                         T.C. Memo. 1997-186



                       UNITED STATES TAX COURT



                ESTATE OF ROSA B. NEFF, DECEASED,
              CHRIS HUNT, EXECUTOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1426-95.                       Filed April 21, 1997.



     Vernon D. Hyde, for petitioner.

     Elizabeth Downs, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     VASQUEZ, Judge:    Respondent determined a deficiency in

petitioner's Federal estate tax in the amount of $61,381.    All

section references are to the Internal Revenue Code in effect as

of the date of decedent's death, and all Rule references are to

the Tax Court Rules of Practice and Procedure.
                                - 2 -

     The sole issue for decision is whether transfers of

decedent's property shortly before her death were incomplete

gifts, the value of which should be included in her estate.1

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    At the time the petition

was filed, the legal residence of the executor was Keyes,

Oklahoma.

     Rosa B. Neff (decedent) died on September 13, 1992, at the

age of 97.   Decedent was a resident of Keyes, Oklahoma, most of

her adult life and at the time of her death.    Decedent executed

her last will and testament on January 18, 1980.

     A Federal estate tax return was filed on behalf of

petitioner on June 9, 1993.    The Federal estate tax return was

signed by Chris Hunt, the estate's executor.    On May 1, 1993, a

Federal gift tax return for the 1992 tax year was filed on behalf

of the estate by Chris Hunt.




     1
        Petitioner claims that respondent erred in her
determination that a charitable contribution to Willowbar
Cemetery Association in the amount of $2,500 did not qualify as a
deduction. Petitioner did not present any evidence at trial
regarding this issue, nor did it argue this point on brief. We
cannot be sure that petitioner intended to abandon the issue, but
in any case respondent's determination with respect to this issue
must be sustained as petitioner has not met its burden of proof
on this matter.
                                - 3 -

     The 1992 Federal gift tax return showed gifts to 19

relatives of decedent made on August 27 or 28 or September 12,

1992.   These gifts included 19 separate annuities, 3 Series E

bonds, and $4,000 in cash, with a total reported value of

$293,249.   The estate claimed nineteen $10,000 exclusions under

section 2503(b), in the total amount of $190,000, resulting in a

net taxable gift of $103,249.   After the gifts in issue were

made, the total gross estate, as reported on the estate tax

return, exceeded $973,000.

     Rosa Neff purchased the 19 separate annuities in 1987 from

Delta Life and Annuity Co. (Delta Life).    The 19 annuitants were

decedent's nephews and nieces, a sister-in-law, and a former

brother-in-law (Chris Hunt).    On each of the annuities, decedent

was listed as the owner, and the annuitant was listed as the

contingent owner.   The contingent owner would become the owner at

the death of decedent.   Jess Murphy was the selling agent on

behalf of Delta Life with respect to the 19 annuities.    The 19

annuities were transferred to their respective “annuitants” on or

about August 27, 1992, according to the schedules attached to the

Federal estate and gift tax returns.    The three Series E bonds

were transferred on August 28, 1992.    The $4,000 in cash was

transferred on September 12, 1992.

     These gifts of annuities, bonds, and cash were executed by

Chris Hunt, Melvin Hammontree, and Mildred Williams, who at the

time jointly held a durable power of attorney on behalf of
                                   - 4 -

decedent.    Mr. Hunt, Mr. Hammontree, and Ms. Williams were each

recipients of one of the annuities in issue.           The durable power

of attorney contained broad grants of authority which stated,

inter alia:

          My attorneys-in-fact shall have all of the powers,
     discretions, elections, and authorities granted by
     statute, common law, and under any rule of court.

                      *   *    *    *      *   *   *

          My attorneys-in-fact may sell, convey, lease,
     exchange, mortgage, pledge, release, hypothecate, or
     otherwise deal with, dispose of, exchange, or encumber
     any of my property, either real or personal.

                      *   *    *    *      *   *   *

          My attorneys-in-fact may act in all matters with
     respect to all powers described herein as freely,
     fully, and effectively as I could or might do
     personally if present and of sound and disposing mind.

The power of attorney did not, however, contain an explicit grant

of gift-giving authority.     Decedent executed the durable power of

attorney by her own hand on July 17, 1992, and her signature was

notarized.    Prior to initiating the transfer of the 19 annuities,

Mr. Murphy consulted the attorney who had drafted the durable

power of attorney regarding whether the attorneys in fact had the

power to make the transfers under the durable power of attorney.

Mr. Murphy was told that the attorneys in fact did have the power

to make such transfers.

     The Rosa Neff Living Trust (the trust), a revocable trust,

was created on August 27, 1992, by Mr. Hunt, Mr. Hammontree, and

Ms. Williams, acting as decedent's attorneys in fact.          Decedent
                                - 5 -

did not personally sign the trust documents; they were executed

by her attorneys in fact on August 27, 1992.   Decedent's property

was distributed according to the provisions of the trust rather

than the provisions of decedent's will.

     During the period August 16 through September 1, 1992,

decedent was hospitalized due to a fall which resulted in a

broken hip.    On September 1, 1992, decedent returned to her home,

where she was under the care of home health care nurses and

family members until her death on September 13, 1992.   Decedent

died of acute heart failure as a result of chronic cardiovascular

hypertensive disease and bronchitis from which she had suffered

for approximately 10 years.   Decedent's death was not unexpected.

     Rosa Neff did not file any Federal gift tax returns during

the 10-year period preceding her death in 1992.   The only gifts

made by Rosa Neff to relatives during this 10-year period which

can be shown by documents bearing her signature are checks of

small amounts, with respect to which gift tax returns were not

required to be filed.   Decedent also made several gifts of bonds

and certificates of deposit during the 10-year period preceding

her death, the amounts of which did not require the filing of

Federal gift tax returns.   Decedent was mentally competent to

manage her affairs at all times.

     Decedent was concerned about retaining control of her

property at the time that she was considering executing a power

of attorney.   Decedent was present when the power of attorney was
                               - 6 -

discussed with the attorney who drafted the document.    Decedent

was capable of signing her name in spite of failing eyesight if

directed where to sign.

     Prior to her injury and hospitalization, decedent informed

several individuals that she was considering making a gift of the

19 annuities.   Sometime during the summer of 1992, decedent told

Betty Aaron, her accountant, that she was considering giving the

annuities to the respective annuitants presently rather than

after her death.   Decedent also talked to Mr. Murphy about the

possibility of giving the annuities to the annuitants.   Prior to

meeting with the attorney regarding the drafting of a durable

power of attorney, decedent indicated to Chris Hunt that she

wanted to give the 19 annuities to the annuitants.

     Prior to her last illness, decedent cashed in two Delta Life

annuities whose contingent owners had died.   These annuities are

not included in the 19 in issue.   At the time that decedent

cashed in the two annuities, she told Mr. Murphy that she

intended to pay the taxes resulting from the transaction and give

a portion of the proceeds of the annuities, in the amount of the

principal or face amount of $10,000 each, to the heirs of the

deceased annuitants/contingent owners.
                               - 7 -

                     ULTIMATE FINDING OF FACT

     Decedent intended to make a present inter vivos gift of the

19 annuities in issue to the respective recipients.

                              OPINION

     Section 2038(a)(1) provides that a decedent's gross estate

includes any interest in property transferred by the decedent for

less than full consideration if, at the time of the decedent's

death, the transferred interest was subject to the decedent's

power to revoke, alter, amend, or terminate.    Section 2033

provides that the gross estate includes the value of all property

to the extent that the decedent had an interest in it at the time

of her death.   State law determines the extent of a decedent's

interest in property.   Burnet v. Harmel, 287 U.S. 103, 110

(1932).   We will follow the decisions of the highest State court,

but in the absence of a decision by that court, we may look to

the State's lower courts' rulings and holdings.    Commissioner v.

Estate of Bosch, 387 U.S. 456, 465 (1967).

     Respondent contends that because the durable power of

attorney did not specifically grant the attorneys in fact the

authority to make gifts of decedent's property, such gifts were

incomplete, invalid, or revocable by decedent and thus includable

in decedent's gross estate.   We disagree.

     The elements of a completed gift under Oklahoma law are:

(1) Intention to give, (2) complete delivery, and (3) acceptance

by the donee.   In re Estate of Carano, 868 P.2d 699 (Okla. 1994);
                               - 8 -

McSpadden v. Mahoney, 431 P.2d 432 (Okla. 1967).   In order to

establish an inter vivos gift after the death of the alleged

donor, “the evidence must be clear, explicit, and convincing in

support of every element necessary to constitute a gift.”      Estate

of Stinchcomb v. Stinchcomb, 674 P.2d 26, 30 (Okla. 1983).     There

does not seem to be any dispute that the annuities were delivered

and accepted by the donees.   Thus, if petitioner can prove

donative intent, the transfers will be considered to be completed

gifts which are not includable in decedent's gross estate.

Respondent claims that the required donative intent cannot be

supplied by a written durable power of attorney absent an express

written gift authorization.   Petitioner contends that the

required donative intent is present because decedent authorized

her attorneys in fact to make the gifts, because decedent

ratified the gifts after the transfers, and because a written

durable power of attorney, even absent an express gift

authorization, is adequate to allow decedent's attorneys in fact

to make effective inter vivos gifts.   In order to determine

whether the requisite donative intent existed, we must first look

to the record as a whole to determine whether decedent possessed

the requisite intent, taking into account the authority granted

to decedent's attorneys in fact.    See Estate of Goldman v.

Commissioner, T.C. Memo. 1996-29.

Decedent's Intent To Make Gifts
                                 - 9 -

     The transfers of property which are in issue in this case

were executed shortly before decedent's death by decedent's

attorneys in fact.     Chris Hunt testified that in the summer of

1992 decedent specifically instructed him and Melvin Hammontree

to transfer the annuities in question to the respective

annuitants.2    We found Mr. Hunt's testimony to be credible and

supported by the record as a whole.      Shortly before the gifts

were made, some of decedent's nephews became sick, and they

needed money.    At that time, decedent decided to give all of the

annuities to the annuitants.     Mr. Hunt testified that after he

completed the transfers and so informed decedent, she was “well

pleased” that the transfers were taken care of.

     The record provides additional reasons to believe Mr. Hunt's

testimony.     The annuities were transferred to the annuitants who

had been chosen by decedent when she originally purchased the

annuities.     These 19 annuitants would have become the owners of

their respective annuities upon the death of decedent.      Jess

Murphy testified that when contingent owners of two annuities not

in issue predeceased decedent, it was decedent's desire that a

portion of the funds from the annuities go to the heirs of the

contingent owners.    Mr. Murphy described decedent as "generous in

     2
        We focus our inquiry on the annuities in question because
the parties have so focused their arguments. The annuities in
issue are each valued at $10,000, and that is the amount of the
annual exclusions in question. If we find that the transfers of
the annuities were valid inter vivos gifts, we need not discuss
the validity of the other transfers presented here.
                               - 10 -

giving."   Additionally, Betty Aaron, decedent's accountant since

approximately 1984, testified that decedent had talked to her in

the summer of 1992 about transferring the annuities in question

to the annuitants at that time rather than waiting until her

death.   Mr. Murphy and Ms. Aaron were not contingent owners of

any of the annuities.    Lastly, even after the transfers in

question, decedent was left with over $973,000 in assets.      Cf. In

re Estate of Rolater, 542 P.2d 219, 223 (Okla. Ct. App. 1975)

(involving “circumstances which discourage the image of a woman

capable of suddenly initiating a program aimed at divesting

herself of over 80 percent of her estate by giving it to her

brother”).

     We are cognizant that some States have a flat prohibition

against attorneys in fact making gifts to themselves or to third

parties absent express written authorization.    See Townsend v.

United States, 889 F. Supp. 369 (D. Neb. 1995); Fender v. Fender,

329 S.E.2d 430 (S.C. 1985).   Oklahoma, however, has not adopted

such a rule.   We believe that if the Oklahoma Supreme Court were

to rule on this issue, it would look for “clear, explicit, and

convincing” evidence of intent.    Estate of Stinchcomb v.

Stinchcomb, supra at 30.    In In re Estate of Rolater, supra at

222, when presented with an issue similar to that found here, the

Court of Appeals of Oklahoma found lacking any “hard evidence or

cogent circumstances” that the decedent intended for her attorney

in fact to make gifts.    Those circumstances, however, are not
                               - 11 -

lacking in the instant case.   Given the facts and circumstances

of this case, we conclude that under Oklahoma law, the transfers

in question would be valid gifts.   This is consistent with the

way the Court of Appeals for the Fourth Circuit resolved a

similar issue in Estate of Ridenour v. Commissioner, 36 F.3d 332

(4th Cir. 1994), affg. T.C. Memo. 1993-41.   In that case, the

court found that a durable power of attorney could impliedly

include the authority to make irrevocable gifts during the

principal's life if the surrounding circumstances indicated such

an intent.   Prior to Estate of Ridenour, the Virginia legislature

passed a statute which specifically provides for an implied gift

power in certain circumstances.   Va. Code Ann. sec. 11-9.5

(Michie Supp. 1992).   The court in Estate of Ridenour v.

Commissioner, supra at 334, stated that the statute expanded and

clarified the legal standard applied in Estate of Casey v.

Commissioner, 948 F.2d 895 (4th Cir. 1991), revg. T.C. Memo.

1989-511.    The court went on to say that Estate of Casey “stands

for the proposition that to infer an implied gift power, the

court must look to the intent of the person granting power of

attorney.”    Estate of Ridenour v. Commissioner, supra at 334.

     The power of attorney which decedent executed does not

restrict the attorneys in fact from making gifts.   The power of

attorney which decedent executed authorized her attorneys in fact

to “convey * * * any of my property, either real or personal.”

The power of attorney authorizes the attorneys in fact to “act in
                              - 12 -

all matters * * * as freely, fully, and effectively as I could or

might do personally if present”.   This language evidences an

intent to permit the attorneys in fact to make gifts of

decedent's property.   See Taylor v. Vernon, 652 A.2d 912 (Pa.

Super. Ct. 1995) (finding similar language evidenced an intent to

allow the attorney in fact to make gifts of the principal's

property); cf. Whitford v. Gaskill, 480 S.E.2d 690 (N.C. 1997)

(finding that the power to “transfer” real estate authorized the

attorney in fact to make gifts of the property in dispute).

     Respondent argues that this Court should not allow

decedent's intent to make a gift or decedent's ratification of a

gift to be proved by the oral testimony of interested parties;

namely Mr. Hunt.   Respondent points to various factors which she

contends show that decedent did not intend to make present inter

vivos gifts at the time of the transfers.   We disagree.   As we

have already found, petitioner's witnesses were credible, and

their testimony was supported by the record.   See Diaz v.

Commissioner, 58 T.C. 560 (1972) (basing analysis upon evaluation

of the entire record and the credibility of witnesses); cf.

Estate of Goldman v. Commissioner, T.C. Memo. 1996-29.     In

determining the intent of decedent, we have looked at “The facts

and circumstances surrounding the parties, their relationship,

and the direct expressions of the decedent”.   Foster v. Rose, 238

P.2d 332 (Okla. 1951).   Based on the record as a whole, we

conclude that decedent, acting through her attorneys in fact,
                             - 13 -

made completed inter vivos gifts of the annuities in question.

Therefore, the value of the gifts is not includable in decedent's

gross estate.

     To reflect the foregoing,

                                              Decision will be

                                        entered under Rule 155.
