of the benefits of Jack's legacy to her, prior to that time, necessarily prevented her from thereafter making a qualified disclaimer of an undivided portion of the interest pursuant to I.R.C. § 2518 (c) (1).

*26 II

THE DISTRICT COURT CORRECTLY DECIDED THAT THE ESTATE WAS NOT ENTITLED TO A

DEDUCTION UNDER I.R.C. § 2053 FOR A CLAIM AGAINST THE ESTATE IN THE AMOUNT

PAID TO JACK'S HEIRS PURSUANT TO THE AGREED JUDGMENT

Standard of Review

Whether the estate was entitled to deduct the obligation to the decedent's husband's heirs arising from an agreed judgment entered in a state court proceeding presents a mixed question of fact and law. Questions of fact are reviewable for clear error and questions of law are reviewable de novo, and the clearly erroneous standard is inapplicable to the trial court's application of facts to the legal standards. Sunbeam Products, Inc. v. The West Bend Company. 123 F.3d at 250 and n.2.

The federal estate tax that is imposed on the taxable estate of a decedent under Section 2001of the Code is determined by subtracting from the gross estate certain deductions authorized by statute. I.R.C. § 2051. In general, Section 2053(a)(3), Appendix, infra, provides an estate tax deduction for "claims against the estate ... as are allowable by the laws of the jurisdiction ... under which the estate is being administered." The regulations promulgated under Section 2053(a)(3) further provide that only amounts representing "personal obligations of the decedent existing at the time of his death" may be deducted. Treas. Reg. (26 C.F.R.) § 20.2053-4.

*27 In addition, deductions for claims otherwise allowable under state law are limited by Code Section 2053(c)(1)(A), Appendix, infra, which provides that a claim founded on a promise or agreement is deductible only to the extent that it is "contracted bona fide and for an adequate and full consideration in money or money's worth." See Taft v. Commissioner, 304 U.S. 351, 356 (1938); Estate of Labombarde v. Commissioner, 58 T.C. 745, 754 (1972), aff'd per curiam, 502 F.2d 1158 (1st Cir. 1973).

In short, an amount is deductible under I.R.C. § 2053(a) (3) as a claim against the estate if (1) the claim is allowable against the estate under the laws of the jurisdiction where the estate is being administered, (2) the claim represented a personal obligation of the decedent existing at the time of the decedent's death, and (3) if based on a promise or agreement, the claim was contracted bona fide and for an adequate and full consideration in money or money's worth (which will presumably be reflected in the value of the gross estate).

Here, plaintiffs contend (Br. 18-30) that, under Louisiana law, decedent had an enforceable "natural obligation" at the time of her death to make a testamentary disposition to Jack's heirs. They argue that the obligation arose in one of two ways. First, plaintiffs contend that it arose from her promise to make a renunciation of her inheritance from Jack and that it ripened into an "onerous contract" under Louisiana law when she directed attorneys Attaya and Palmer to prepare the written renunciation *28 documents. [FN7] Second, they argue that the obligation arose from an oral agreement that decedent and Jack purportedly had made to divide their property among their heirs upon the death of the survivor. Plaintiffs conclude that this created a "natural obligation" that ripened into a contractual obligation when decedent instructed attorneys to prepare written renunciation documents. This obligation, they maintain, was paid after it became the subject of the agreed judgment entered by the Louisiana court, and was a deductible claim against the estate. These contentions are without merit.

FN7. The obligation created by the agreed judgment approved and entered by the Louisiana court arose after the decedent's death, and thus did not create a deductible claim against the estate existing at the time of her death. Plaintiffs do not argue that the agreed judgment, itself, formed the basis for a deductible claim under I.R.C. § 2053. Instead, they contend that the obligation existed at the time of her death because it was created by decedent's oral agreement made before she died, and was later ratified in writing by Jack's and decedent's heirs through the agreed judgment.

Plaintiffs' contention (Br. 19-29) that decedent had an enforceable obligation under Louisiana law at the time of her death to provide a portion of hers and Jack's combined estates to Jack's heirs is a strained effort to transform decedent's unenforceable oral testamentary intentions (as purportedly related to attorneys representing Jack's estate) into a binding contractual duty. We are aware of nothing in Louisiana law that supports this contention. As plaintiffs concede (Br. 23 n.9), oral testamentary dispositions are not valid in Louisiana.

*29 Plaintiffs nevertheless argue that a natural obligation creating an enforceable moral duty arose in favor of Jack's heirs pursuant to articles 1760-1762 of the Louisiana Civil Code. Article 1760 states that "[a] natural obligation arises from circumstances in which the law implies a particular moral duty to render a performance." Article 1762 sets forth circumstances giving rise to a natural obligation. Plaintiffs rely on the circumstance set forth at article 1762(3), which states that a natural obligation arises "[w]hen the universal successors are not bound by a civil obligation to execute the donations and other dispositions made by a deceased person that are null for want of form." Article 1761 provides:

A natural obligation is not enforceable by judicial action. Nevertheless whatever has been freely performed in compliance with a natural obligation may not be reclaimed. [Emphasis supplied.]

A contract made for the performance of a natural obligation is onerous.

But here, there simply were no donations or dispositions by Jack that were "null for want of form" and which decedent had a natural obligation to execute in favor of Jack's other heirs. His will bequeathed his entire residual estate to decedent. Moreover, even if there had been any natural obligation created, article 1761 expressly states that it is not an enforceable obligation.

Plaintiffs also cite Breaux v. Breaux, 51 So. 2d 73 (La. 1951) and Succession of Harrison, 444 So. 2d 1191 (La. 1984) to support their contention that an enforceable moral duty arose on the part of decedent to provide a portion of the combined estates *30 to Jack's heirs. Breaux involved an attempt by a legatee, Iselle Breaux, to rescind a contract she made for the transfer of real property to her son. The property had been left to Iselle by will. The testator had bequeathed the property to Iselle based on Iselle's oral agreement that she would convey it to Iselle's son, Elmo Breaux, when he reached age 21. Iselle transferred the property as agreed, but sought to reclaim it on the ground that the conveyance was not enforceable for lack of consideration. The Louisiana court held that a natural obligation arose in favor of Elmo when Iselle made her agreement with the testator to convey Elmo the property. It further held that, upon freely performing the natural obligation, Iselle could not undo the transfer and reclaim the property.

The case is not apposite to the situation here, where there was no moral or natural obligation created in favor of Jack's heirs in the first place, since decedent and Jack never made changes to their wills. Moreover, decedent never attempted to reclaim the rights given up through the performance of an obligation. She simply never renounced her interest in Jack's estate and had no obligation, moral or otherwise, to turn the inheritance away. She died before making a valid renunciation.

In Succession of Harrison, the Louisiana court enforced the terms of a written, but invalid, holographic will. Here, on the other hand, there was no writing whatsoever made by Jack or decedent to indicate their intentions to divide their property other than as provided in their properly executed written wills. *31 Those wills were valid and, under their terms, Jack's residual estate passed to decedent, and, upon her death, decedent's residual estate passed to her heirs. For the same reasons, plaintiff's reliance (Br. 26-27) on Succession of Gumbel, 56 So. 2d 418 (La. 1951), where the court enforced an oral agreement among legatees to carry out the written, but invalid, testamentary wishes of the testator, is likewise misplaced.

Thus, plaintiffs' contention is unpersuasive and lacks support in the Louisiana Civil Code and case law. The District Court correctly held (R. 13) that no natural obligation to Jack's heirs arose from the alleged oral agreement between Jack and decedent that upon the death of the survivor of them, their property would be divided among their heirs. It also correctly held that plaintiffs had not shown that decedent's instruction to attorneys to prepare a renunciation created an enforceable contract against her estate in favor of Jack's heirs. At any event, even if it had been shown that there was an agreement creating an enforceable obligation under Louisiana law, there was still no deductible "claim against the estate" within the meaning of I.R.C. § 2053(a), because no such claim was "contracted bona fide for full and adequate consideration in money or money's worth." I.R.C. § 2053(c) (1) (A).

The question whether an agreement is supported by adequate and full consideration is a question of fact (see Gray v. United States, 541 F.2d 228, 233 (9th Cir. 1976), and the record establishes here that no consideration whatsoever was received by *32 decedent in exchange for her purported promise to make a disposition of property upon her death to Jack's heirs.

The general policy of Section 2053is to ensure that the transfer of the net estate is taxed and "to prevent deductions, under the guise of claims, of what were in reality gifts or testamentary dispositions." Carney v. Benz, 90 F.2d 747, 749 (1st Cir. 1937); see also Estate of Pollard v. Commissioner, 52 T.C. 741, 744 (1969). Absent the limitation of Section 2053(c) (1) (A), a decedent could, during her lifetime, "promise away" her entire estate to other persons in exchange for their bare promises, receiving nothing of value in return, and could thereby turn a non-deductible testamentary gift into a deductible "claim" or "debt." See, e.g., Estate of Hartshorne, 402 F.2d 592, 594-95 n.2 (2d Cir. 1968); Stephens, Maxfield, Lind and Calfee, Federal Estate and Gift Taxation, p. 5-26, (6th ed. 1991). The consideration requirement thus operates to permit deductions against the estate only if consideration in money or money's worth is received by the decedent.

Transactions among members of a family are subject to particular scrutiny in this regard. Bank of New York v. United States, 526 F.2d l012, 1016 (3d Cir. 1975) (mutual promises by family members to make testamentary gifts, i.e., reciprocal wills, do represent consideration within the meaning of I.R.C. § 2053). As the First Circuit has noted, "the things which the statute was intended to disallow were colorable family contracts and similar undertakings made as a cloak to cover gifts." *33Carney v. Benz, 90 F.2d at 749. See also Estate of Hartshorne v. Commissioner, 402 F.2d at 594 n.2; Estate of Labombarde v. Commissioner, 58 T.C. 745; Helvering v. Robinette, 129 F.2d 832 (3d Cir. 1942), aff'd, 318 U.S. 184 (1943). And the purported agreements here are subject to even closer judicial scrutiny than would be the case if unrelated parties had been involved.

It is well established that promises or agreements to make testamentary dispositions do not qualify as "adequate and full consideration in money or money's worth" for federal tax purposes. Bank of New York v. United States, 526 F.2d at 1015-1017; Helvering v. Robinette, 129 F.2d at 835 ("A family agreement regarding testamentary dispositions does not meet this statutory requirement of consideration."); see also Phillips v. Gnichtel, 27 F.2d 662 (3d Cir. 1928); Latty v. Commissioner, 62 F.2d 952 (6th Cir. 1933); Estate of Pollard v. Commissioner, 52 T.C. 741; Estate of Lazar v. Commissioner, 58 T.C. 543 (1972); Estate of Gray v. Commissioner, 44 B.T.A. 545 (1941).

In determining the adequacy of the consideration for an agreement, the court is not bound by state law concepts of consideration. See Bank of New York. 526 F.2d at 1016. Rather, the court must look to the law of federal estate taxation, and the policy behind it, to decide the case. See United States v. Stapf, 375 U.S. 118, 130-131 (1963). Thus, plaintiffs' argument (Br. 29-30) that under Louisiana law a bona fide contract for adequate consideration was created here in favor of Jack's heirs is irrelevant. (As noted, supra, we also submit that the *34 contention that any enforceable obligation was created is simply incorrect.)

It is clear that any agreement here by decedent to provide for Jack's heirs was "essentially donative in character", which is precisely the type of agreement that the statute was designed to address. See H. Rep. No. 2333, 77th Cong., 2d Sess. 169, reprinted in 1942-2 C.B. 372, 493; S. Rep. No. 1631, 77th Cong., 2d Sess. 238, reprinted in 1942-2 C.B. 504, 679. Because the claim of Jack's heirs was, at best, based on a promise or agreement supported only by donative intent, the payment to them under the agreed judgment entered by the Louisiana court was not deductible as a claim against decedent's estate. [FN8]

FN8. Moreover, as we noted previously, the Louisiana probate court did not consider the existence or the enforceability of the claims of Jack's heirs. It merely approved a settlement agreement. Treasury Regulation (26 C.F.R.) Section 20.2053-1(b)(2), addresses the effect of such a court decree:

The decision of a local court as to the amount and allowability under local law of a claim or administration expense will ordinarily be accepted if the court passes upon the facts upon which deductibility depends. * * * It must appear that the court actually passed upon the merits of the claim. This will be presumed in all cases of an active and genuine contest.

It is beyond dispute that claims based on an asserted right to inherit from a decedent's estate are not supported by adequate consideration. Young v. United States. 559 F.2d 695 (D.C. Cir. 1977); Estate of Lazar v. Commissioner, 58 T.C. at 552-553. Plaintiffs implicitly acknowledge the testamentary nature of the payment to Jack's heirs, contending that the supposed agreements *35 creating the claim involved the division of property upon the death of the survivor of Jack and decedent to their heirs. Indeed, if Jack's heirs had not pursued their Louisiana court action, they would not have been entitled to any inheritance.

Moreover, the state court, action did not convert their "inheritance" into a "claim against the estate." A testamentary disposition does not become a "claim" merely because it must be enforced by a court of law. See Lyeth v. Hoey, 305 U.S. 188 (1938) (property received by disinherited heir in settlement of will contest was property received by "inheritance" and not taxable as income); In re Sage's Estate, 122 F.2d 480 (3d Cir. 1941) (property received by widow in settlement of will contest was received by "inheritance" within meaning of estate tax provisions).

III

EVEN IF A REFUND OF AN OVERPAYMENT WERE DUE TO PLAINTIFFS, THE AMOUNT OF ANY

SUCH REFUND WOULD BE LIMITED TO THE TOTAL OF THE AMOUNTS PAID BY EACH SUCH

CLAIMANT

Standard of Review

Whether a refund of an overpayment of tax owed to a group of plaintiffs is limited to the total of the amounts paid by each claimant/taxpayer is a question of law. A trial court's conclusions of law are reviewable by this Court de novo. Sunbeam Products. Inc. v. The West Bend Company, 123 F.3d at 250.

The amount of the estate tax deficiency was assessed by the IRS against the estate and also against the estate's transferees *36 under the transferee liability provisions of the Code. See I.R.C. § 6901(a)(1)(A)(ii). The amount of the tax deficiency, together with accrued statutory interest (a total of $146, 728), was paid to the IRS by the estate and fourteen of its transferees as follows (Exs. X, Y):

The estate, through its co-executors, and nine of the above fourteen transferee/taxpayers brought the instant suit against the Government, seeking a refund of the entire amount of the alleged overpayment of the estate's tax liability. We maintain, of course, that no overpayment of tax was made. For purposes of completeness, however, we point out that even if this Court were to disagree with us on this point, and were to reverse the trial court, the total amount of any refund would be limited to the total of the amounts paid by each of the ten claimants. No *37 refund would be owed to the five transferees who did not make a claim for a refund. [FN9]

FN9. The five taxpayers who did not bring suit are Soloman Acy, Estate of Hearin, Carolyn Acy Hebert, William P. Delaune, Bessie D. Gautreau.

We made this argument below in our opposition to the plaintiffs' motion for summary judgment (R. 200-201), but the District Court, in denying summary judgment, apparently misconstrued our position to be that the transferees, rather than the estate itself, could not receive a refund (R. 127). At any event, the court found it unnecessary to decide the issue for purposes of summary judgment. (Ibid.) We renewed the argument in our trial brief. (R. 72a-73.) Inasmuch as the court decided in its findings of fact and conclusions of law that there was no overpayment of tax made with respect to the estate's tax liability, it did not reach this issue. (R. 6-13.)

It is fundamental that the Code authorizes credits or refunds of overpayments of tax only to the taxpayers who bore the tax liability and made the overpayments. I.R.C. § 6402(a); Rev. Rul. 73-185, 1973-1 C.B. 602. See also Sorensen v. United States, 475 U.S. 851, 860 (1986) ("All refunds made by the Secretary [of the Treasury] under § 6402(a) are paid to 'the person who made the payment."'). A person cannot seek a refund of an overpayment of taxes paid by another taxpayer. See, e.g., Cindy's, Inc. v. United States. 740 F.2d 851, 854 (llth Cir. 1984). Here, only nine of the fourteen transferees who paid the liability have sought refunds. The Government could refund to them only the *38 amounts they paid toward the assessed tax deficiency (and interest).

The United States waives its sovereign immunity for suits for the recovery of taxes alleged to have been erroneously assessed and collected only if the assessed tax liability has been paid in full, an administrative claim for refund has been timely made, and, after six months or denial of the claim, a refund suit is timely brought. See Flora v. United States. 362 U.S. 145 (1960); I.R.C. §§ 7422, 6511(a), and 6532(a); see also M. Garbis, P. Junghans, and S. Struntz, Federal Tax Litigation, ¶ 16.03(4)(C) (1985).

As we pointed out in our Statement of Jurisdiction, supra, the Government waived its sovereign immunity for plaintiffs' suit here, but only to the extent they seek a refund of the overpayments made by them. Indeed, plaintiffs herein lack standing to seek a refund of the amounts paid by others. See, e.g., Bartley v. United States, 123 F.3d 466, 469-472 (7th Cir. 1997). It is apparent, moreover, that the five transferees who did not make a claim for refund of the alleged overpayment of estate taxes are now time-barred from making such a claim. They had two years from November 28, 1990, the date they paid their portion of the assessed deficiency, to make an administrative claim for refund and apparently did not do so. [FN10]

FN10. It is not entirely clear from the record whether the five transferees were included in the administrative claim filed by plaintiffs' counsel on November 20, 1992, but even if they were, they plainly are not included in the instant suit, and any refund suit filed by them now would be more than two years after the administrative claim was denied on July 23, 1993, and thus would be time-barred. I.R.C. § 6532(a).

*39 CONCLUSION

For the foregoing reasons the judgment of the District Court is correct and should be affirmed.