(CN) - The U.S. government is not entitled to estate tax from the $5 million a Louisiana woman would have inherited from her uncle had she not been excluded from a family trust, the 5th Circuit ruled.
Caroline Hunt and her husband Nelson went bankrupt and owed the Internal Revenue Service $90 million in back taxes. The Hunts made an arrangement with the IRS to turn over any inherited money up to that amount.
Hunt was set to inherit $5 million from her uncle, Turner Hunt Lewis. Six days before he died, his nephews set up a trust that would skip the money past Caroline Hunt to her children, as if she had died before her uncle.
The United States challenged this action, arguing that it violated Louisiana law and that the money belonged to the IRS.
Judge Higginbotham of the New Orleans-based federal appeals court affirmed the trial court's ruling for the Hunt family, noting that it did not commit tax fraud or violate its agreement with the IRS.
"Ultimately, the government is unable to demonstrate any entitlement to the disputed moneys by virtue of its contract with Caroline Hunt," Higginbotham wrote.
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