Opinion ID: 2199033
Heading Depth: 1
Heading Rank: 4

Heading: Settlement of the estate.

Text: The heirs and Jan proceeded with the settlement of the estate and the payment of taxes. On July 18, 1932 Jan sent to the taxing authorities a copy of the sale memorandum of May 10, 1931, asserting no tax was due because he had bought the property by oral contract in Thomas' lifetime. The taxing authorities naturally refused to accept this contention, and considerable negotiation followed. Finally, the tax liability was compromised about a year later by assessing a 2% tax on the value of the property pretended to have been sold to Jan. That value was fixed at 274,540,264 crowns  about $8,200,000 in our money. In September 1932, steps were taken looking to the filing of the declaration of heirship. By appropriate court action under Czech law, Tom was declared of age on September 21, 1932, shortly after he became eighteen. This was done, the Chancellor found (and we think correctly), primarily to enable Tom and his mother to accept the estate unconditionally and thus avoid the court inventory of the estate. Such an inventory would have disclosed the gross under-valuation of the property listed on the sale memorandum and might well have led to the disclosure of the Leader holdings and a tax so large as to cripple the Bata enterprise. The tax settlement was reached some time in the late spring or summer of 1933. On June 8, 1933, the declaration of heirship was filed, accepting the estate unconditionally, and on the same day was approved by the court. On June 23 the required statement in lieu of oath was filed. This statement described the principal item of the estate as a claim upon the firm of Bata a.s. in Zlin in the amount of Kc. 57,262,131. The language of the declaration recited that Jan had settled this amount with the firm Bata    to the benefit of the testator   . In effect, what was done was to charge Bata a.s. with Jan's supposed debt to Thomas, and also with the approximate amount of the other assets listed in the will. This was done as of May 10, 1932 by a debit entry in Jan's account with Bata a.s. This was obviously done to make it appear that a sale had been completed before the death of Thomas. In accordance with the sale memorandum, the minority shares of most of the foreign operating companies that stood in Thomas' name were transferred by Tom and Marie to Jan. Jan appears to have taken possession without objection of the minority bearer shares, or at least some of them. The majority shares were, as above noted, held by Leader. Jan took control of Bata a.s. No certificates of this company had ever been issued, and none were issued until some years later. All dividends declared in respect of the minority shares were credited to Jan's account with Bata a.s. Finally, Jan succeeded to Thomas' position of control with respect to the Swiss mandatories  the apparent holders of the Leader stock. No steps were ever taken, however, to transfer the ownership of any of the Leader shares to Jan. The foregoing steps relate to the supposed inter vivos sale. The provisions of the will also had to be carried out. The will purported to dispose of an estate of about 57 million crowns, consisting largely of Jan's supposed debt, thereafter assumed by Bata a. s., as above noted. The deed of delivery of June 28, 1933, reciting the debt as settled with Bata a. s., stated that the property of Thomas Bata appeared as a claim against the firm. The deed specified the distribution of the estate according to the terms of the will. The deed also provided for the payment of any debts of the estate by Tom and Marie, and for the payment of estate duties by the heirs and legatees. The actual distribution of the estate by the parties did not follow the will in several respects. First, there was a substantial debt owing by Thomas to Bata a.s., at the time of his death. At the end of 1932 it was about 27 million crowns. Tom and Marie were legally obligated to pay it, but payment would have wiped out their cash legacies. The amount of the debt was charged to Jan's account on Bata a. s., and Thomas' account was credited with payment. Second, certain of the real estate devised to Marie was not in the name of Thomas, but in Bata a.s. These properties were nevertheless transferred to her, together with the Zlin dwelling house, which was not devised to her in the will. Third, inheritance taxes were legally payable by Tom and Marie. There were set up on the books of Bata a.s. accounts crediting Tom and Marie with the amounts of the cash legacies (and in Marie's case with the value of the real estate transferred by Bata a.s.). Against these accounts inheritance taxes were charged, but offsetting credits for the benefit of Tom and Marie were set up on the books of Leader. Fourth, although on the face of the will the sole cash provision for the widow was the legacy of 5 million crowns, many of her living expenses during the succeeding years were charged to Bata a. s., as had been the practice in Thomas' lifetime. It is clear from these facts that after Thomas' death all parties in interest cooperated to carry into effect the scheme of secrecy and tax evasion devised by Thomas  as, indeed, it was to their interest to do.