Estate of Fields v. Commissioner (5th Cir. June 8, 2026): $17 Million Into a Partnership 10 Days Before Death

The 34 days: what happened between May 20 and June 23, 2016

The court’s opinion gives the dates. The decedent had been diagnosed with Alzheimer’s disease in 2011, and her agent under a 2010 power of attorney had been handling most of her finances since 2012. The partnership was built after a fall on May 6, 2016.

The agent signed every document, both individually and for the decedent. The opinion notes he “appeared on both sides of every transaction.” The agent was also the executor, and the opinion’s caption names the executor as Bryan K. Milner; we use no other individual names from the record.

The numbers: from $17 million to $10,877,000 to a $1,828,594 deficiency

Our arithmetic on those figures: the reported $10,877,000 is $6,095,409 below the $16,972,409 contributed, a 35.9% gap. The partnership took in about 88.8% of the assets the opinion accounts for ($16,972,409 plus about $2.15 million). A $270,417 penalty at 20% implies a base of $1,352,085; the opinion does not say which part of the $1,828,594 deficiency the penalty applies to, so we do not infer it. For the Tax Court’s own discount percentages, see our page on family limited partnerships and the 2026 estate tax rules, which reads T.C. Memo. 2024-90.

Because the decedent’s will left ten specific cash bequests and the transfers left too little cash, the executor had to take a distribution from the partnership to pay them. The Fifth Circuit treated that as one of its six additional facts.

The legal test: what section 2036(a) asks

The Fifth Circuit quotes section 2036(a) and reduces it to three elements: “(1) the decedent transferred property before death; (2) the decedent retained an interest in the property that was relinquished only at death; and (3) the transfer was not a bona fide sale for adequate and full consideration.” The statute’s own words are an exception for “a bona fide sale for an adequate and full consideration in money or money’s worth”, and the retained interest can be “the possession or enjoyment of, or the right to the income from, the property” or “the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom.”

Only one question was argued on the 2036(a) side. In footnote 3 the court records that the Tax Court found the decedent kept an interest and that she received adequate and full consideration, and that the estate contested neither. The appeal was about whether the transfers were “a bona fide sale,” which the court calls “a purely objective inquiry” into whether the transfer serves a substantial business or other non-tax purpose. Quoting a Tax Court case, it adds: “A significant purpose must be an actual motivation, not a theoretical justification.”

When the exception fails, section 2036(a) brings in the transferred property, and the discount on the partnership interest disappears for that property. A related rule in 26 U.S.C. 2043(a) limits inclusion to the excess of the property’s value over the consideration the decedent received when a transfer was for consideration but not a bona fide sale; the Fifth Circuit’s statement of its holding speaks only of including the value of the transferred assets rather than the value of the interest.

The three reasons, and why each one failed

On the first reason the Tax Court called the argument a “post hoc theoretical justification,” and the Fifth Circuit agreed it was not an actual motivation. The court’s summary of all three: “They support the Tax Court’s ruling that it is far more likely that the Estate’s three proposed non-tax purposes are after-the-fact justifications, not actual motivations.”

Six more facts the court counted against the estate

The Fifth Circuit endorsed six additional reasons the Tax Court gave. In its words, in order:

1. The timeline. The partnership was created by late May and funded with $17 million by June 13, and she died ten days later. That timeline “casts significant doubt” on any motive other than reducing estate tax.
2. Late discussion. No evidence anyone discussed a partnership until her health was in serious decline.
3. No change in the assets. Nothing about her holdings changed beforehand that could explain a non-tax reason.
4. The discount email. The estate-planning attorney emailed an appraiser seeking a “deeper discount.”
5. Both sides. She was incapacitated, and her agent “appeared on both sides of every transaction.”
6. Liquidity. The transfers “depleted Fields’s liquid assets such that the Estate could not pay her bequests upon her death.”

Facts 1 to 5 describe how the plan was made; fact 6 describes what was left. Our reading: the opinion treats each as evidence about motive, not as an automatic disqualifier. The court did not say any single fact would have been enough.

The 20% penalty: why professional advice did not help

Section 6662 adds 20 percent of the part of an underpayment it covers, and (b)(1) covers negligence or disregard of rules. Section 6664(c)(1) removes the penalty on a portion of an underpayment if the taxpayer shows reasonable cause and good faith. The opinion walks through both.

• Too good to be true. The Tax Court found that a $6 million reduction, from a $17 million asset value to an $11 million partnership value, should have struck a reasonable person in the executor’s position as “very possibly too good to be true.” The Fifth Circuit added that the executor did not explain why he did not question the difference, “especially given his education and background in finance.”
• Reliance on advisers. The Tax Court found no evidence that the accountant advised reporting the interest “at a discount,” and no evidence that anyone advised that the treatment was proper. The Fifth Circuit: “merely engaging tax and legal professionals does not, by itself, demonstrate reasonable cause.” The executor’s own testimony was that the attorney advised him on the potential tax benefits of creating the partnership.
• Standard. Reasonable cause findings are factual, so they are reviewed for clear error. The panel found none.

What the opinion does not decide

• It does not hold that every family partnership formed late in life fails. The decision is a clear-error review of one set of facts. The panel contrasts a Fifth Circuit case where assets were working oil and gas interests that did need active management (Kimbell, 371 F.3d 257), which it describes as a bona fide sale.
• It does not decide the retained-interest element or adequate consideration. Both were conceded or uncontested (footnote 3).
• It does not give discount percentages or the Tax Court’s date-of-death valuation. Those are in the Tax Court opinion, T.C.M. (RIA) 2024-090, which the Fifth Circuit cites by page.
• We read only the revised opinion. The court granted the Commissioner’s motion to modify and substituted the text on July 31, 2026, 53 days after the June 8 filing date (our arithmetic). We did not compare it with the original, and we did not search the docket for a petition for rehearing or for certiorari.

What the 2026 exclusion changes (illustration, our arithmetic)

Rev. Proc. 2025-32, section 2.14, records that section 70106 of the 2025 budget law raised the basic exclusion amount to $15,000,000 for calendar year 2026, adjusted for inflation for 2027 and later years. Here is how the choice between the two valuations would look at today’s exclusion, using only figures from the opinion and ignoring every other asset, debt, deduction and prior gift:

This is not a prediction for any family. It shows why the valuation question matters most near the exclusion: in this illustration the discounted figure falls under it and the undiscounted figure does not, while an estate already under the exclusion saves no federal estate tax from a discount. Under 26 U.S.C. 1014(a)(1) heirs generally take a basis equal to “the fair market value of the property at the date of the decedent’s death,” so a discounted interest also carries a lower basis; our step-up in basis guide explains how that works for inherited real estate. Our estate tax exemption page covers the 2026 figures and state taxes.

What this means for people planning around a partnership

The facts the court used are things a family can see in its own file (our reading, not a recommendation):

• When the idea first appeared, and why. The court asked who discussed a partnership before health declined. The estate had no such evidence.
• Who signs. A single agent signing for the owner and for the other partners, with the owner incapacitated, was a listed fact.
• How much is left outside. About $2.15 million stayed outside, and it was not enough to pay the will’s ten cash bequests.
• Whether the assets needed combining. Brokerage accounts, bank stock and a tree farm run by outside managers did not need “consolidation” in the court’s view.
• What the written advice says. The court noted the absence of any adviser saying the reported treatment was proper.

Our family limited partnership guide reads the statute, the 18 Tax Court estate opinions we had read as of October 12, 2026 and the IRS data on how often estates report partnership interests. If the estate is the one filing, our Form 706 instructions page shows where partnership interests are reported.

This is analysis of public documents, not investment, legal or tax advice.

What a reader can do with this

• If you are an executor or heir, ask who valued the partnership interest on the return, which discounts were used, and what written advice supports reporting the interest instead of the assets. The Fifth Circuit faulted the absence of exactly that.
• If you are an agent under a power of attorney, read what the document lets you do for the owner and whether you sit on more than one side of a transaction. The court counted that against the estate.
• If you hold a limited partner interest through a family, ask for the date the partnership was formed, the dates assets were contributed and the owner’s health at those dates. Those are the facts the opinion lists.
• If you are comparing structures, a partnership is not the only one; our GRAT guide covers a different tool with its own rules.
• Check the 2026 amounts for your own estate size before reading this case as relevant: the exclusion is $15,000,000 per person for 2026, and many states tax estates well below that.

FAQ

Sources, read and saved on November 5, 2026: Estate of Anne Milner Fields, Deceased, Bryan K. Milner, Executor v. Commissioner of Internal Revenue, No. 25-60403, United States Court of Appeals for the Fifth Circuit, revised opinion (Document 83-1, filed July 31, 2026; opinion filed June 8, 2026), ca5.uscourts.gov; 26 U.S.C. 1014, 2036, 2043, 6662 and 6664 (Legal Information Institute, Cornell Law School); Revenue Procedure 2025-32, IRS, section 2.14. Tax Court figures are those the Fifth Circuit reports from T.C.M. (RIA) 2024-090. Differences, day counts and the 2026 illustration are CrowdfundedWealth arithmetic. This is analysis of public documents, not investment, legal or tax advice.