Attorney-at-Law

AN ORAL TRUST

In Uncategorized on 08/14/2012 at 16:19

Isn’t Worth the Paper It’s Not Written On

Another uninteresting Tax Court case August 14 (unopposed summary judgment in a collection alternative where taxpayer wasn’t current with estimateds and current liabilities), so on to the Designated Hitters.

And who shows up (twice) but our old friend the Flying Dream Teamer F. Lee Bailey? See my blogposts “Service Trumps Sickness”, 4/2/12, and “A Victim of His Own Success”, 4/4/12.

You’ll remember F. Lee got rudely handled over the money he earned while safeguarding his client’s ill-gotten gains for the benefit of a U. S. civil forfeiture, based on a handshake. F. Lee again asserts a handshake over a pension distribution from his late wife Patricia, which IRS claims F. Lee got, but F. Lee claims he held in trust for Patricia’s mom, Mrs. McGovern, pursuant to an oral trust.

Judge Gustafson gets this gem on a motion for reconsideration, and issues a Designated Order, filed 8/14/12. Bottom line: F. Lee, you have to be more specific. F. Lee claims that Mrs. McG wanted a mortgage paid off on a condo if her daughter predeceased her, which in fact happened. But the mortgage never made it into the trial record, and Judge Gustafson can’t tell if F. Lee would have benefited from the payoff.

Now oral trusts can be enforced, but they need “strong proof”, and F. Lee hasn’t got it. Judge Gustafson: “Mr. Bailey’s position, if it succeeded, would therefore excuse the payee (himself) from tax on apparent income and would shift the liability to someone unknowable by the tax collector–i.e., the beneficiary of an oral trust. The law abhors such asymmetry or ‘whipsaw’. In the United States Court of Appeals for the First Circuit (to which an appeal in this case would be taken), that abhorrence reflects itself in a heavy evidentiary burden that is put on a party to a contract who seeks a tax treatment at odds with the terms of a contract. See Muskat v. United States, 554 F.3d 183, 188-189 (1st Cir. 2009) (to alter an allocation in a written agreement for tax purposes, ‘the proponent must adduce “strong proof” that, at the time of execution of the instrument, the contracting parties actually intended the payments to compensate for something different’). Here Mr. Bailey asks us to uphold a tax treatment at odds with the apparent terms of the pension contract, which named Mr. Bailey in his individual capacity (not as a trustee) as the death benefit beneficiary. If we treat this situation as analogous to Muskat and therefore look for ‘strong proof’ of an oral trust, that strong proof is certainly lacking.” Order, at p. 3.

So an oral trust had better be strong, or it’s not worth the paper it’s not written on.

Oh yes, the citation is F. Lee Bailey et al., Docket No. 3080-08, 3081-08.

 

 

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: