Tips From the Pros: Did the Moores Make The Wrong Argument?Tips From the Pros: Did the Moores Make The Wrong Argument?

In United States v. Carlton, ¹ the U.S. Supreme Court upheld the retroactive application of Internal Revenue Code Section 2057, as amended in the Omnibus Budget Reconciliation Act of 1987.² Carlton remains the Supreme Court’s most recent comprehensive pronouncement on the constitutionality of retroactive tax laws.

As originally enacted as part of the Tax Reform Act of 1986,³ IRC Section 2057 allowed an estate to take an estate tax deduction in an amount equal to 50% of the proceeds of “any sale of employer securities by the executor of an estate” to “an employee stock ownership plan” (ESOP). Jerry Carlton, in his capacity as executor of the will of Willametta Day, who died on Sept. 29, 1985, sought to take advantage of this deduction. Acc...