Court Opinion

ID: 4598957
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:22:21.954046+00
Date Added: 2024-06-11T07:52:02.303027
License: Public Domain

MECHANICS BANK OF NEW HAVEN ET AL., EXECUTORS, ESTATE OF ROLLIN S. WOODRUFF, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Mechanics Bank of New Haven v. CommissionerDocket No. 38941.United States Board of Tax Appeals20 B.T.A. 1033; 1930 BTA LEXIS 1975; September 29, 1930, Promulgated *1975  A note, given as a donation to a university, payable one year after death of both the maker and his wife, is not a claim deductible from the gross estate.  Alfred C. Frodel, Esq., for the petitioners.  Lloyd W. Creason, Esq., for the respondent.  LOVE *1033  This proceeding is for the redetermination of a deficiency in estate tax, in the amount of $785.99, asserted as due by the estate of Rollin S. Woodruff.  In the petition, petitioners claimed that the Commissioner erred in not allowing as deductions from the gross estate, a number of promised contributions to various organizations, claimed to be charitable, educational, or religious, and aggregating $55,000.  At the hearing all those items except one were specifically waived, which action narrowed the controversy down to a question of whether or not the Commissioner erred in refusing to allow as a deduction from gross estate a promised contribution to the Wesleyan University of Middletown, Conn., in the amount of $50,000.  None of the facts are controverted.  From the allegations in the petition, admissions in the answer, and stipulations into the record, we make the following findings*1976  of fact.  FINDINGS OF FACT.  Petitioners are the duly qualified and acting executors of the estate of Rollin S. Woodruff, deceased.  The decedent was a resident of Connecticut, and died June 30, 1925, leaving a gross estate valued at $1,210,477.19.  Rollin S. Woodruff executed the following instrument: June 5, 1921.  For value received and in consideration of subscriptions made by others, I hereby promise to pay to Wesleyan University, Middletown, Connecticut, the sum of Fifty Thousand Dollars, the same to be paid by my executors and administrators one year after both the death of myself and my wife, Kaomeo E. Woodruff.  I hereby reserve the right to pay all or any part of the above note at any time prior to my death.  (Signed) ROLLIN S. WOODRUFF.  The decedent did not pay any part of that note prior to his death, and no part of same has since been paid.  His wife survived him.  The Wesleyan University of Middletown is an institution organized and operated exclusively for educational purposes, no profits of said *1034  institution inuring to private stockholders.  The Commissioner determined the residue of the decedent's estate which was to pass to charities under*1977  the will, subject to the life estate of the wife, to be $671,946.54.  In doing so he did not reduce the gross estate by the amount of the $50,000 item here under consideration.  Article 10 of decedent's will, in disposing of the residue of his estate, subject to said life estate, directed that $50,000 be given to the Wesleyan University of Middletown, upon the death of his wife.  The "present worth" of that item of $50,000, taking into consideration the life expectancy of the wife, was included by the Commissioner in the item of $671,946.54 residue, which under the will was to pass ultimately to charity.  OPINION.  LOVE: In this case the petitioners urge their right to have the $50,000 item here in controversy, as represented by the note, copied into our findings, treated as a debt due by the decedent at the date of his death, and as such a debt they claim it is deductible as a claim against the estate.  The Commissioner denied the deduction, but did allow it as a bequest, nontaxable, to the extent of its "present worth" in arriving at the net taxable estate.  In that computation it would seem that the Commissioner ignored, in a way, the note, and based his computation on the will, *1978  and treated the item as a bequest as per the will, and not as a debt, as per the note.  The decedent died in 1925; hence, the Revenue Act of 1924 is the applicable statute.  Section 303(a)(1) of that act, in stating allowable deductions from gross estate, prescribes "such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages upon, or an indebtedness in respect to, property (except in the case of a resident decedent, where such property is not situated in the United States) to the extent that such claims, mortgages, or indebtedness were incurred or contracted bona fide and for a fair consideration in money or money's worth." The 1926 Act is to the same effect.  That note, as such, in view of the fact that a part of the consideration for its execution, was as stated in the note itself, subscriptions by others to the same institution, may have been a valid, legal claim against the estate, and enforcible at law independent of the provisions of the will.  The probate court seems to have so considered it.  However that may be, it falls short of meeting the requirements prescribed in the Federal estate-tax law, and that is the law we are now*1979  dealing with.  The consideration for that note was not money, or money's worth.  We believe the Commissioner treated the *1035  proposition in accordance with the law applicable thereto, and his action is therefore approved.  We have stated the entire amount of the deficiency.  However, the record discloses the fact that said amount is to be reduced by certain credits for State inheritance tax.  Such adjustment should be made.  Judgment will be entered under Rule 50.