United States Tax Court

United States Tax Court

CORRECTED

T.C. Memo. 2024-90

ESTATE OF ANNE MILNER FIELDS, DECEASED, BRYAN K.

MILNER, EXECUTOR,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 1285-20.

Filed September 26, 2024.

—————

David C. Gair, Norman Arthur Lofgren, George Tomas Rhodus, and

Joshua D. Smeltzer, for petitioner.

Vivian Bodey, Courtney M. Hill, Sharmeen Ladhani, Audrey Marie

Morris, Billi Seale, and Amy Dyar Seals, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

COPELAND, Judge: Anne Milner Fields inherited an oil business

when her husband passed away in the 1960s. She ran that business

well and, over time, became a successful businessperson. She took a

particular interest in her great nephew, Bryan Milner, educating him,

mentoring him, and designating him as the successor to her wealth. In

her later years she relied on Mr. Milner to take care of her and manage

her assets, entrusting him with a comprehensive durable power of

attorney. This case arises from an estate plan that Mr. Milner, using

the power of attorney, implemented about a month before Ms. Fields’s

death on June 23, 2016.

On May 20, 2016, Mr. Milner formed AM Fields Management,

LLC (AM Fields Management), of which he was the sole member and

manager. He then formed AM Fields, LP (AM Fields) on May 26, 2016,

Served 11/04/24

2

[*2] for which AM Fields Management was the general partner and Ms.

Fields was the limited partner. In forming AM Fields, Mr. Milner acted

on behalf of both the general and limited partners. That is, he signed

the partnership agreement both as the manager of AM Fields

Management and as Ms. Fields’s agent. Afterwards, he used his power

of attorney to transfer to AM Fields approximately $17 million of Ms.

Fields’s personal assets (constituting most of her wealth). He also

caused AM Fields Management to contribute $1,000 to AM Fields. In

exchange for the contributions, Ms. Fields received a 99.9941% limited

partner interest in AM Fields, and AM Fields Management received a

0.0059% general partner interest.

After Ms. Fields passed away, Mr. Milner got an appraisal of Ms.

Fields’s limited partner interest in AM Fields. The appraiser valued the

interest at about $10.8 million as of Ms. Fields’s date of death, reflecting

the approximately $17 million in contributed assets less a 15% discount

for lack of control and a 25% discount for lack of marketability. Mr.

Milner, as executor for the Estate of Anne Milner Fields (Estate),

reported this discounted value on the Estate’s federal estate tax return.

The Internal Revenue Service (IRS) audited the return and found

the estate plan suspect. In a Notice of Deficiency the Commissioner

determined that section 2036(a) 1 applies such that the gross estate

includes the full date-of-death value of Ms. Fields’s assets that were

contributed to AM Fields. 2 As an alternative, the Commissioner

determined that the Estate undervalued Ms. Fields’s limited partner

interest and that the interest was worth $15,388,000. He also

determined a penalty under section 6662(a) and (b)(5) for an

underpayment attributable to a substantial estate tax valuation

understatement or, as an alternative, a penalty under section 6662(a)

and (b)(1) for an underpayment attributable to negligence or disregard

of rules or regulations.

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, regulation

references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all

relevant times, and Rule references are to the Tax Court Rules of Practice and

Procedure.

2 The Estate did not elect the alternate valuation date under section 2032(a).

3

[*3] The Commissioner has since conceded that the Estate is not liable

for the penalty under section 6662(a) and (b)(5). We are therefore left to

decide:

1.

Whether section 2036(a) includes within the gross estate

the date-of-death value of the assets Ms. Fields contributed

to AM Fields in excess of the value of Ms. Fields’s 99.9941%

limited partner interest in AM Fields;

2.

If not, what the date-of-death fair market value was of Ms.

Fields’s limited partner interest; and

3.

Whether the Estate is liable for an accuracy-related

penalty under section 6662(a) and (b)(1).

FINDINGS OF FACT

Ms. Fields resided in Texas on the date of her death. Mr. Milner,

the Estate’s executor, resided in Texas when the Petition in this case

was timely filed.

I.

The Milner Fields Family

A.

Anne Milner Fields

Ms. Fields was born in the small town of Winnsboro, Texas. After

graduating from high school, she moved to Dallas, Texas, where she

worked as a secretary and eventually met Bert Fields, Sr., an oil

businessman, whom she later married. Ms. Fields lived the life of a

socialite during her marriage to Mr. Fields. She did not have any

children before or during her marriage to Mr. Fields.

Mr. Fields passed away in 1963, leaving Ms. Fields with the

family business. Ms. Fields had no experience running a business, and

she realized that keeping the family enterprise successful would require

a personal transformation on her part. She subsequently replaced her

socialite lifestyle with business training. She enrolled in accounting and

business classes at Southern Methodist University (SMU). She asked

business partners and advisers to help her learn the various aspects of

the oil business. Ms. Fields’s approach ultimately served her well: Her

schooling, charisma, drive, and curiosity yielded good business

decisions, which over time compounded into considerable personal

wealth. She did not remarry or have children after Mr. Fields’s passing.

4

[*4]

B.

Bryan Milner

Mr. Milner is Ms. Fields’s great nephew, in whom Ms. Fields took

a particular interest. She paid for his bachelor’s degree in finance from

the University of North Texas and his master’s degree in business

administration from SMU. She also mentored him throughout her life.

At the time of trial Mr. Milner worked as a commercial banker with

Texas Capital Bank. He had previously worked at Wells Fargo Bank for

17 years, focusing on asset-based commercial lending.

II.

Ms. Fields’s Will and Power of Attorney

On January 29, 2010, Ms. Fields personally signed a last will and

testament (will), a statutory durable power of attorney (general POA),

and a medical power of attorney (medical POA). The relevant portions

of each document are described in turn below.

The will appointed Mr. Milner the executor of the Estate. It

provided for 11 specific bequests, all but one of which were cash

bequests. Three of the ten specific cash bequests were charitable

bequests to the following entities:

Entity

Amount of Charitable Bequest

The Tinney Chapel Methodist Church,

Winnsboro, Texas

$50,000

The First Methodist Church,

Winnsboro, Texas

200,000

The Winnsboro, Texas ISD High School

100,000

Other specific bequests were to family members and friends. The total

amount of the cash bequests was $1,450,000, while the noncash bequest

comprised 6,000 shares of North Dallas Bank & Trust (NDBT) stock.

Ms. Fields bequeathed the remainder of her estate to Mr. Milner.

The general POA resembled the form power of attorney provided

in Texas Probate Code Annotated § 490 (West 2010) (repealed 2014).

The document appointed Mr. Milner to act as Ms. Fields’s agent and

attorney-in-fact. It further appointed Susan Milner, Ms. Fields’s great

niece, as the first alternate agent and Ms. Milner’s sister as the second

alternate agent. Ms. Fields did not restrict any of the powers provided

for in the general POA. She elected to give Mr. Milner the power to

make gifts, provided they did not exceed “the amount of annual

exclusions allowed from the federal gift tax for the calendar year of the

5

[*5] gift.” She also elected to have the general POA go into effect upon

her disability or incapacity. The general POA further stated that Ms.

Fields

shall be considered disabled or incapacitated for purposes

of this [general POA] if a physician certifies in writing at a

date later than the date this power of attorney is executed

that, based on the physician’s medical examination of me,

I am mentally incapable of managing my financial affairs.

Likewise, the medical POA designated Mr. Milner as Ms. Fields’s agent

to make healthcare decisions for her should she be unable to do so (and

should a physician certify in writing that she was so unable). Ms. Milner

and her sister were designated the first and second alternate agents,

respectively. There were no restrictions on the medical POA. Both the

general and medical POAs were validly executed under Texas law.

III.

Events Leading to the Formation of AM Fields and AM Fields

Management

A.

Ms. Fields’s Health Before the Formation of AM Fields

Ms. Fields was diagnosed with Alzheimer’s dementia

(Alzheimer’s) in early 2011. Several months later, when out at dinner

with Mr. Milner and Ms. Milner, Ms. Fields fell and broke her hip. She

had surgery to repair the hip, followed by stays at two rehabilitation

centers. Mr. Milner soon after placed Ms. Fields in a long-term care

facility focusing on the memory-impaired, run by the company Silverado

(Silverado home).

Mr. Milner strived to make Ms. Fields as comfortable as possible

at the Silverado home. He rented two adjacent rooms and, through

Silverado, hired caregivers to provide Ms. Fields with round-the-clock

care. Despite those efforts, Ms. Fields did not enjoy living at the

Silverado home and would routinely express to Mr. Milner her

dissatisfaction with her quarters and her neighbors. The last straw for

Mr. Milner came when Ms. Fields fell while unsupervised during a shift

change between her various caregivers.

Mr. Milner discovered that a house across the street from his own

home was listed for sale (Covehaven property). He planned to purchase

that house for Ms. Fields, remodel it to look similar to her old

6

[*6] house, 3 move her in, and hire caregivers to provide round-the-clock

care under his close supervision. While the Covehaven property was in

escrow, it became unclear whether Mr. Milner had the authority to act

on Ms. Fields’s behalf in the home purchase and other financial matters.

Thus, Mr. Milner obtained letters from two of Ms. Fields’s physicians:

Dr. Alfredo Garcia and Dr. Vaqar Dar. Both letters are dated April 20,

2012. Dr. Garcia’s letter stated that, in his medical opinion, Ms. Fields

had the requisite mental capacity to understand the meaning and

significance of the general POA when she signed it on January 29, 2010.

Dr. Dar’s letter stated that, in his medical opinion, as of April 20, 2012,

Ms. Fields was “not capable of appreciating the meaning or significance

of the [purchase of the Covehaven property], or of handling her legal and

financial affairs,” thereby satisfying the condition precedent for the

general POA to take effect. Subsequently Mr. Milner, as Ms. Fields’s

agent, used her assets to purchase the Covehaven property and title it

in her name. Ms. Fields moved in after the remodeling, and Mr. Milner

hired three caregivers.

B.

Financial Elder Abuse

Ms. Fields was a victim of two instances of financial elder abuse.

The first came to light in August 2011, after Ms. Fields had hip surgery

and was recovering at a rehabilitation center. Mr. Milner visited Ms.

Fields’s house to check her answering machine and heard multiple

suspicious messages from a man unfamiliar to him. After investigating,

he discovered that the man was part of a home repair scam and that,

over the course of several months, the man had duped Ms. Fields out of

approximately $20,000. Mr. Milner filed a report with the Dallas Police

Department. (The record does not indicate what happened after the

report was filed.)

The second instance of abuse occurred after Ms. Fields moved into

the Covehaven property. Mr. Milner gave Ms. Fields’s caregivers a debit

card so they could purchase necessities like groceries and gas in

connection with her care. Upon checking the receipts, Mr. Milner

discovered that one of the caregivers was routinely requesting $20, $30,

or $50 in “cash back” when shopping in grocery stores. He warned the

caregiver that he would fire her if she embezzled from Ms. Fields again.

He also started leaving only small amounts of cash in the bank account

3 Mr. Milner did so because he had learned that people with Alzheimer’s tend

to cope better with the disease when they live in familiar surroundings.

7

[*7] linked to the debit card, and he set alerts to inform him by text

message every time the card was used.

C.

Formation of AMF Capital, LLC, and Winnsboro Capital,

LLC

Mr. Milner was friends with John Mongogna. In 2015 and 2016

Mr. Mongogna worked as a business litigation and transaction attorney

for the law firm of Coats Rose. Mr. Milner routinely asked Mr.

Mongogna, as a friend, for his advice on different legal issues, and from

time to time he retained Mr. Mongogna as his attorney on various legal

matters.

In 2015 Mr. Milner approached Mr. Mongogna about certain

investments that he wanted to make using Ms. Fields’s assets. Mr.

Mongogna believed that it was best practice to keep certain types of

investments in a limited liability company (LLC), to take advantage of

statutory liability protections. If something went wrong with an

investment, any liability generally would be limited to the LLC’s assets,

keeping the personal assets of the LLC’s members safe and out of reach

of creditors. However, Mr. Mongogna did not believe that an LLC

necessarily would resolve the problem of a third party’s refusing to

honor a general POA.

On the advice of Mr. Mongogna, Mr. Milner formed two LLCs in

May 2015: AMF Capital, LLC (AMF Capital), and Winnsboro Capital,

LLC (Winnsboro Capital). Ms. Fields, who was the sole member of both

LLCs, did not personally sign the company agreements; rather, Mr.

Milner signed those agreements for her as her agent. Mr. Milner also

signed each company agreement on his own behalf as LLC manager. At

the time of Ms. Fields’s death, AMF Capital held three assets: cash,

notes receivable, and collectible guitars; 4 Winnsboro Capital held real

estate in Winnsboro, Texas.

4 The notes receivable consisted of loans AMF Capital made to Mr. Milner,

other members of the Milner Fields family, and third parties. AMF Capital owned at

least six guitars, including a 1957 Fender Stratocaster, a 1958 Fender Stratocaster, a

1958 Gibson SJ, a 1958 Les Paul Special TV, a 1960 Gibson Les Paul, and a 1963

Fender Stratocaster.

8

[*8] IV.

A.

Formation of AM Fields and AM Fields Management

Formation

On or about May 11, 2016, Mr. Milner approached Mr. Mongogna

to discuss estate planning for Ms. Fields. Mr. Mongogna was not an

estate planning attorney and so referred Mr. Milner to his colleague at

Coats Rose, Jamie Katzen. Following a meeting with Mr. Milner, Mr.

Katzen began drafting a company agreement for AM Fields

Management, a partnership agreement for AM Fields, and a certificate

of formation for each entity. Mr. Katzen also suggested that Mr. Milner

retain the business valuation firm of Katzen Marshall to appraise AM

Fields’s assets. Mr. Milner retained Katzen Marshall on or about May

20, 2016.

Also on May 20, 2016, Mr. Katzen’s office filed a certificate of

formation for AM Fields Management with the Texas secretary of state.

Three days later, on May 23, 2016, Mr. Katzen sent an email to David

Katzen (a partner at Katzen Marshall), 5 attaching a draft of the

partnership and company agreements for AM Fields and AM Fields

Management, respectively, and asking David Katzen for “any comments

[he might have] . . . regarding the terms that might be useful in

obtaining a deeper discount.” The record does not reflect whether or how

David Katzen replied to that email.

On or about May 25, 2016, Mr. Milner executed the company

agreement for AM Fields Management. Under that agreement, Mr.

Milner was the company’s sole member and sole manager, and he signed

the agreement in both capacities. The agreement provided that Mr.

Milner would contribute $1,000 to the company in exchange for a 100%

interest.

Also on or about May 25, 2016, Mr. Milner executed the limited

partnership agreement for AM Fields (partnership agreement). Under

the partnership agreement, AM Fields Management was the

partnership’s general partner and Ms. Fields its sole limited partner.

Section 5 of the partnership agreement, titled “Management,” provided

that subject to certain enumerated restrictions not relevant here, the

general partner “shall have the sole and exclusive right to manage the

business of [AM Fields].” Section 3.1, titled “Profits,” generally provided

that profits for each fiscal year “shall be allocated to the Partners in

5 David Katzen is Jamie Katzen’s father.

9

[*9] proportion to their respective Percentage Interests.” Section 4,

titled “Distributions,” generally provided that the general partner had

absolute discretion to distribute cash “to the Partners in proportion to

their respective Percentage Interests.” Section 13, titled “Dissolution

and Winding Up,” provided that the partnership would dissolve and

wind up upon (among other things) “[t]he affirmative vote of all the

Partners.” Section 13 also provided that in the event the partnership

was wound up, partnership property would be liquidated and the

proceeds first used to pay the partnership’s debts and liabilities to third

parties, then used to pay the partnership’s debts and liabilities to the

partners, and finally distributed to the partners in accordance with their

respective capital accounts.

The partnership agreement further provided that AM Fields

Management would contribute $1,000 to the partnership in exchange for

a “0.0069%” 6 interest and that Ms. Fields would contribute $16,972,409

to the partnership in exchange for a 99.9941% interest. Mr. Milner

signed the partnership agreement both in his role as manager of AM

Fields Management and on Ms. Fields’s behalf, as her agent. Further,

as manager of AM Fields Management, he executed a certificate of

formation for AM Fields, which was filed with the Texas secretary of

state on May 26, 2016.

B.

Contributions to AM Fields

Following the formation of AM Fields and AM Fields

Management, AM Fields Management contributed $1,000 to AM Fields

in exchange for its general partner interest. On May 27, 2016, Mr.

Milner executed a bill of sale and assignment (bill of sale). The bill of

sale listed Ms. Fields as the seller of certain assets and AM Fields as the

purchaser. Mr. Milner signed the bill of sale both for the seller (as Ms.

Fields’s agent) and for the buyer (as manager of AM Fields

Management). Exhibit A to the bill of sale, titled “Legal Description of

Property,” lists the following:

6 Although Exhibit A of the partnership agreement states that AM Fields

Management would receive a 0.0069% interest in exchange for a $1,000 contribution,

that percentage is a scrivener’s error, as 99.9941% + 0.0069% = 100.001%. The total

amount contributed to AM Fields was $16,973,409, and the partnership agreement

stated that each partner would receive an interest proportionate to its contribution.

Thus, AM Fields Management in fact received a 0.0059% interest: $1,000 ÷

$16,973,409 = 0.0059%.

10

[*10] 1) Ten Million ($10,000,000) of the assets held at that

certain Brokerage Account held at Wells Fargo Bank in my

name.

2) All of my shares, being approximately Eighty-Nine

Thousand (89,000), of stock of North Dallas Bank and

Trust, having an approximate value of Five Million Three

Hundred Forty Thousand Dollars ($5,340,000).

3) All my interest in the Tree Farm being approximately

Three Hundred Fifty (350) acres of real property located in

Wood County, Texas, and having an approximate value of

One Million One Hundred Four Thousand Seven Hundred

Twenty Dollars ($1,104,720).

4) All of my interest in AMF Capital, LLC, a Texas limited

liability company[.]

5) All of my interest in Winnsboro, LLC [sic], a Texas

limited liability company[.]

The tree farm was transferred by general warranty deed executed

on May 27, 2016, by Mr. Milner as Ms. Fields’s agent. Ms. Fields’s

interests in AMF Capital and Winnsboro Capital were also transferred

on that date by two separate assignments of membership interest,

executed by Mr. Milner both as Ms. Fields’s agent (Ms. Fields was the

assignor) and as manager of AM Fields Management (AM Fields was

the assignee). Ms. Fields’s 89,093 shares of NDBT stock were

transferred to AM Fields on June 6, 2016, when Mr. Milner executed a

transfer request form. And the Wells Fargo brokerage account was

transferred to AM Fields on June 13, 2016, when Mr. Milner executed a

securities and cash transfer form. Mr. Milner acted as Ms. Fields’s agent

when he executed the forms that transferred the NDBT shares and the

Wells Fargo brokerage account to AM Fields.

Ms. Fields received a 99.9941% limited partner interest in AM

Fields in exchange for the five assets. Following the transfers, her

assets remaining outside the partnership totaled approximately

$2,152,508, consisting of $1,530,262 in liquid assets, $495,000 in real

estate (the Covehaven property), and $127,246 in other illiquid assets.

C.

Ms. Fields’s Health in May and June 2016

Sometime during the week of May 2, 2016, Ms. Fields fell in the

presence of one of her caregivers. That caregiver scheduled an

appointment for Ms. Fields with Dr. Garcia on May 13, 2016. On May

21, 2016, Ms. Fields fainted and was sent to the hospital, where she was

11

[*11] found to have suffered from a heart attack and a spine fracture.

She was 91 years old at the time. Ms. Fields was discharged from the

hospital on May 25, 2016. About two weeks later, on June 9, 2016, she

had a followup visit with Dr. Garcia, who noted Ms. Fields’s continuing

dementia, weak condition, and need for “total care.” He gave his

impression that Ms. Fields’s Alzheimer’s was “end-stage.” Six days

later, on June 15, 2016, Dr. Garcia issued Ms. Fields a prescription for

hospice care. He also signed a Physician Certification of Terminal

Illness, which certified to the Texas Medicaid Hospice Program of the

Texas Department of Aging and Disability Services that Ms. Fields had

an illness “with a medical prognosis of six months or less to live, if the

illness runs its normal course.” Ms. Fields died eight days later, on June

23, 2016.

V.

Events Occurring After Ms. Fields’s Death

A.

Probate Action

After Ms. Fields died, Mr. Milner initiated a probate action with

Probate Court No. 1 of Collin County, Texas. That court subsequently

issued an order admitting Ms. Fields’s will to probate, appointing Mr.

Milner as executor, and authorizing the issuance of letters

testamentary.

As stated above, Ms. Fields’s will provided for ten specific cash

bequests totaling $1,450,000 and one noncash bequest of 6,000 shares of

NDBT stock. 7 Since the Estate did not have enough cash to pay all the

cash bequests, in December 2017 Mr. Milner distributed $600,000 and

1,200 shares of NDBT stock from AM Fields to the Estate. He then

wrote a check to the Tinney Chapel Methodist Church for $50,000, a

check to the Winnsboro, Texas ISD High School for $100,000, and a

check to the First Methodist Church for $140,000. He also assigned the

1,200 shares of NDBT stock to the First Methodist Church.

B.

Estate Tax Return

Mr. Milner retained the accounting firm of Armanino LLP

(Armanino) to prepare the Estate’s Form 706, United States Estate (and

Generation-Skipping Transfer) Tax Return. Jerri Hammer, a partner

at Armanino, was the primary estate tax return preparer. At the time

she was both a certified public accountant and an attorney. Both Mr.

7 The legatee of the noncash bequest predeceased Ms. Fields and the bequest

therefore lapsed.

12

[*12] Milner and Ms. Hammer signed the estate tax return, which was

timely filed on March 21, 2017.

On that return, the Estate included in the gross estate Ms.

Fields’s limited partner interest in AM Fields, valued at $10,877,000.

The Estate did not include, independently of the limited partner

interest, any value of Ms. Fields’s assets transferred to AM Fields. The

Estate calculated an estate tax liability of $4,617,800, which it did not

have enough cash to pay. Thus, Mr. Milner sold some of AM Fields’s

marketable securities and distributed the cash proceeds from AM Fields

to the Estate, which then paid the reported tax liability.

OPINION

I.

Burden of Proof and Witness Credibility

Generally, we presume that the IRS’s determinations in a notice

of deficiency are correct, and the taxpayer bears the burden of proving

those determinations incorrect. See Rule 142(a)(1); Welch v. Helvering,

290 U.S. 111, 115 (1933). 8

As the Estate correctly noted in its posttrial briefs, witness

credibility is an essential part of this case, which turns on Mr. Milner’s

motives for forming and funding AM Fields. As the trier of fact, we may

credit testimony in full, in part, or not at all. See Neonatology Assocs.,

P.A. v. Commissioner, 115 T.C. 43, 84 (2000), aff’d, 299 F.3d 221 (3d Cir.

2002). We decide whether a witness’ testimony is credible by relying on

objective facts, the reasonableness of the testimony, the consistency of

the witness’ statements, and the witness’ demeanor. See Quock Ting v.

United States, 140 U.S. 417, 420–21 (1891); Wood v. Commissioner, 338

F.2d 602, 605 (9th Cir. 1964), aff’g 41 T.C. 593 (1964); Pinder v. United

States, 330 F.2d 119, 124–25 (5th Cir. 1964); Concord Consumers Hous.

Coop. v. Commissioner, 89 T.C. 105, 124 n.21 (1987). We may discount

testimony that we find unworthy of belief, see Tokarski v. Commissioner,

87 T.C. 74, 77 (1968), but we may not arbitrarily disregard testimony

that is competent, relevant, and uncontradicted, see Conti v.

8 Under section 7491(a), the burden of proof shifts to the Commissioner with

respect to a factual issue where the taxpayer (1) produced credible evidence regarding

that issue, (2) complied with the Code’s substantiation and recordkeeping

requirements, and (3) complied with the IRS with regard to all reasonable requests for

information. See also Higbee v. Commissioner, 116 T.C. 438, 440–41 (2001). The

Estate does not contend that section 7491(a) applies, and the record does not otherwise

indicate that it should.

13

[*13] Commissioner, 39 F.3d 658, 664 (6th Cir. 1994), aff’g and

remanding 99 T.C. 370 (1992) and T.C. Memo. 1992-616.

II.

Legal Principles

The federal estate tax is imposed on the transfer of a decedent’s

taxable estate. I.R.C. § 2001(a). The taxable estate’s value is the value

of the gross estate after applicable deductions. I.R.C. § 2051. The value

of the gross estate generally includes the fair market value of all

property that the decedent owned on the date of death or that is

otherwise included in the gross estate under the Code. See I.R.C.

§§ 2031, 2033–2046; Treas. Reg. § 20.2031-1.

If a decedent made an inter vivos transfer of property (other than

a bona fide sale for adequate and full consideration) and retained

specific rights or interests in the property that were not relinquished

until death, the full value of the transferred property generally is

included in the gross estate. I.R.C. § 2036(a). 9 The purpose of section

2036(a) is to include in the gross estate inter vivos transfers that were

testamentary in nature. Estate of Bongard v. Commissioner, 124 T.C.

95, 112 (2005) (citing United States v. Estate of Grace, 395 U.S. 316

(1969)).

There are three requirements for property to be included in the

gross estate under section 2036(a). First, the decedent must have made

an inter vivos transfer of property. Second, the decedent must have

retained an interest or a right specified in section 2036(a)(1) or (2) in the

transferred property that he or she did not relinquish until death.

Finally, the transfer must not have been a bona fide sale for adequate

and full consideration. Estate of Bongard, 124 T.C. at 112.

9 Sec. 2036. Transfers with retained life estate.

(a) General Rule.—The value of the gross estate shall include

the value of all property to the extent of any interest therein of which

the decedent has at any time made a transfer (except in the case of a

bona fide sale for an adequate and full consideration in money or

money’s worth), by trust or otherwise, under which he has retained for

his life or for any period not ascertainable without reference to his

death or for any period which does not in fact end before his death—

(1) the possession or enjoyment of, or the right to the

income from, the property, or

(2) the right, either alone or in conjunction with any

person, to designate the persons who shall possess or enjoy the

property or the income therefrom.

14

[*14] III.

Whether Section 2036(a) Requires Inclusion of the

Underlying AM Fields Asset Values in Excess of the

Partnership Interest Value

The parties do not dispute that the first condition—an inter vivos

transfer of property—occurred here: Mr. Milner, on Ms. Fields’s behalf,

contributed five of Ms. Fields’s assets to AM Fields between May 27 and

June 13, 2016. We therefore consider whether Ms. Fields retained

applicable rights or interests in the property she transferred. If she did,

we then must consider whether her transfers meet the exception for

bona fide sales for adequate and full consideration.

A.

Whether Ms. Fields Retained Applicable Rights or Interests

in the Transferred Property

Transferred property may be included in the gross estate if the

decedent retained possession or enjoyment of, or the right to income

from, the property. I.R.C. § 2036(a)(1). For these purposes, a transferor

retains “possession or enjoyment” if she retains a “substantial present

economic benefit” from the property, as opposed to “a speculative

contingent benefit which may or may not be realized.” Strangi v.

Commissioner, 417 F.3d 468, 476 (5th Cir. 2005) (quoting United States

v. Byrum, 408 U.S. 125, 145, 150 (1972)), aff’g Estate of Strangi v.

Commissioner, T.C. Memo. 2003-145, 85 T.C.M. (CCH) 1331. Possession

or enjoyment is “retained” for these purposes if there is an express or

implied agreement among the parties to that effect at the time of the

transfer, whether or not the agreement is legally enforceable. Strangi

v. Commissioner, 417 F.3d at 476; Estate of Strangi, 85 T.C.M. (CCH)

at 1336; see also Treas. Reg. § 20.2036-1(c)(1)(i).

Although the partnership agreement gave AM Fields

Management some rights to the income and underlying property of AM

Fields, 10 it acquired those rights in exchange for a $1,000 contribution

that yielded a merely de minimis interest. That interest was “hardly

more than a token in nature. . . . Accordingly, we direct our attention to

the purpose, as opposed to the mechanics, of partnership distributions

10 Section 3.1 of the partnership agreement generally provided that profits for

each fiscal year “shall be allocated to the Partners in proportion to their respective

Percentage Interests,” and Section 13 provided that upon dissolution of the

partnership and after payment of debts, partnership property would be distributed to

the partners in accordance with their capital accounts.

15

[*15] and expenditures.” Estate of Strangi, 85 T.C.M. (CCH) at 1338.

As explained below, that purpose was testamentary in nature.

AM Fields Management was the general partner at all times,

with absolute discretion to make proportionate distributions; Mr. Milner

was its sole member and manager; and both before and throughout his

tenure as manager he acted as Ms. Fields’s agent under the general

POA. Therefore, at all times Ms. Fields effectively held the right to

virtually all the income from her transferred assets, and the AM Fields

partnership agreement constituted an express agreement to that effect.

See id. at 1337 (holding that the decedent retained the right to income

from property transferred to a family limited partnership in exchange

for a 99% partnership interest, where the general partner was managed

by the decedent’s attorney-in-fact). Although Ms. Fields did not actually

receive any income distributions from AM Fields during life, we have

clarified before that section 2036(a)(1) “does not require that the

transferor pull the ‘string’ or even intend to pull the string on the

transferred property; it only requires that the string exist.” Estate of

Pardee v. Commissioner, 49 T.C. 140, 148 (1967).

We also conclude that Ms. Fields retained enjoyment (i.e.,

substantial present economic benefit) of the five transferred assets

themselves. The AM Fields transfers left Ms. Fields with only $2.15

million of assets outside the partnership, while her will listed bequests

of $1.45 million, and a substantial estate tax liability was foreseeable.

On this basis, we find an implicit agreement between Mr. Milner and

Ms. Fields that he, as manager of AM Fields’s general partner, would

make distributions from the partnership to satisfy her expenses, debts,

and bequests if and when necessary. See Estate of Bongard, 124 T.C.

at 129 (“The existence of an implied agreement is a question of fact that

can be inferred from the circumstances surrounding a transfer of

property and the subsequent use of the transferred property.”). Mr.

Milner did in fact make distributions to satisfy Ms. Fields’s bequests and

the Estate’s estate tax liability. “[P]art of the ‘possession or enjoyment’

of one’s assets is the assurance that they will be available to pay various

debts and expenses upon one’s death.”

Estate of Strangi v.

Commissioner, 417 F.3d at 477. The use of a significant portion of

partnership assets to discharge obligations of a decedent’s estate is

evidence of a retained interest in the assets transferred to the

partnership. Estate of Liljestrand v. Commissioner, T.C. Memo. 2011259, 102 T.C.M. (CCH) 440, 448; Estate of Jorgenson v. Commissioner,

T.C. Memo. 2009-66, 97 T.C.M. (CCH) 1328, 1337, aff’d, 431 F. App’x

544 (9th Cir. 2011). As we remarked in an analogous case: “[V]irtually

16

[*16] nothing beyond formal title changed in decedent’s relationship to

[her] assets.” Estate of Strangi, 85 T.C.M. (CCH) at 1339.

In addition to retaining enjoyment and rights under section

2036(a)(1), Ms. Fields also retained “the right, either alone or in

conjunction with any person, to designate the persons who shall possess

or enjoy the [transferred] property or the income therefrom.” I.R.C.

§ 2036(a)(2). Section 13.1(a) of the partnership agreement provided that

Ms. Fields had the right, in conjunction with Mr. Milner, to dissolve the

partnership, upon which Mr. Milner would be obligated to liquidate all

partnership property, pay off partnership debts, and distribute cash to

the partners in accordance with their capital accounts. Accordingly, Ms.

Fields retained the right—in conjunction with Mr. Milner—to at any

time acquire outright all income from the transferred assets and then

designate its disposition. See Estate of Powell v. Commissioner, 148 T.C.

392, 402 (2017) (holding that the decedent’s ability, along with other

others, to dissolve a family limited partnership in which he was a 99%

limited partner “is sufficient to invoke section 2036(a)(2)”); Estate of

Strangi, 85 T.C.M. (CCH) at 1341–43 (same). We emphasize that here

there was essentially no pooling of assets in the partnership, which

accordingly functioned not as a joint investment vehicle but rather only

as a vehicle to reduce estate tax.

We therefore hold that up until her death Ms. Fields retained the

enjoyment of the five transferred assets as well as the right to the

income from those assets and the right to designate who should possess

or enjoy that income.

B.

Whether the Transfers Were a Bona Fide Sale for Adequate

and Full Consideration

Section 2036(a) contains a carveout for transfers constituting a

“bona fide sale for an adequate and full consideration in money or

money’s worth.” Whether a transfer is a bona fide sale is a question of

motive, and whether a transfer is for adequate and full consideration is

a question of value. See Estate of Bongard, 124 T.C. at 117–18; Estate

of Moore v. Commissioner, T.C. Memo. 2020-40, at *30, aff’d, No. 2073013, 2021 U.S. App. LEXIS 33111 (9th Cir. Nov. 8, 2021). Here Ms.

17

[*17] Fields received adequate and full consideration, so the case hinges

on whether there was a bona fide sale. 11

Regarding whether Ms. Fields’s transfers to AM Fields were bona

fide, “the proper inquiry is whether the transfer in question was

objectively likely to serve a substantial nontax purpose. Thus, the finder

of fact is charged with making an objective determination as to what, if

any, nontax business purposes the transfer was reasonably likely to

serve at its inception.” Strangi v. Commissioner, 417 F.3d at 479–80

(footnote omitted). “The objective evidence must indicate that the

nontax reason was a significant factor that motivated the [family

limited] partnership’s creation. A significant purpose must be an actual

motivation, not a theoretical justification.” Estate of Bongard, 124 T.C.

at 118 (citations omitted). In gauging the bona fides of a sale or other

exchange, we may consider the decedent’s age and health at the time of

the transfer. See, e.g., Estate of Miller v. Commissioner, T.C. Memo.

2009-119, 97 T.C.M. (CCH) 1602, 1610 (concluding that a second set of

inter vivos transfers was not a bona fide sale for adequate and full

consideration because the transfers were executed just before the

decedent’s precipitous decline in health); Estate of Erickson v.

Commissioner, T.C. Memo. 2007-107, 93 T.C.M. (CCH) 1175, 1182

(“Mrs. Erickson’s age and health at the time of the transaction strongly

indicate that the transfers were made to avoid estate tax.”).

11 Whether a transfer to a partnership in exchange for a partnership interest

was made for adequate and full consideration depends on

(1) whether the interests credited to each of the partners was

proportionate to the fair market value of the assets each partner

contributed to the partnership, (2) whether the assets contributed by

each partner to the partnership were properly credited to the

respective capital accounts of the partners, and (3) whether on

termination or dissolution of the partnership the partners were

entitled to distributions from the partnership in amounts equal to their

respective capital accounts.

Kimbell v. United States, 371 F.3d 257, 266 (5th Cir. 2004). All three of these

requirements were met here. AM Fields Management and Ms. Fields received

partnership interests proportionate to their contributions to the partnership. The

contributions of both partners were properly credited to their respective capital

accounts. And the partnership agreement provided that upon termination or

dissolution and after payment of partnership debts, the partners would receive

distributions in accordance with their respective capital accounts. We therefore

conclude that Ms. Fields received adequate and full consideration for her contribution

of the five assets to AM Fields.

18

[*18] The Estate alleges that there were four significant and legitimate

nontax purposes for Ms. Fields’s contributions to AM Fields:

1. AM Fields protected Ms. Fields from further instances of

financial elder abuse.

2. AM Fields allowed for “succession management of assets,”

i.e., Mr. Milner would be able to choose his successor to

manage AM Fields (whereas he could not choose his

successor under the general POA).

3. AM Fields resolved the problem of third parties, such as

banks, refusing to honor the general POA.

4. AM Fields allowed for consolidated and streamlined

management of assets.

In support of these four reasons, the Estate relies on some documents in

the record but largely on Mr. Milner’s testimony.

While we found Mr. Milner to have been sincere in his desire to

care and provide for Ms. Fields, we do not find credible Mr. Milner’s

testimony that he was actually motivated to contribute Ms. Fields’s

assets to AM Fields in order to achieve any of the above four goals,

especially given Ms. Fields’s age and health at the time of the

contributions. The following timeline juxtaposes the AM Fields

transactions with Ms. Fields’s declining health:

19

[*19]

Week of May 2, 2016

Ms. Fields falls in the

presence of a caregiver.

May 11, 2016

Mr. Milner approaches Mr. Mongogna

about estate planning for Ms. Fields.

May 13, 2016

Ms. Fields visits Dr. Garcia.

May 20, 2016

Certificate of formation for AM Fields

Management filed with the Texas

Secretary of State.

May 21–25, 2016

Ms. Fields is hospitalized due to

a heart attack, among other

health issues.

May 25, 2016

Mr. Milner executes company and

partnership agreements for AM Fields

Management

and

AM

Fields,

respectively.

May 26, 2016

Certificate of formation for AM Fields

filed with the Texas Secretary of State.

May 27, 2016

Mr. Milner executes the bill of sale and

effects transfers of the tree farm, AMF

Capital, and Winnsboro Capital.

June 9, 2016

Dr. Garcia examines Ms. Fields

during a posthospitalization

visit. He notes that Ms. Fields

has end-stage Alzheimer’s and

recommends hospice care.

June 15, 2016

Ms. Fields is placed in hospice

care.

June 6, 2016

Mr. Milner effects transfer of the NDBT

shares, the second largest asset

contributed.

June 13, 2016

Mr. Milner effects transfer of the Wells

Fargo brokerage account, by far the

largest asset contributed.

June 23, 2016

Ms. Fields dies.

This timeline casts significant doubt on Mr. Milner’s avowal that

he was actually motivated to undertake the AM Fields transactions for

any reason other than reducing estate tax (by virtue of obtaining a

discount on Ms. Fields’s partnership interest for lack of control and lack

of marketability). More generally, the following facts are troublesome:

1.

There is no evidence of any discussion of transferring Ms.

Fields’s assets into partnership form (other than those

20

already in AMF Capital and Winnsboro Capital) until Ms.

Fields’s health appeared to be in precipitous decline. Yet

thereafter the transfers proceeded rapidly. 12

[*20]

2.

Leading up to the formation of AM Fields, there were no

significant changes in the amount or composition of Ms.

Fields’s wealth that might reasonably have triggered a

nontax concern for asset management that did not exist

before.

3.

The instances of financial elder abuse had occurred years

before the formation of AM Fields.

4.

The record contains no contemporaneous documentary

evidence of Mr. Milner’s motivations for effecting the AM

Fields transactions other than the email from Mr. Katzen

to David Katzen about “obtaining a deeper discount” of Ms.

Fields’s partnership interest for tax purposes.

5.

The assets transferred to AM Fields were of a disparate

character, promised no obvious synergies with each other,

and came almost exclusively from Ms. Fields. Therefore,

there was virtually no prospect of “intangibles stemming

from a pooling [of assets] for joint enterprise.” See Estate

of Harper v. Commissioner, T.C. Memo. 2002-121, 83

T.C.M. (CCH) 1641, 1654.

6.

The assets transferred to AM Fields were not “working”

interests in any business requiring active management.

Cf. Kimbell, 371 F.3d at 267.

7.

Ms. Fields was not herself involved in any of the

partnership planning or management. Rather, Mr. Milner

represented both her interests and his own.

12 The Estate relies on the expert testimony of Dr. Joseph Murphy, who

concluded, among other things, that Ms. Fields did not have end-stage Alzheimer’s.

His conclusions are based on a posthumous review of Ms. Fields’s medical records,

most of which were drafted by Dr. Garcia, her primary care physician. Dr. Garcia also

testified at trial. Given that Dr. Garcia had firsthand knowledge of Ms. Fields’s health

and Dr. Murphy did not, we disregard Dr. Murphy’s testimony in favor of Dr. Garcia’s.

21

[*21] 8.

The asset transfers depleted Ms. Fields’s liquidity to the

point that the Estate could not pay Ms. Fields’s bequests or

its reported estate tax liability.

The four nontax purposes posited by the Estate are all plausible.

But in view of the troublesome factors just listed and the timeline of

events, it seems more likely that the four putative nontax purposes are

post hoc “theoretical justification[s]” rather than “actual motivation[s].”

Estate of Bongard, 124 T.C. at 118. Since the Estate bears the burden

of proof, we conclude that the transfers to AM Fields were not bona fide.

C.

Conclusion Regarding Section 2036(a)

Since the transfer of Ms. Fields’s assets to AM Fields was not a

bona fide sale, and since she retained applicable rights and interests

with respect to those assets up until her death, section 2036(a) includes

in the gross estate the date-of-death fair market value of the transferred

assets. However, we must still address the interaction of section 2036(a)

with sections 2033 and 2043. Section 2033 provides that “[t]he value of

the gross estate shall include the value of all property to the extent of

the interest therein of the decedent at the time of [her] death.” Section

2043(a) provides that if a transfer described in section 2036 is made

for a consideration in money or money’s worth, but is not a

bona fide sale for an adequate and full consideration in

money or money’s worth, there shall be included in the

gross estate only the excess of the fair market value at the

time of death of the property otherwise to be included on

account of such transaction, over the value of the

consideration received therefor by the decedent.

The interaction of sections 2033, 2036, and 2043 is best explained

by the formula set out in Estate of Moore, T.C. Memo. 2020-40, at *42,

as follows:

The number that needs to be included in the gross

estate [on account of sections 2033, 2036, and 2043] can be

expressed in an equation: Vincluded = Cd + FMVd – Ct, where

Vincluded = value that must be added to the gross

estate;

22

[*22]

Cd = date-of-death value of the consideration

received by the decedent from the transaction that remains

in [her] estate, see [I.R.C. §] 2033;[13]

FMVd = fair market value at date of death of

property transferred by the decedent whose value is

included in the gross estate under section 2036; and

Ct = consideration received by the decedent at the

time of the transfer, which has to be subtracted under

section 2043(a).

(Footnote omitted.) See also Estate of Powell, 148 T.C. at 414–15. Here,

Cd is the value of Ms. Fields’s interest in AM Fields on the date of her

death (June 23, 2016), FMVd is the death-of-death value of the five of

Ms. Fields’s assets contributed to AM Fields, and Ct is the value of Ms.

Fields’s interest in AM Fields on May 27, 2016. 14 Cd and Ct are only 27

days apart, and neither party has argued that Ms. Fields’s partnership

interest changed in value over that short time. Therefore, those two

partnership valuation numbers cancel out (i.e., Cd − Ct = 0), and we are

left with determining the fair market value of the assets transferred

(i.e., Vincluded = FMVd). The net inclusion under sections 2036(a), 2043(a),

and 2033 is effectively the date-of-death fair market value of the five

transferred assets.

As to this remaining issue of the fair market value of the assets

transferred, the Estate and the Commissioner dispute only one

component, namely, the value of the 89,093 shares of NDBT stock held

by AM Fields at Ms. Fields’s death, representing about 3.5% of the total

outstanding shares of NDBT as of December 31, 2015. The parties agree

that NDBT stock traded at $61 per share on June 22, 2016, yielding a

net asset value of $5,434,673 (i.e., 89,093 × $61) for AM Fields’s

holdings. As to fair market value, the Estate relies on its expert David

Katzen, who noted that NDBT shares are “thinly traded,” with a total of

35,800 shares traded publicly between January 1, 2016, and June 23,

2016, and a total of 44,700 shares traded publicly in 2015. Further

positing that AM Fields’s 89,093 shares “could require significant time

to liquidate without depressing the market price,” David Katzen

13 The Estate did not elect the alternative valuation date under section 2032(a).

14 We use the date of execution of the bill of sale for the five contributed assets,

although most of the assets were actually transferred to AM Fields later.

23

[*23] concluded that a 10% illiquidity discount was appropriate,

yielding a fair market value of $4,891,206.

The Commissioner relies on his expert David Fuller, president of

Value Incorporated, a financial valuation consulting firm. Mr. Fuller

agreed with David Katzen that an illiquidity discount of some amount

was appropriate, given that AM Fields’s NDBT holdings likely would

need to be sold either over a period of months or in a private transaction

in order to avoid depressing the public trading price. (Moreover, the

existence of a willing private buyer for all 89,093 shares could not be

guaranteed.) Therefore, Mr. Fuller compiled a list of 32 transactions

that he deemed comparable to AM Fields’s hypothetical sale of its NDBT

holdings. Each of the 32 transactions was a private sale of a sizable

block of restricted stock (i.e., stock that would not be publicly tradable

for another 6 to 12 months) of a thinly traded bank or savings

institution, occurring between 2003 and 2015. 15 Mr. Fuller then

compared AM Fields’s NDBT shares to the 32 comparable transactions

along the following dimensions: block size (as a proportion of total shares

outstanding); number of days until the stock could be publicly traded;

number of shares relative to open market trading volume in the month

of sale; open market trading volume relative to total shares outstanding;

price volatility; and the underlying company’s contemporaneous book

value of equity, net profit margin, dividend yield, and 12-month return

(adjusted to account for industry average stock performance). Mr. Fuller

calculated NDBT’s percentile ranking (relative to the 32 comparable

transactions) across each of these dimensions, with an average ranking

of 33.9%. That average ranking corresponded to a 5.7% illiquidity

discount, as computed using the discounts observed in the 32

comparable transactions. Thus, Mr. Fuller estimated the date-of-death

fair market value of AM Fields’s NDBT shares at $5,124,897.

Because David Katzen did not offer any specific reasons or

calculations to support his 10% discount, we accept Mr. Fuller’s

valuation. Therefore, we find that the total date-of-death fair market

value of the assets that Ms. Fields transferred to AM Fields is

$17,297,329 (i.e., $5,124,897 of NDBT stock plus the stipulated

$12,172,432 aggregate value of AM Fields’s four other assets). However,

the Notice of Deficiency determines an inclusion of only $17,062,631 on

account of the AM Fields assets, and the Commissioner did not plead an

15 AM Fields’s NDBT stock was not restricted, but Mr. Fuller deemed a trading

restriction to have a similar economic effect as the largeness of a block of stock. In

both cases the holder of the shares enjoys less liquidity than it might otherwise.

24

[*24] increase to this amount in his Answer. Therefore, we determine

that the value of the Estate’s gross estate must include $17,062,631 to

account for Ms. Fields’s relationship with AM Fields. By contrast, the

Estate did not report any amount of AM Fields’s assets and reported the

value of Ms. Fields’s limited partner interest as $10,877,000, reflecting

Katzen Marshall’s appraisal of that interest. 16

IV.

Accuracy-Related Penalty

The Commissioner determined that the Estate is liable for a 20%

accuracy-related penalty on the underpayment of tax required to be

shown on a return attributable to negligence or disregard of rules or

regulations. See I.R.C. § 6662(a) and (b)(1). Section 6662(c) provides

that “the term ‘negligence’ includes any failure to make a reasonable

attempt to comply with the [Code], and the term ‘disregard’ includes any

careless, reckless, or intentional disregard.” Section 6664(c)(1) provides

that “[n]o penalty shall be imposed under section 6662 . . . with respect

to any portion of an underpayment if it is shown that there was

reasonable cause for such portion and that the taxpayer acted in good

faith with respect to such portion.” The Estate bears the burden of proof

regarding the reasonable cause defense. See Rule 142(a)(1); Higbee, 116

T.C. at 446–47.

The Estate contends that Mr. Milner, as executor, had reasonable

cause for any underpayment and acted in good faith in determining the

Estate’s estate tax liability. 17 It relies primarily on the testimony of Mr.

Milner and Ms. Hammer, which (it contends) shows that Mr. Milner

exerted considerable “effort to assess the [Estate’s] proper tax liability,”

which pursuant to Treasury Regulation § 1.6664-4(b)(1) is generally the

“most important factor” in determining reasonable cause and good faith.

See Gerhardt v. Commissioner, 160 T.C. 436, 469 (2023). However, Mr.

Milner never contended that he personally considered, researched, or

understood the implications of section 2036 for the Estate’s estate tax

liability. Moreover, a reduction of approximately $6.2 million in the

Estate’s reportable assets thanks to the seemingly inconsequential

16 Since we have found that the discounted value of Ms. Fields’s limited partner

interest in AM Fields did not change between the date she received it and her date of

death, see supra p. 22, the parties’ arguments regarding appropriate valuation of that

interest will not impact the outcome of this case and need not be considered.

17 The Estate does not attempt to show that neither “negligence” nor

“disregard,” as defined in section 6662(c), applies to its calculation of estate tax

liability.

25

[*25] interposition of a limited partner interest between Ms. Fields and

her assets on the eve of her death would strike a reasonable person in

Mr. Milner’s position as very possibly too good to be true.

Therefore, the Estate lacks reasonable cause for its

underpayment unless Mr. Milner reasonably relied in good faith on

competent and informed advice that the AM Fields transactions merited

a steep discount in calculating the gross estate. To demonstrate reliance

on professional tax advice as a basis for the reasonable cause defense,

the Estate must show that (1) the adviser was a competent professional

who had sufficient expertise to justify reliance, (2) the Estate provided

necessary and accurate information to the adviser, and (3) the Estate

actually relied in good faith on the adviser’s judgment. See Neonatology

Assocs., P.A., 115 T.C. at 99.

There is no evidence that Ms. Hammer or anyone else at

Armanino advised Mr. Milner that the Estate could both report the

value of Ms. Fields’s AM Fields interest at a discount and also exclude

the entire value of the AM Fields assets. Indeed, Ms. Hammer testified

that she did not provide any legal advice to the Estate. Nor is there

evidence that Mr. Katzen or anyone else at Coats Rose specifically

advised Mr. Milner that the Estate’s treatment of AM Fields on its

estate tax return was proper. Mr. Milner testified that Mr. Katzen

mentioned the potential tax benefits of forming AM Fields, but he did

not recount any specific legal advice that Mr. Katzen gave him. (Mr.

Katzen did not testify at trial.)

The Estate did not meet its burden of establishing that it

“actually relied in good faith on [an] adviser’s judgment,” see

Neonatology Assocs., P.A., 115 T.C. at 99, so it did not meet its burden

of establishing reasonable cause. We thus hold it liable for the penalty

under section 6662(a) and (b)(1).

To reflect the foregoing,

Decision will be entered under Rule 155.