## Facts

- Lionel L. Campbell executed a “full and universal” power of attorney in 1965 authorizing his son to do any act Campbell could do through an agent.
- On December 9, 1976, Campbell suffered a cerebral hemorrhage and became permanently mentally incompetent; he remained so until his death on January 2, 1977.
- On December 10, 1976, Campbell’s son used Campbell’s funds to purchase a discounted U.S. Treasury “flower bond” (face amount $200,000) intending to act under the power of attorney and knowing Campbell’s condition.
- After Campbell’s death, the executrix applied to redeem at par the portion of the bond needed to pay federal estate taxes; the IRS determined the estate tax liability was $103,219.
- The government refused par redemption, asserting the power of attorney terminated upon Campbell’s incompetence, making the purchase ineffective and leaving Campbell not the “owner” of the bond at death under the governing Treasury regulation.
- The executrix sued in the United States Court of Claims on stipulated facts seeking recognition of the right to redeem at par for estate tax payment.

## Issues

1. Whether Campbell’s broad power of attorney authorized his son to purchase a flower bond with Campbell’s funds after Campbell became permanently incompetent.
2. Whether Campbell was the “owner” of the flower bond at death within the meaning of the Treasury regulation conditioning par redemption for payment of federal estate taxes.

## Decision

- The Court of Claims held for the estate.
- The court rejected the government’s position that the power of attorney lapsed upon incompetence for purposes of this transaction.
- The court concluded the son’s purchase effectively made Campbell the bond’s owner at death under the Treasury regulation.
- The estate was entitled to redeem the flower bond at par to pay federal estate taxes.

## Legal Principles

- A broadly worded power of attorney executed while the principal is competent may be construed to authorize substantial financial transactions undertaken for the principal’s account, including tax-related planning steps, when consistent with the instrument’s language and purpose.
- In applying federal regulations conditioning a tax-related benefit on “ownership,” courts may treat securities acquired with the decedent’s funds by an authorized agent as owned by the decedent at death, even if the government argues common-law agency termination by later incompetence.
- Where the government creates a regulatory mechanism permitting par redemption of specific Treasury instruments to satisfy estate tax, restrictions on that benefit must rest on clear regulatory or statutory limits rather than a narrowing construction that defeats the mechanism’s intended operation.

## Conclusion

The Court of Claims held that the decedent’s estate qualified for par redemption of a flower bond to pay estate tax because the bond was purchased with the decedent’s funds under a broad power of attorney and the decedent was treated as the bond’s owner at death for purposes of the Treasury regulation.


Campbell v. United States, 657 F.2d 1174 (Ct. Cl. 1981)