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Nance v. Iowa Department of Revenue

Court of Appeals of Iowa

September 13, 2017

BEVERLY GARDINER NANCE, Petitioner-Appellant,
v.
IOWA DEPARTMENT OF REVENUE, Defendant-Appellee.

         Appeal from the Iowa District Court for Polk County, Michael D. Huppert, Judge.

         Beverly Gardiner Nance appeals from an adverse judgment on judicial review of the department of revenue's denial of her request for a partial refund on an inheritance tax payment.

          David M. Repp and F. Richard Lyford of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for appellant.

          Thomas J. Miller, Attorney General, Donald D. Stanley Jr., Special Assistant Attorney General, and Hristo Chaprazov, Assistant Attorney General, for appellee.

          Danilson, C.J., and Potterfield and Bower, JJ.

          DANILSON, Chief Judge.

         Beverly Gardiner Nance unsuccessfully sought judicial review from the Iowa Department of Revenue's (the Department) denial of her request for a partial refund of an inheritance tax payment. On appeal, she contends the distribution of a decedent's assets pursuant to a Family Settlement Agreement (FSA) should govern the imposition of inheritance taxes if the FSA was made in good faith and not for the purpose of avoiding taxes. Because we conclude the Department and the district court misapplied the law, we reverse and remand to the district court for remand to the Department for further proceedings consistent with this opinion.

         I. Scope and Standard of Review.

         Our review of this appeal from a judicial-review decision is governed by Iowa Code section 17A.19(10) (2016). Brakke v. Iowa Dep't of Nat. Res., 897 N.W.2d 522, 530 (Iowa 2017). We, like the district court, function in an appellate capacity to correct any errors of law on the part of the agency. See id. If we reach the same conclusions as the district court, we affirm; otherwise, we reverse. Iowa Ag Constr. Co. v. Iowa State Bd. of Tax Review, 723 N.W.2d 167, 172 (Iowa 2006). Our review here is limited to deciding whether the Department's application of the relevant law to the facts of this contested case was irrational, illogical, or wholly unjustifiable. See Iowa Code § 17A.19(10)(m); Iowa Ag. Constr., 723 N.W.2d at 174.

         II. Background Facts.

         In 2003, Lester Gardiner Sr. and Mildred Gardiner executed a transfer-on-death (TOD) agreement for their brokerage accounts. They named their son, Lester Jr., as the beneficiary, and Lester Jr.'s wife, Beverly, as the contingent beneficiary.

         Mildred died in 2004, Lester Jr. died in 2007, and Lester Sr. died in 2009. Lester Sr.'s three grandchildren (Beverly's stepchildren) were the beneficiaries and executors of Lester Sr.'s estate.

         1.Estate versus Beverly.

         In May 2009, the Estate of Lester Sr. (by the grandchildren) filed an action against Beverly to challenge the validity of the TOD agreement, claiming Lester Sr. had not been competent to execute it.[1] During the pendency of that action, the estate filed an inheritance tax return and remitted $18, 988 to the Department based on the TOD designation for the assets of the brokerage accounts. This Dallas County lawsuit was resolved as a result of mediation which resulted in the execution of a FSA in July 2010, providing the assets of the brokerage accounts would be divided equally between the estate and Beverly.

         2.Estate versus Department of Revenue.

         a. ...


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