## Facts

- Grafton Burgess received several parcels of real property from his mother during his lifetime.
- Burgess’s will gave his mother a life interest in some of those parcels, with remainder interests to two churches after the mother’s death.
- Burgess died while his mother was still living.
- After Burgess’s death, Burgess’s brother sued, challenging the validity of the earlier transfers from the mother to Burgess and asserting that Burgess did not hold good title to the parcels.
- The parties settled the state-court litigation by redistributing the parcels’ ownership interests.
- As part of the settlement, fee-simple ownership of certain parcels was transferred directly to the two churches.
- Burgess’s estate filed a federal estate tax return claiming a charitable deduction for the value of the parcels transferred in fee simple to the churches.
- The Commissioner disallowed the deduction on the ground that the churches received the property because of the settlement of a pre-death property dispute, not by inheritance or testamentary transfer from Burgess.
- The estate sought a redetermination in federal district court; the district court ruled for the Commissioner, and the estate appealed.

## Issues

1. Whether the estate may claim an estate tax charitable deduction for real property transferred in fee simple to churches pursuant to a post-death settlement resolving adverse claims to the decedent’s title.
2. Whether property transferred to charity through compromise of claims based on rights independent of the decedent’s will can be treated as property “passing from the decedent” for purposes of the charitable deduction.

## Decision

- The Fourth Circuit affirmed the district court’s judgment for the Commissioner.
- The court held that the estate was not entitled to a charitable deduction for the fee-simple transfers to the churches made under the settlement.
- The court treated the churches’ receipt of fee-simple title as the product of settling a dispute over pre-death property rights, rather than a transfer that took effect at Burgess’s death through his will.

## Legal Principles

- The federal estate tax charitable deduction (I.R.C. § 2055) applies only to the value of property interests that pass from the decedent to a qualifying charitable beneficiary by bequest, devise, or other qualifying transfer at death.
- A transfer to a charity made pursuant to a settlement is not deductible when the charity’s entitlement is traced to the resolution of adverse claims based on rights that exist apart from the decedent’s testamentary plan (such as claims contesting the decedent’s ownership of the property).
- The fact that a will names charitable beneficiaries does not by itself make deductible a later settlement arrangement that conveys property to those charities on a different basis than the will, particularly where the settlement responds to a bona fide challenge to the decedent’s pre-death title.

## Conclusion

The Fourth Circuit denied the estate’s charitable deduction because the churches received fee-simple title through a settlement of adverse, pre-death property claims challenging Burgess’s ownership, rather than through a qualifying transfer of property passing from Burgess at death under I.R.C. § 2055.


Estate of Burgess v. Commissioner, 622 F.2d 700 (1980)