Court Opinion

ID: 4608547
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:42:56.334149+00
Date Added: 2024-06-11T07:53:43.537967
License: Public Domain

EDMUND H. FLEMING ET AL., EXECUTORS, ESTATE OF C. F. FLEMING, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Fleming v. CommissionerDocket No. 7212.United States Board of Tax Appeals9 B.T.A. 419; 1927 BTA LEXIS 2595; November 29, 1927, Promulgated *2595  1.  MOTION FOR SUBSTITUTION OF PARTIES. - Denied under section 3467 of the Revised Statutes, which provides for the personal liability of executors for debts due the United States from the estate.  2.  ESTATE TAX. - Real estate transferred to trustees in 1911 with life estate reserved to grantor, held not transferred in contemplation of nor intended to take effect at or after death, and may not be included in the gross estate of the decedent.  Shannon B. Charlton, Esq., for the petitioner.  John W. Fisher, Esq., for the respondent.  TRUSSELL *419  This proceeding is for a redetermination of the deficiency in the amount of $2,710.74 in estate taxes as asserted by the respondent against the estate of C. F. Fleming, deceased.  At the time the petition in this proceeding was filed Edmund H. Fleming and May Fleming Barr were the duly appointed executors of the estate of C. F. Fleming, deceased, but prior to the hearing on this proceeding the said executor and executrix were discharged from their trust by the District Court of Delaware County, Iowa, for the reason that the said court accepted the final report of the distribution of all the estate*2596  property in their hands.  The petitioners herein moved that there be a substitution of parties and that Edmund H. Fleming, May Fleming Barr and Andrew M. Fleming, the decedent's heirs and devisees and the parties in interest, be substituted as the petitioners herein.  *420  The petitioners allege that the respondent erred in including in the decedent's gross estate the value of certain real estate which decedent transferred by deeds in 1911, upon the ground that such transfers were made in contemplation of or intended to take effect at or after death without a fair consideration in money or moneys worth.  FINDINGS OF FACT.  Edmund H. Fleming and May Fleming Barr are residents of the State of Iowa and were duly appointed the executor and executrix of the estate of C. F. Fleming who departed this life on May 15, 1924, a resident of Delaware County, Iowa.  On numerous occasions as his children were growing up and both before and after they became of age, the decedent promised them that if they would stay at home and help him manage his farms and pay off the mortgages thereon, he would deed those farms to them in compensation for such services.  In expectation of receiving*2597  the promised compensation, the children did devote their time to aiding their father in the accumulation and management of the farms here in question, and up to April 5, 1911, they received no compensation for their services other than the ordinary and necessary living expenses.  Two sons managed and operated two of their father's farms, one being located in Kemper County, Mississippi, and the other being located in Ida County, Iowa.  On April 5, 1911, the decedent's only surviving children and heirs were Andrew M. Fleming, age 53 years; Edmund H. Fleming, age 41 years; May Fleming Barr, age 38 years, and the decedent was 83 years of age at that time.  The decedent had always been healthy and active and remained so until a few months prior to his death in 1924.  On April 5, 1911, the decedent executed and delivered three deeds conveying 5,239 acres of farm land situated in Kemper County, Mississippi, 625 acres situated in Ida County, Iowa, and 334 acres situated in Delaware County, Iowa, respectively, which deeds were properly recorded within a few days thereafter.  The three deeds were identical except as to the descriptions of the lands conveyed and the pertinent portions provided*2598  as follows: KNOW ALL MEN BY THESE PRESENTS That I, Charles F. Fleming, widower, more commonly known as C. F. Fleming, of the Town of Delhi in the County of Delaware and State of Iowa, in consideration of One Dollar and other valuable considerations in hand paid by May Fleming Barr, Andrew M. Fleming and Edmund H. Fleming, children of the said Charles F. Fleming, have granted, bargained, sold, aliened, conveyed and confirmed and by these presents do grant, bargain, sell, alien, convey and confirm unto the said May Fleming Barr, Andrew M. Fleming and Edmund H. Fleming those tracts and parcels of real estate situated * * * to have and to hold all and singular the above described premises with all the appurtenances thereto belonging unto the said May Fleming Barr, Andrew M. Fleming and Edmund H. Fleming *421  (who are hereinafter referred to as trustee), their successors and assigns forever in trust, nevertheless, for the following uses and purposes to-wit: Said trustees shall at once upon the execution and delivery of these presents take possession of said premises but shall turn over the use, control, rents, issues and profits thereof to me, the said Charles F. Fleming, together*2599  with the full power of management and control of said premises except the power to sell, mortgage or otherwise encumber the same, for the term of my natural life; immediately upon the death of myself, the said Charles F. Fleming, said trustees shall again take possession of said premises and shall have all the powers over the same that an unconditional and absolute owner in fee simple would have except only, that said trustees shall not, during the term of twenty years from and after the date of these presents have any power or authority to sell, convey, mortgage or permit any lien or encumbrance of any kind whatsoever, either for improvements, tenants' supplies or any purpose whatsoever, to be put upon said premises or any part thereof, nor shall said trustees as such, have any power to incur any indebtedness of any kind or nature and shall enter into no contract requiring the payment of money unless they, the said trustees, shall have the cash in hand to pay the same.  After the death of me, said Charles F. Fleming, said trustees shall from the income of said premises, pay the taxes and insurance thereon and make any necessary repairs and improvements and shall divide the remainder*2600  of said income equally among themselves each year until twenty years from the date of these presents have fully elapsed; Upon the expiration of said period of twenty years, the trust hereby created, shall terminate and said premises shall, thereupon, subject only to the condition hereinafter set forth, [said condition being a condition subsequent is not material in this proceeding], become the absolute property in fee simple of the aforesaid May Fleming Barr, Andrew M. Fleming and Edmund H. Fleming, their heirs and assigns forever * * *.  The total value of the real estate so transferred has been appraised at $171,290 by the respondent, which value is not in controversy.  At the time of the execution of the said deeds decedent stated that they were executed and delivered in full compensation for the services which the grantees had rendered unto him.  After the execution and delivery of the deeds the grantees advised the decedent as to the management of the farms and made improvements thereon.  The value of decedent's gross estate amounted to approximately $35,600, exclusive of the value of real estate here in question.  The respondent included the value of the lands here*2601  in question in the decedent's gross estate and asserted a deficiency in the amount of $2,710.74 in estate tax.  He has admitted that if the value of said lands should not be included in the value of the gross estate, there is no dificiency.  OPINION.  TRUSSELL: The petitioners' motion for the substitution of parties petitioner is denied.  Section 3467 of the Revised Statutes provides that: Every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts, before he *422  satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate for the debts so due to the United States, or for so much thereof as may remain due and unpaid.  Under the Revenue Act of 1921 both the estate of a decedent and the executors are liable to the Government for the payment of any lawful tax levied under the estate-tax provisions of the Act and the liability of the executors is personal.  See United Statesv. Rodenbough (U.S.D.C., E. Dist. Pa.), decided September, 1927.  The respondent has included the value of the real estate involved in this*2602  action in the gross estate of the decedent, justifying his action under section 402(c) of the Revenue Act of 1921, which is as follows: To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair consideration in money or money's worth * * *.  The transfers here in question were made in the year 1911 at a time when there was no tax upon transfers of property of deceased persons.  The transfers were made in entire good faith and for good and valid reasons and at a time when the grantor was in good and sound health, in which condition he continued until a few months prior to his death, 13 years later, and at a time when there had occurred no incident which could suggest to the grantor the thought of impending death.  We are, therefore, of the opinion that these transfers can not be held to have been made in contemplation of death.  The terms of the instrument*2603  by which the transfers were made specifically provide that the trustees therein named shall at once, on the execution and delivery of the transfer instruments, immediately take possession of said premises subject only to the life interest of the grantor.  It appears that under the term of that instrument the title of the trustees became fixed and indefeasible.  We must, therefore, conclude that the transfers were not intended to take effect at or after the death of the grantor.  The facts in this case bear a close analogy to the trust created in the year 1907 by the grantors described in the case of , and following the reasoning and the decision of the Supreme Court in that case, we must hold that the real estate here in question did not constitute a part of the decedent's estate at the time of his decease and the value of such property may not be included in computing his gross estate for the purpose of determining the amount of the estate tax upon his net estate.  There is no deficiency.  Judgment will be entered accordingly.Considered by LITTLETON, SMITH, and LOVE.