Commissioner v. Estate of Bosch
United States Supreme Court, 1967, 387 U.S. 456
87 S. Ct. 1776
18 L. Ed. 2d 886
67-2 USTC Para. 12,472
19 AFTR2d Para. 147,135
19 AFTR2d 1891
1967 U.S. Lexis 2840
Judge: Clark (opinion)
Ric Honsa
TAX 8020
Facts
• Decedent created a revocable trust in 1930
• The spouse (taxpayer) sought to convert the general
power of appointment to a special power in 1951, prior to
her husband’s death
• Husband dies; the taxpayer took the marital deduction
• The commissioner disallowed the marital deduction,
ruling that it did not qualify under section 2056(b)(5)
• The taxpayer sought relief in the tax court AND filed a
petition in the New York Supreme Court (state court),
seeking a re-determination of the characterization of the
special power (taxpayer wanted the change from general
power to special power to be declared void)
Facts: (continued)
• The Tax Court withheld a decision pending the outcome
of the state court
• The state court did declare the instrument used to
change powers as invalid
• The Tax Court recognized the decision of the state court
as being “an authoritative exposition of New York law
and adjudication of the property rights involved,” and
held that the marital deduction was allowable
• The Commissioner disagreed and appealed the decision
to the Second Circuit; the Second Circuit agreed with the
T.C., holding that the state court “had authoritatively
determined the rights of the parties,” and therefore, “was
not required to delve into the correctness of that state
court decree”
Issue
• Are state court decisions concerning
property rights binding upon Federal
Courts and agencies?
Holding
• No, the decisions of state courts do not
necessarily bind the Federal Government,
whether Judicial or Agency
Reasoning
 Justice Clark declared that, “decisions in a state trial court are not
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attributed the same weight as decisions in the state’s highest court,”
especially when the “United States in not made a party to such
proceeding.”
Justice Clark opined on the intent of congress and the Senate
Finance Committee’s report, which suggested that proper regard
should be given state court decisions, not finality
Limitations placed upon allowance of deduction
Justice Clark cited King v. Order of Travellers, 333 U.S. 153: lower
state court rulings not highly regarded when state’s highest court
has not weighed in
If no ruling by high state court, Federal Court shall give proper
regard to other state rulings, in effect, “sitting as a state court”