## Facts

- Herman Bosch created a revocable inter vivos trust for his wife’s life benefit, with a remainder over, giving her a general power of appointment over the corpus.
- In 1951, Mrs. Bosch executed an instrument purporting to change the general power into a special (limited) power of appointment.
- Bosch died in 1957, and the estate claimed a federal estate tax marital deduction equal to the trust’s value.
- The Commissioner disallowed the marital deduction, reasoning that the spouse lacked a qualifying interest due to the 1951 alteration.
- While the tax dispute was pending, the executor sought a New York Supreme Court accounting decree on the validity of the 1951 instrument.
- The New York Supreme Court (a state trial court) held the 1951 release invalid under New York law, implying the spouse retained a general power of appointment.
- The Tax Court treated that state trial-court decree as controlling and allowed the marital deduction; the Second Circuit affirmed on the same basis.

## Issues

1. Whether, in a federal estate tax case turning on state property law, federal authorities are conclusively bound by a state trial court’s determination when the United States was not a party.
2. If the state’s highest court has not decided the question, what weight federal courts must give lower state-court rulings when determining state law for federal tax purposes.

## Decision

- The Supreme Court reversed and remanded the Second Circuit judgment that treated the state trial-court decree as binding.
- The Court held that federal authorities are not bound by a state trial court’s determination of property interests in federal estate tax litigation when the United States was not a party.
- In the absence of a controlling decision by the state’s highest court, federal authorities must determine state law themselves, giving “proper regard” to relevant lower state-court rulings.

## Legal Principles

- When federal estate tax liability depends on a state-law property interest, decisions of the state’s highest court control; lower state-court decisions do not bind federal authorities.
- A state-court decree in a proceeding where the United States was not a party has no res judicata or collateral estoppel effect against the federal government in later federal tax litigation.
- If the state’s highest court has not spoken, federal courts must make an independent determination of state law, treating lower state-court decisions as persuasive data and giving them “proper regard.”

## Conclusion

The Court required federal courts and the IRS to independently determine state property law for federal estate tax purposes unless the state’s highest court has ruled, and it rejected treating state trial-court decrees as conclusive against the United States when it was not a party to the state proceeding.


Commissioner v. Estate of Bosch, 387 U.S. 456 (1967)