Court Opinion

ID: 4590334
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:03:25.818219+00
Date Added: 2024-06-11T07:59:19.454459
License: Public Domain

MARTHA J. BISHOP, EXECUTRIX, ESTATE OF SAMUEL D. BISHOP, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Bishop v. CommissionerDocket No. 20069.United States Board of Tax Appeals14 B.T.A. 130; 1928 BTA LEXIS 3015; November 13, 1928, Promulgated 1928 BTA LEXIS 3015">*3015  The transfer of corporate stock by the decedent to his wife in December, 1918, was not a gift in contemplation of death, and therefore the value in controversy should not be included as a part of the gross estate.  Henry H. Asher, Esq., for the petitioner.  P. M. Clark, Esq., for the respondent.  MORRIS14 B.T.A. 130">*130  This proceeding is for the redetermination of a deficiency in estate tax amounting to $4,113.74, which grows out of the inclusion, by the respondent, in the gross estate of the decedent of $104,000, the value of 8,000 shares of the capital stock of the Mutual Oil Co., which the respondent contends were transferred by the decedent to his wife in contemplation of death.  FINDINGS OF FACT.  The petitioner is the duly appointed executrix of the estate of her deceased husband Samuel D. Bishop, late of Douglas County, Kans.  The decedent was engaged in and had a very extensive law practice just prior to his death.  Among his clients were the Watkins National Bank, Peoples State Bank, and Mutual Oil Co.  He was a member of the board of directors of each of those institutions.  He was also a member of the board of directors of the Fraternal1928 BTA LEXIS 3015">*3016  Aid Union, an insurance company located in his home city, and attorney for the American Cement Plaster Co., of which Alfred Henley was president.  When the latter company was taken over by Henley's estate he became attorney for and represented the estate.  Until the latter part of 1918 the decedent was in moderate financial circumstances, such as might be reasonably expected of the average successful small-town lawyer.  Up to that time, that is, 1918, practically all of his income was derived from his law practice and although he lived well he accumulated very little.  The Mutual Oil Co., in which the decedent had invested, began to expand after 1913, and in the latter part of 1918 negotiations were entered into leading to the sale of that company, at which time it became apparent that its stock would be sold at a very substantial profit.  In December of 1918, just before Christmas, the decedent, in recognition of the companionship of his wife and the aid that she had rendered him during their married life, told her that it was no more than fair and right that she should get the benefit of his fortune 14 B.T.A. 130">*131  and, therefore, that he was going to give her certain shares of corporate1928 BTA LEXIS 3015">*3017  stock.  Pursuant to his promise the decedent transferred and assigned to the petitioner on December 27, 1918, 60 shares of Mutual Oil Co. of Arizona common, evidenced by certificate No. 356 issued on December 27, 1918, and 65 shares of Mutual Refining & Producing Company, evidenced by certificate No. 111 issued on the same date.  At this time the decedent was in good physical condition.  The decedent was regarded by his friends and associates as a dynamic, positive, and unusually energetic man.  He was vigorous, healthy, strong, and quite active at all times, both mentally and physically.  Prior to July 7, 1920, and during his entire married life, the decedent enjoyed very good health and except for an attack of laryngitis in the fall of 1918, which was not regarded by his family physician as serious, and an occasional cold, he never consulted a doctor nor was he confined to his bed with any illness.  That illness was purely a local infection of the throat which resulted from a cold contracted on a trip to Texas.  He consulted his family physician at his office, who did not consider his condition sufficiently serious to warrant a visit at his home.  There was nothing in that illness1928 BTA LEXIS 3015">*3018  of the decedent to create a suspicion of impending death.  On July 7, 1920, the decedent was found in his bathroom in a state of unconsciousness surffering from what at first appeared to be a stroke of paralysis or apoplexy, but which the doctor diagnosed as caused by something taken by the decedent to relieve him of pains resulting from influenza.  After twenty-four hours of unconsciousness the decedent recovered from his illness rapidly and in several days he resumed his duties at his office.  He and his wife took a month or six weeks' sojourn in the East and thereafter he was in his office, except for summer vacations and customary business trips, until the day before his death in 1923.  Although the decedent's health was rather poor just before his death, he was active, and attended to his business as usual on the day before, and there were no visible indications that death was near.  On the morning of January 14, 1923, the petitioner discovered him dead in his bed.  The decedent was 57 years of age when he died.  His estate, consisting of real and personal property, aggregated $293,000 in value.  The 8,000 shares of stock in the Mutual Oil Co. of Maine, valued at $104,000, 1928 BTA LEXIS 3015">*3019  which were included in the gross estate of the decedent as a transfer in contemplation of death under subdivision (c) of section 402 of the Revenue Act of 1921 and which form the basis of a portion of the deficiency in controversy, were the proceeds, avails, 14 B.T.A. 130">*132  and reinvestments of the 60 shares of stock of the Mutual Oil Co. of Arizona and 65 shares of Mutual Refining & Producing Co., hereinbefore discussed.  OPINION.  MORRIS: The sole question for our consideration and determination is whether the gift by the decedent on December 27, 1918, to the petitioner of 125 shares of corporate stock constituted a transfer in contemplation of death within the purview of section 402(c) of the Revenue Act of 1921, which provides: SEC. 402.  That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated - * * * (c) 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 at1928 BTA LEXIS 3015">*3020  or after his death (whether such transfer or trust is made or created before of after the passage of this Act), except in case of a bona fide sale for a fair consideration in money or money's worth.  Any transfer of a material part of his property in the nature of a funal disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title.  Since the gift in question was made more than four years prior to the death of the decedent there is no statutory presumption that it was in the nature of a final disposition or distribution and that it was made in contemplation of death.  It is necessary, therefore, to draw from the testimony adduced by the petitioner the state of mind of the decedent at or about the time these gifts were made and determined therefrom whether the transfer was made in contemplation of death.  We are unable to find anything from which a conclusion may be logically deduced that there was an existing physical infirmity which might have, or reasonably should have, created an apprehension1928 BTA LEXIS 3015">*3021  in the mind of the decedent of impending death on December 27, 1918, when the gift in controversy was made.  On the contrary, the record shows clearly that he was vigorous, healthy, strong, and quite active at all times prior to July 1920 when he was stricken with what resembled apoplexy or paralysis.  The decedent's most intimate friends and business associates and his personal physician regarded his physical condition as very good prior to that time.  It is true that he suffered an attack of laryngitis in the fall of 1918, but the testimony of his personal physician, who attended him at that time, to the 14 B.T.A. 130">*133  effect that the illness was no more serious than an ordinary cold and that he found it unnecessary to treat the decedent at his home, satisfies us that his life was not in peril, and, furthermore, that there was nothing in the illness which would excite or create any suspicion of impending death.  We, therefore, hold that the gift in controversy was not made by the decedent in contemplation of death within the meaning of subdivision (c) of section 402 of the Revenue Act of 1921, and that the respondent was in error in including the value of 8,000 shares of the capital1928 BTA LEXIS 3015">*3022  stock of the Mutual Oil Co. in the decedent's gross estate.  Judgment will be entered under Rule 50.