Academic journal article Journal of Accountancy

Power-of-Attorney Must Specify Power to Give Gifts

Academic journal article Journal of Accountancy

Power-of-Attorney Must Specify Power to Give Gifts

Article excerpt

* A legally blind woman, who had been living in a residential nursing home, was hospitalized in late 1990. Upon her release, she returned to the nursing home and granted a durable general power of attorney to her nephew that attempted to vest in him the power to manage and dispose of her property.

Shortly thereafter, in an attempt to minimize her estate taxes, the nephew prepared, signed and delivered 38 checks, from the taxpayer's accounts, to 38 separate individuals in the amount of $10,000 each. Two weeks later, the taxpayer died.

The estate filed a federal estate tax return that included the $380,000 in gifts and paid a tax of $336,664. The estate then filed an amended return, excluding the $380,000 and seeking a refund of $161,479 ($146,039 of which related to the exclusion).

The IRS denied the refund. It argued that the gifts the nephew made were beyond the powers granted to him by the durable power of attorney, that the taxpayer retained the power to revoke the gifts and that the gifts were void under state law. …

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