Jackson v. United States
376 U.S. 503, 84 S.Ct. 869 (1964)

  • Richards died. The California Probate Court allowed his widow, Jackson, to take $3k a month out of the estate for two years for support and maintenance.
    • That’s called a widow’s allowance.
    • It took the Probate Court 14 months to make this determination, so they gave her $42k in back pay, and then $3k a month for the next 10 months.
      • That’s $72k total.
  • When Richards’ Federal estate tax return was filed, the $72k was claimed as a marital deduction. The IRS denied the deduction and demanded payment of taxes. Jackson appealed.
  • The Federal District Court granted summary judgment to the IRS. Jackson appealed.
    • In general, $$$ going to a decedent’s surviving spouse is non-taxable.
    • However, assets that are considered terminable do not qualify for the deduction.
      • Terminable interests are those that could (either due to time or some contingency) pass to someone other than the surviving spouse.
    • The Federal District Court found that an allowance to a widow was a terminable interest and not deductible under the marital provision of the IRS Code.
  • The Federal Appellate Court affirmed.
  • The US Supreme Court affirmed.
    • The US Supreme Court found that under California State law, the widow’s allowance ends if the widow gets remarried or dies.
      • Therefore, the payments could have been terminated upon a contingency.
      • Therefore it is a terminable interest under IRS regulations.