Court Opinion

ID: 4597714
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:19:46.567779+00
Date Added: 2024-06-11T07:59:22.439609
License: Public Domain

WILLIAM B. MONTAGUE AND MAGGIE L. MONTAGUE, ALLEGED CUSTODIANS OF THE ESTATE OF WILLIAM E. MONTAGUE, DECEASED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Montague v. CommissionerDocket No. 32618.United States Board of Tax Appeals23 B.T.A. 800; 1931 BTA LEXIS 1820; June 19, 1931, Promulgated *1820 Albert S. Lisenby, Esq., for the petitioners.  Frank T. Horner, Esq., for the respondent.  MATTHEWS *800  This is a proceeding for the redetermination of a deficiency in estate tax asserted by the respondent in the amount of $9,345.81.  The sole issue is whether certain real estate and personal property hereinafter referred to constituted a part of the decedent's gross estate.  FINDINGS OF FACT.  The decedent, William E. Montague, died intestate on March 14, 1925.  No executor or administrator has been appointed for the alleged estate of the decedent.  There survived him his widow, Maggie L. Montague, whom he married in 1872, and three sons, John W., William B., and Charles F. Montague.  The notice of deficiency was addressed to William B. Montague, et al., custodians *801  of estate of William E. Montague, and the petition was filed in the names of William B. Montague and Maggie L. Montague, alleged custodians of the estate of the decedent.  Upon the death of her grandfather, Maggie L. Montague received her mother's portion of his estate, which she turned over to her husband to invest for her.  The money was invested in a property on Lehigh*1821  Avenue.  Later this property was sold for $10,000 and the proceeds of the sale were loaned to her husband to be applied in payment of his debts.  There were of record in the Court of Common Pleas of Philadelphia a number of judgments in various amounts against William E. Montague which were obtained during the period from 1888 to 1894.  None of these judgments was in force at the time of the decedent's death.  In 1908 William E. Montague purchased and conveyed to his wife, Maggie L. Montague, the property known as 209 Franklin Avenue, Norristown, Pa., and in 1914 he purchased and conveyed to his wife the property known as 114 Franklin Avenue.  These conveyances were made in repayment of her loan to him and were made directly to Maggie L. Montague.  The decedent was not the equitable owner of these properties.  Titles to the properties have been continuously recorded in the name of Maggie L. Montague in the office of the recorder of deeds in and for Montgomery County, Pennsylvania.  Maggie L. Montague and her husband resided at 209 Franklin Avenue and at the time of the hearing their eldest son, John W. Montague, occupied the property at 114 Franklin Avenue.  At the time of the*1822  death of the decedent there were in the house at 209 Franklin Avenue, which was occupied by the decedent and his wife, household effects and antiques valued at $76,724.35.  All the antiques belonged to Maggie L. Montague.  Most of them were purchased by the decedent as gifts for his wife.  A few were given to her by her son and she bought some of them with her own money.  In addition to the antiques, the household effects and furniture in the house at 209 Franklin Avenue were the property of Maggie L. Montague.  The household furnishings and furniture had been sold to pay decedent's debts and a friend bought them and presented them to Maggie L. Montague.  The antiques and household furnishings were covered by fire insurance policies which were taken out by Maggie L. Montague.  At the date of the decedent's death his son, William B. Montague, owned 2,000 shares of the capital stock of the Coral Manufacturing Company, a Pennsylvania corporation which was organized in 1904.  These shares represented the stock which was given to the son, William B. Montague, by Joseph Greer in 1905, plus the stock dividends accumulated thereon, and they constituted all the capital *802  stock of*1823  the Coral Manufacturing Company, except three shares which were held in the names of others for qualifying purposes only.  Up until and for a number of years prior to the date of his death the decedent was general manager of the Coral Manufacturing Company at a salary of $12,000 a year.  He did not own, and never had owned, any of the stock of that corporation.  The respondent determined a deficiency in estate tax in the sum of $9,245.81, which deficiency was based upon the inclusion in the decedent's gross estate of the above mentioned two parcels of real estate, the household effects and antiques referred to above, the 2,000 shares of stock of the Coral Manufacturing Company standing in the name of William B. Montague, Liberty bonds and accrued interest thereon amounting to $19,806.86, and the balances of two accounts at the Montgomery County Trust Company in the sum of $202.73.  OPINION.  MATTHEWS: William E. Montague died intestate on March 14, 1925.  A return for Federal estate tax was filed by Maggie L. Montague, his widow, and William B. Montague, one of his sons, as custodians of his estate, which showed no tax due.  The deficiency in estate tax which has been determined*1824  by the respondent is based upon the theory that the decedent was the beneficial owner of two parcels of real estate to which his wife held title and of certain household effects and antiques located in the home occupied by him and his wife, and also owned the 2,000 shares of stock of the Coral Manufacturing Company which stood in the name of his son.  In the notice of deficiency addressed to the custodians of the estate of William E. Montague the following statement appears: It appears that certain real estate, furniture and antiques were held in the name of decedent's wife and the stock in the name of his son under circumstances from which the Bureau finds that all of the above-described property belonged to the decedent at the date of his death and formed part of his taxable estate.  The history of the various transactions by which title to the property in question was taken in the names of members of decedent's family, his business dealings and impelling motives all indicate that the decedent intended to and in fact did, in each instance, place his property in trust for his own beneficial use.  The Bureau finds, therefore, that all the items of property listed in the tentative*1825  letter formed, at his death, a part of this decedent's taxable estate.  At the hearing it was contended by counsel for the respondent that because of a large number of judgments which had been obtained against him the decedent had for a number of years so managed his affairs and his properties as to be beyond the reach of creditors, and it was claimed that although these properties were put in the names of his wife and his son the decedent was the equitable owner of the *803  real estate referred to above as well as the beneficial owner of the antiques and of the stock.  These judgments were obtained from 1888 to 1894 and counsel for the respondent admitted that none was in force at the time of the decedent's death.  It was agreed by counsel for both parties that if the real estate referred to in the findings and the shares of stock of the Coral Manufacturing Company and the household effects and antiques in the house at 209 Franklin Avenue, Norristown, are not subject to Federal estate tax as a part of the decedent's estate, there is no Federal estate tax due in this particular case.  The respondent took the depositions of a number of witnesses, including the widow and*1826  the three sons of the decedent, in an effort to show that the properties involved herein were in fact held in trust for the beneficial use of the decedent.  These depositions were the only testimony introduced on behalf of the respondent and, instead of supporting the respondent's theory of the case, they sustain the position of the petitioners.  We are convinced that the real estate and the household furnishings, including the valuable collection of antiques, were owned by the wife, Maggie L. Montague.  She acquired these properties prior to the enactment of any Federal estate tax laws and it is not contended that any transfer was made to her by the decedent in contemplation of death.  We have found that the real estate was purchased and conveyed to her by her husband in repayment of a loan to him in the sum of $10,000 and that at a sale, which was held to pay the decedent's debts, a friend purchased the household effects and presented them to the wife.  It was further testified that the decedent and his wife had collected antiques over a period of years, that she bought some of them herself and that some were purchased by her son.  Of the son's purchases a few were gifts to his mother*1827  and some were paid for by her.  The decedent bought most of the antiques and presented them to his wife.  In addition to the positive testimony of the wife that the antiques belonged to her, several friends of the family who had visited in the decedent's home and who had known the Montague family intimately for a number of years, testified that the decedent always referred to the antiques as the property of his wife.  It was also testified by antique dealers that the decedent had remarked on several occasions that he was making certain purchases to give to his wife.  There was no evidence to indicate that the decedent ever claimed any interest in the antiques or the household furnishings.  Insurance on the household furnishings and the antiques had been carried in the wife's name for more than twenty years prior to the decedent's death.  We have also found that the shares of stock of the Coral Manufacturing Company which stood in the name of the son, William *804  B. Montague, were the property of the son and were not held in trust for the decedent.  It was developed that the decedent had been the general manager of the Coral Manufacturing Company for a number of years prior*1828  to his death and that his salary was $12,000 a year, but there was no evidence to show that he had ever owned any of the stock of the corporation or that there was any agreement under which the stock held by his son belonged to the decedent.  The son had been connected with the Coral Manufacturing Company from the date of its organization and gradually took over the management of the company.  The father remained as general manager until his death but the son was in active charge and had assumed many of the managerial functions of the business for many years prior to the death of his father.  In view of the foregoing it is held that there is no Federal estate tax due and there is, therefore, no deficiency in this case.  Judgment will be entered for the petitioners.