ESTATE OF Duаne B. FARNAM, Deceased, Mark D. Farnam, Personal Representative, Estate of Lois L. Farnam, Deceased, Mark D. Farnam, Personal Representative, Appellants, v. COMMISSIONER of INTERNAL REVENUE, Appellee.
No. 08-3196
United States Court of Appeals, Eighth Circuit
Oct. 8, 2009
Rehearing and Rehearing En Banc Denied Dec. 30, 2009.
583 F.3d 581
Submitted: June 10, 2009.
El Herman knew thаt the district court was prepared to grant a motion for mistrial after Smith‘s volunteered testimony, but he declined to seek one, preferring instead to see whether the jury would return an acquittal. He now contends that he was entitled to the best of both worlds: a chance for acquittal by the jury, and an order by the court for a new trial if the jury convicted. We disagree. “To refuse a mistrial and elect to take his chance with the jury, and then seek a second chance, is not a procedure that appeals except in the gravest instances.” Fleming v. United States, 332 F.2d 23, 25 (1st Cir. 1964). El Herman tоok a calculated risk by proceeding to verdict despite Smith‘s testimony, and there is no compelling reason why he should be permitted to escape the consequences.
El Herman suggests that the district court misled him when it said it did not think his decision to continue with the trial precluded him frоm raising the prejudicial effect of Smith‘s statement in post-trial motions. The court made clear, however, that there were “no promises down the road” as to whether El Herman would receive the relief he sought. El Herman thus made a knowing and intelligent decision to forgo a mistrial, and the district court did not abuse its discretion by holding him to it.
* * *
The judgment of the district court is affirmed.
* Judge Bye and Judge Shepherd would grant the petition for rehearing en banc.
Christine Durney Mason, DOJ, argued, Jonathan S. Cohen, DOJ, on the brief, Washington, DC, for appellee.
Before SMITH and SHEPHERD, Circuit Judges, and LIMBAUGH,1 District Judge.
LIMBAUGH, District Judge.
This is an estate tax case in which the single issue is whether certain unsecured loans made by the decedents to a family-owned corporation constitute “interests” in the corporation, as that term is used to determine the estates’ eligibility for “qualified family-owned business interеst” (QFOBI) deductions under
Duane and Lois Farnam‘s family-owned business, Farnam‘s Genuine Parts, Inc. (Farnam Parts), was incorporated in Minnesota on April 27, 1981. At the time of its incorporation, Farnam Parts operated four retail automotive parts stores, and Duane Farnam was its sole shareholder. Over the years, Farnam Parts’ business expanded, and by May, 2000, it operated 17 retail stores in Minnesota, North Dakota and South Dakota. Throughout its existence, Farnam Parts has been owned and managed by members of the family. On the date of Mr. Farnam‘s death, September 6, 2001, Mr. and Mrs. Farnam, and their son, Mark, collectively owned all of the voting and nonvoting shares of the company stock; and when Mrs. Farnam
Beginning in 1981, and every year thereafter, Farnam Parts borrоwed funds from its shareholders or persons or entities related to its shareholders to support its business operations. Farnam Parts issued promissory notes evidencing the loans, which were unsecured and subordinated to the claims of its outside creditors. Initially, Farnam Parts paid only the principal on the borrowed funds, but beginning in 1984, in response to new tax laws, the company made annual payments of principal and interest on the notes. Each year the aggregate loan amounts varied due to additional advances, interest payments, principal repayments and accrued but unpaid interest.
The estates timely filed federal estate tax returns. The DBF estate claimed a qualified family-owned business interest deduction under
As noted, this case turns on whether the term, “interest,” or “interest in an entity,” as used in the statutory definition of a qualified family-owned business interest, includes both equity and debt interests, or equity interests only. The estates do not contend that the shareholder loans constitute an equity, or ownership interest in Farnam Parts, but only that they constitute a debt interest in Farnam Parts. The estates’ interests, then, as holders of the promissory notes that evidence the loans, is only that of creditors of the company, not owners. Nonethelеss, as we understand the estates’ argument, the term “interest in an entity” is unrestricted and unqualified, and therefore includes an interest of any kind, even an “interest” in collecting a debt from the company.
With that understanding, we now consider the definition of qualified family-owned business interest, set forth in
(1) In generаl-For purposes of this section, the term “qualified family-owned business interest” means-
(A) an interest as a proprietor in a trade or business carried on as a proprietorship, or
(B) an interest in an entity carrying on a trade or business, if-
(i) at least-
(I) 50 percent of such entity is owned (directly or indireсtly) by the decedent and members of the decedent‘s family,
(II) 70 percent of such entity is so owned by members of 2 families, or
(III) 90 percent of such entity is so owned by members of 3 families, and
(ii) for purposes of subclause (II) or (III) of clause (i), at least 30 percent of such entity is so owned by the decedent and members of the decedent‘s family.
The goal of statutory analysis, of course, is to give effect to the Congressional intent behind the statute‘s enactment, Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984). The first step to that end “is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.” Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997). If so, the analysis ends and the court applies the statute‘s plain meaning. Bartman v. Comm‘r, 446 F.3d 785, 787-88 (8th Cir. 2006). In determining whether statutory language is plain and unambiguous, the court must read all parts of the statute together and give full effect to each part. Flahertys Arden Bowl, Inc. v. Comm‘r, 115 T.C. 269, 274 (2000), aff‘d, 271 F.3d 763 (8th Cir. 2001) (per curiam). If, however, the language of the statute is ambiguous, the court may examine legislative history and other authorities to determine legislative intent. Burlington N. R.R. Co. v. Okla. Tax Comm‘n, 481 U.S. 454, 461 (1987).
Applying these principles, and particularly the admonition that all parts of the statute are to be read together, the plain meaning becomes clear. Although section 2057(e)(1)(B) refers to “an interest in an entity carrying on a trade or business,” and the term “interest in an entity,” standing alone, is arguably open-ended, clause (i), which immediately follows, requires in pertinent part that “at least 50 percent of such entity [must be] owned (directly or indirectly) by the decedent and members of the decedent‘s family....” The use of the word, “owned,” then, refers to the term “such entity” which in turn refers back to the term “interest in an entity” so that an interest in an entity necessarily means an ownership interest in an entity. In fact, a later provision, sеction 2057(e)(3)(A) expressly restricts the kind of interest that qualifies under clause (i) to “the ownership of stock in a corporation or the ownership of a capital interest in a partnership.” In view of the context of the entire section as revealed in clause (i), there is no ambiguity, and in the absence of ambiguity, there is no need to resort to legislative history, rules of statutory construction, or any other means to determine Congressional intent.
Even without the context of the statute as a whole, the plain and ordinary meaning of the words “interest in an entity,” is that the person who holds that interest has an ownership interest in it. In contrast, it strains common understanding to say that a person holds an interest in an entity merely because he or she is a creditor of that entity. That person has an interest in the entity only in the broadest sense that he or she loоks to the entity to secure repayment of the debt. It bears mention as well that the statute does not refer to the more broad and inclusive term “any interest,” but only to “an interest,” and had Congress intended to include a more broad and inclusive term, it could have done so. Again, we find no аmbiguity.
For the foregoing reasons, the judgment of the Tax Court is affirmed.
SHEPHERD, Circuit Judge, dissenting.
As the majority concedes, Congress enacted section 2057 in order to effectuate the remedial purpose of preserving family-owned farms and businesses-such as the Farnam‘s business-by reducing the need for the liquidation of all or part of such family enterprises to pay federal estate taxes. See ante at 584-85. Nevertheless, through today‘s opinion, this cоurt ignores not only congressional intent but also the clear meaning of the broad language which Congress selected in order to bring about this purpose.
[O]ur starting point in interpreting a statute is always the language of the statute itself. If the plain language of the statute is unambiguous, that languаge is conclusive absent clear legislative intent to the contrary. Therefore, if the intent of Congress can be clearly discerned from the statute‘s language, the judicial inquiry must end. If, on the other hand, the language of a statute is ambiguous, we should consider “the purpose, the subject matter and the condition of affairs which led to its enactment.” When the meaning of a statute is questionable, it should be given a sensible construction and construed to effectuate the underlying purposes of the law.
United States v. McAllister, 225 F.3d 982, 986 (8th Cir. 2000) (quoting United States v. S.A., 129 F.3d 995, 998 (8th Cir. 1997)) (internal citations omitted).
Turning to the language of the statute itself, it can not be argued that the term “qualified family-owned business interest” as defined by section 2057(e)(1)(B)‘s phrase “an interest in an entity” excludes, by its express terms, an interest in the form of loan indebtedness owed by the family business to family shareholders. Further, in my view, nothing in section 2057 indicates that Congress intended to limit the term “interest” to less than its full mеaning, which would include both debt and equity interests. I can only conclude that, had Congress intended to limit the scope of “an interest in an entity” in the way found by the majority, it would have inserted the terms “equity,” “common stock,” “real property,” or the like, before the word “interest” in section 2057, as it hаs done in limiting the types of interests referred to in other sections of the Internal Revenue Code. See
The broad scope of “qualified family-owned business interest” is further evidenced by the House-Senate Committee Conference report on section 2057, which states that a qualified family-owned business interest includes “any interest in a trade or business (regardless of the form in which it is held) with a principal place of business in the United States if ownership of the trade or business is held at least 50 percent by one family.” H.R.Rep. No. 105-220, at 396 (1997) (Conf.Rep.). I agree with the appеllants that the parenthetical language from the report demonstrates that Congress intended for the tax deduction to apply to more than equity interests.
No one questions that prior to the deaths of Lois and Duane Farnam, they, along with their son, were vested with full ownership of their family auto parts supply business. Part of that ownership interest was in the form of indebtedness owing to the Farnams, not as mere creditors of the family corporation, but by virtue of family shareholder loans made by the Farnams as part of the family‘s plan for the structure and ownership of this family business. To determine, as has the majority, that such debt interest does not constitute a “qualified family-owned business interest” ignores the real life practicalities of family business planning and is directly opposed to the congressional intent reflected in section 2057.
Respectfully, I dissent.