Court Opinion

ID: 4591138
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:05:08.866573+00
Date Added: 2024-06-11T09:25:04.972853
License: Public Domain

ESTATE OF CHARLES H. GREENWOOD, DECEASED, KENNETH R. GREENWOOD, ADMINISTRATOR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Greenwood v. CommissionerDocket No. 104987.United States Board of Tax Appeals46 B.T.A. 832; 1942 BTA LEXIS 807; April 3, 1942, Promulgated *807 Held, that separate property was not transmuted into community estate by oral agreement between husband and wife, under the law of Arizona.  John M. Schwartz, Esq., for the petitioner.  Frank T. Horner, Esq., for the respondent.  DISNEY*832  This proceeding involves Federal estate tax liability.  The deficiency determined (as corrected by stipulation) is in the amount of $18,501.28.  The issue presented is whether husband and wife, constituting a marital community in Arizona, by oral understanding transmuted separate property into community estate.  *833  From allegations admitted in the pleadings and evidence adduced, we make the following findings of fact.  FINDINGS OF FACT.  The estate tax return involved herein was filed with the collector of internal revenue for the district of Arizona, by the duly qualified administrator with will annexed of the estate of Charles H. Greenwood, who died testate on July 21, 1939.  The decedent and Albertine Greenwood were married about 1899, and resided during the greater part of their married life in the State of New York.  For about 25 years decedent was employed by the Carborundum Co.*808  at Niagara Falls, New York.  During the last ten years with that company he was general manager at a salary of $15,000 per year.  About 1922, because of the condition of the health of decedent's son, the son and decedent's wife moved to Tucson, Arizona.  The decedent remained in Niagara Falls, retaining his position with the Carborundum Co. and making frequent visits to his wife and son in Arizona from about 1922 until 1927.  In January or February 1927, decedent inherited some property from his mother.  The record does not show the amount of the inheritance, but it was "fairly sizeable", in the language of decedent's widow.  In March 1927 he retired, resigning his position with the Carborundum Co. and went to Arizona.  Thereafter the decedent, his wife, and his son lived together at Tucson, Arizona, until the time of his death.  He remained retired and did not engage in any occupation, profession or business until his death, but lived upon his investments and income from the time he went to Arizona.  He established bank accounts prior to his retirement in Massachusetts, to which accounts his wife made no contribution.  He also established bank accounts in Arizona in which the wife*809  made no deposits.  These consisted of a savings account in a bank at Phoenix, Arizona, and a savings account and a checking account in a bank at Tucson, Arizona.  Upon the accounts in Tucson either the petitioner or his wife could draw.  Both signed the signature cards for both accounts, and on the card for the checking account the bank was specially authorized in writing by the decedent to accept the endorsement of his wife upon all checks made to him personally for deposit.  The checking account, established in 1928, was to the credit of "Greenwood, C. H., or Albertine, Either or Survivor of Either." Dividends from stock in the Carborundum Co. were deposited in the checking account and C. H. Greenwood checked upon that account in buying stocks up to the time of his death.  In addition, a safe deposit box was in 1928 rented from the bank under a contract signed by both husband and wife and reciting in part: We, the undersigned, joint renters of the above numbered Safe Deposit Box from the Southern Arizona Bank & Trust Company, (hereinafter called the Bank) *834  hereby declare and represent that we own as joint tenants, with the right of survivorship, all the property of every*810  kind or character now within said box and that all property which may be deposited therein by either or any of us shall be and is owned by us as such joint tenants.  We, jointly and severally, authorize the Bank to grant access to said Box, to either or any of us or the duly appointed deputy of either or any of us and we hereby expressly agree that the Bank is authorized to permit the surrender of the box and or the removal of the entire contents thereof, by either or any of us without notice to the others or to the survivor of us.  And we hereby, jointly and severally, for ourselves, our executors, administrators and assigns hereby bind and obligate ourselves to indemnify, protect and save the Bank harmless from any loss, claims or damage it may be caused, or any expense of any kind or character it may or shall be compelled to incur by reason of its reliance in and acting upon the declarations and representations herein contained in granting access to and the removal of the contents of said box by either or any of us or the duly appointed deputy of either or any of us or by the survivor.  The undersigned in consideration of the letting of the above numbered safe deposit box*811  by the Bank acknowledge receipt of two keys thereto and certify that they have read, received a copy and approve of the Bank's rules governing safe deposit boxes as printed on the reverse hereof and do hereby adopt and accept said rules and conditions as part of this rental contract.  1.  Signature C H GREENWOOD.  2.  Signature ALBERTINE GREENWOOD.  At the date of the death of the decedent the safety deposit box contained the assets, securities, and other documents of title and certificates evidencing the stocks and bonds held by the decedent at the time of his death and listed on the estate tax return filed.  Of the assets so listed, valued in the return at $240,956.99, the sum of $179,188.30 represented stocks and bonds, and $26,708.31 represented deposits in bank, of which $4,320.01 was in the savings account in the Tucson, Arizona, bank in the name of "Greenwood, C.H., or Albertine", $3,553.52 was in the checking account in the name of Greenwood, C.H., or Albertine, Either, or Survivor of Either" above referred to, and the remainder, $18,834.78, represented savings accounts in decedent's name in cities in Massachusetts; Los Angeles, California; and Phoenix, Arizona.  The*812  decedent allowed his wife $200 per month for household and personal expenses.  He paid this amount to her when he was at home, and when he was out of the city, the wife customarily issued checks upon the account, ordinarily to the extent of $200 per month.  At one time she paid hospital and other bills out of the amount, while her husband was in South America.  She also in his absence paid preminums on her husband's life insurance policy out of the checking account.  At the time of the marriage of decedent and his wife, neither had any property, and with the exception of the inheritance from the decedent's mother in 1927, and $1,000 inherited by the wife about *835  1937, the decedent's earnings constituted the income of the husband and wife.  The wife was not engaged in any occupation or business, except that of a housewife.  She deposited the $1,000 which she inherited in her own name and the amount was still on deposit in her name at the bank at the time of the hearing.  She at one time had some stock in a railroad company, about 10 shares, which she acquired with money she had saved out of the $200 monthly allowance.  The stock was later sold by her husband in her absence. *813  He put the money in stock of the American Woolen Co., in his own name.  The dividend checks came to him.  The dividends received thereon were sometimes kept by the husband and sometimes turned over to the wife.  The husband always received the other income, including his salary, and handled it without control by the wife.  She never received or requested an accounting from him.  Although she had a key to the safety deposit box, she never went to the safety deposit box and never saw the contents thereof.  She had seen some stocks and bonds and had had some in her hands, but all were in the name of the husband.  The decedent never discussed tax returns with her, although he prepared and filed returns for both husband and wife, and told her he was so doing.  In a general way the husband and wife discussed their property relations.  He consulted her when real estate was bought, but there was no specific occasion upon which property was discussed.  He always spoke of his property as being half hers and always referred to the fact that half of everything he had was hers.  He used the expression community property, and always referred to the property as community property.  It was her*814  understanding that half of the ownership of the bank accounts was hers, that understanding being based upon different things that he told her.  The wife had a general knowledge of the stocks and bonds owned by her husband.  She did not know whether he had ever put any stock or bonds in her name.  Their home when they lived in New York was in the name of both husband and wife, but, aside from that home and the bank accounts in Tucson, Arizona (and real estate in Arizona, in the name of both and not herein involved), all other forms of property were carried by the husband in his own name.  He never asked her opinion, permission, or advice about making sales or changes in the property.  About a year before he died the husband told the wife she was worth one-half of what he was worth, but she never had any written communication or document on the subject.  Neither husband nor wife signed any written statement.  He received his income from all sources and disposed of it as he saw fit.  Once when the husband and wife had a disagreement, about a year before he died, he made the remark, "Well, half of everything I have is yours." He made that statement several *836  times.  He prepared*815  the income tax returns for both, but she signed her own and he signed his.  Her income as returned was slightly less than his.  The conversations about community property and her interest were only occasional and the subject was not referred to often.  The decedent stated to an intimate friend while automobile riding in 1936 that one-half of all of his property belonged to his wife, that they had split everything they had fifty-fifty.  On another occasion in 1938, in the course of a family argument the wife said to her husband in the presence of the friend: "You know, Charles, that one-half of all we own belongs to me", and the husband stated: "That is correct, I know it as well as you do." In 1938 the decedent stated to the same friend that his wife was ill and that he wanted a will prepared so that if she passed away her community interest would not pass to the son, which would be embarrassing to him, and that he would like to have a will so that she could give her half to him, the decedent.  At the date of decedent's death, his wife's will provided that all of her property go to him; and his will left all of his property, except a certain trust estate not here involved, to his*816  wife.  The son as administrator returned the property upon the Federal estate tax return as community property for the reason that his father always stated that he had believed that one-half of the property was his and one-half belonged to the wife, and the son wished to carry out his ideas in the administration of the estate.  The estate tax return showed, as the separate property of the decedent, a trust estate of $16,360.38.  In determining the deficiency in estate tax herein, the Commissioner, with certain exceptions not material, computed gross estate without allowing a deduction of one-half as set up in the return under the claim of community property.  OPINION.  DISNEY: The question which we are required to answer here is whether under the law of Arizona decedent's wife had a community property interest to be excluded from the computation of his estate.  We are, of course, controlled herein by state law.  . See also . The property involved is personalty, consisting of stocks and bonds, largely corporate stock of the Carborundum Co.; also cash.  A*817  portion of the property, the amount not shown except that it was "sizeable", was inherited by the husband, and inherited property is by the Arizona statute specifically excepted from community estate, so that with such a record we could not determine that any of the property was *837  originally community.  The evidence clearly indicates that the husband separately acquired the property prior to removal to Arizona.  The petitioner pointedly disclaims any contention that the property was originally acquired as community property.  We therefore hold that the property was originally the separate property of the decedent.  The petitioner states the question as follows: "The primary question presented is that of transmutation by understanding and intention." We therefore examine the record to ascertain whether under all of the evidence it is shown that property originally separately owned by the decedent became that of a marital community in Arizona.  The petitioner relies in substance upon the idea that there was a general understanding between the husband and wife that their property was held as community estate, and upon statements which the husband made to the effect that half*818  belonged to her and that the property was community.  There was no written communication, understanding or document on the subject.  The husband made such statements on two occasions to a friend and upon one occasion, in the presence of such friend and in the course of a family argument, the wife said to her husband, "You know, Charles, that one-half of all we own belongs to me", to which the husband stated, "That is correct, and I know it as well as you do." This is the only occasion shown by the evidence where any agreement between husband and wife expressly appears.  It is obvious, of course, that the oral statements above recited do not amount to a conveyance.  The petitioner, however, urges that under the law of California such statements suffice to transmute separate property into community estate and urges us to follow such decisions.  Under the law of California an executed oral agreement is sufficient transmutation of separate property into community. ; ; *819 ; ; . ; and , indicate that in California express agreement need not be shown if it is proven by the nature of the transaction or surrounding circumstances. . We have for consideration here, however, not only the oral expressions above noted, but also documents in writing, signed by both husband and wife.  In 1928, the year following that in which the decedent moved to Arizona, and several years before the family argument and statement above referred to, petitioner and his wife signed a contract of rental of safety deposit box from the Southern Arizona Bank & Trust Co.  Therein, over their signatures, it is stated that they declare and represent that they own as joint tenants with the right of survivorship all of the property within or which may be deposited in the box, and that it shall be and is owned by *838  them as such joint tenants.  They jointly and*820  severally authorized the bank to grant access to either of them, and jointly and severally obligated themselves to save the bank harmless.  Further reference is made to the survivor.  It is recited that the signers have read, received a copy of, and approved the bank's rules covering safe deposit boxes as printed on the reverse side.  On the reverse side reference is made to the survivor.  On or about January 5, 1928, a checking account was opened in the same bank in the name of "Greenwood, C. H., or Albertine, Either, or Survivor of Either", that expression appearing on the signature cards which bear the signatures of C. H. Greenwood and Albertine Greenwood.  In 1934 a savings account was opened in the same bank by "Greenwood, C. H. or Albertine", that expression appearing upon the signature card bearing the signatures of C. H. Greenwood and Albertine Greenwood.  All of the personalty and assets involved in this case, consisting of stocks, bonds, certificates, and documents of title, was, at the date of the death of the decedent, in the safe deposit box above described.  Of the cash, $3,553.52 was in the joint checking account in the Tucson bank, $4,320.01 in the savings account*821  therein, and $18,834.74 represents savings accounts in decedent's name in other banks.  It is apparent that, if the decedent and his wife were at the date of his death the owners in joint tenancy of the property deposited in the safe deposit box and in the joint checking account, such property must be included in the gross estate of the decedent, under the provisions of section 302(e), Revenue Act of 1926. 1 Moreover, the language of the act seems specifically to cover the deposits both in safe deposit box and checking account.  The petitioner argues that the doctrine of survivorship is not favored by the law in Arizona, and that it is a matter of intention on the part of the parties, , *839  and suggests that the right of survivorship in that state may have been abolished.  However, upon examination of the Arizona statute and construction thereof by the Supreme Court of Arizona, we find that if the instrument expressly vests estate in the survivor, the right of survivorship exists, although proof of a contrary intention on the part of the parties would suffice to destroy the joint ownership.  *822 ;. Examination of the contract signed and entered into by the decedent and his wife in renting the safe deposit box containing the larger portion of his estate indicates clearly to us that the instrument does "expressly vest the estate in the survivor" under the Arizona statute, section 986, Revised Code Arizona 1928, and negatives any idea of a contrary intent on the part of the signers.  The provisions of such written agreement were never revoked nor modified throughout more than ten years prior to the death of the decedent.  *823 Agreements as to safe deposit boxes essentially the same as that above described have been held to preclude claims of community property by the California courts.  , involved a claim of community property.  The husband and wife had orally agreed that property should be owned as joint tenants and their moneys were deposited in a bank in a joint account with a written agreement in the pass book reciting joint tenancy and survivorship.  It was held that there was joint tenancy.  The same court in , considered a bank deposit in form to be paid to either husband or wife or the survivor, additions to become the property of the persons making the deposit as joint tenants, and concluded that community property deposited in such account passed out of the community at the time of the deposit and became the joint property of the husband and wife.  In , it was held that a husband and wife having community ownership of money converted same into joint ownership by the terms of a signed signature card similar to that hereinabove described. *824  The card bore the recitation that the undersigned gave each other a joint ownership in moneys deposited or thereafter to be deposited, payable to either or the survivor.  , involved a question of community property or joint estate in connection with the renting of a safe deposit box by a husband and wife, as herein, and which safety deposit box contained the personal property in question - stocks and bonds.  An agreement in writing between husband and wife in renting the safety deposit box recited a declaration that the contents then or thereafter should be joint property with ownership in the survivor.  In addition, somewhat similar to the situation herein, the husband and wife opened a "deposit account" in another bank with *840  an agreement signed to the effect that moneys deposited should be paid by the bank to either or the survivor.  The court held that the property was joint and not community estate, although the personal property involved was placed in the safe deposit box by the husband, whose executor contended that it was community as against the wife's claim by right of survivorship.  *825  The above decisions clearly indicate, we think, not only the weight which should be given to the agreement of joint ownership as to the safe deposit box and the joint bank account, but refute the petitioner's contention that joint tenancy can not be created by one person conveying to himself and another as joint tenants.  In that respect see also ; ; . In the light of such decisions we conclude that the evidence of oral understanding or agreement between the husband and wife here involved is not sufficient to indicate a change from the joint estate set up in writing in the safe deposit agreement and in the agreement as to the checking account.  Indeed, it seems to us that in the light of such written agreement the oral statements later are explained and that they refer to the joint tenancy set up in writing.  The oral references to community property and to ownership as half in each of the spouses may well have referred, in the minds of the decedent and wife, as laymen, to the joint estate in the property in bank.  At least we*826  think such references do not negative the written agreements or show an executed oral agreement sufficient under primary rules of law to overcome a previous written contract.  We therefore hold that all property in the safe deposit box and in the checking account payable to either or the survivor was not community property, but joint estate, to be included in the estate of decedent.  The record indicates plainly that the property did not originally belong to the survivor within the exception recited in section 302(e) of the Revenue Act of 1926.  As to the remainder of the decedent's estate not appearing to have been covered by the written agreements as to joint ownership: We conclude that the evidence is not sufficient to indicate community property.  Assuming that an oral understanding is sufficient to transmute separate estate into community property, under the law of the state in question, we note that the evidence as to oral agreement placed all property in the same category - the contention being that all was community and that everything was owned in like manner by the husband and wife.  Having concluded that almost the entire estate was held in joint tenancy, we believe this*827  indicates that the remainder was so held; or, if not, that the effect of the written evidence as to joint tenancy is such as to indicate that the separate estate of the husband in the other bank accounts is not shown to have been transmuted *841  into community estate.  The evidence is that all of his assets, including documents of title and certificates, were in the safe deposit box - which we above concluded contained property held by joint tenancy.  The box, therefore, apparently contained the certificates of deposit by the husband in the other separate bank deposits in Massachusetts; Phoenix, Arizona; and Los Angeles, California, for they obviously are covered by the expression "assets, securities and other documents of title" and "certificates" used to describe the contents of the safe deposit box.  Certainly that they were not in such box is not shown by the record.  The oral understanding relied upon by the petitioner can not, we think, overcome the presumption of correctness of the Commissioner's determination as to any property, in the light of our conclusion as to the written agreements covering the joint bank accounts and deposits, for no distinction is made in the*828  evidence as to oral agreement sufficient to separate one bank account from the other.  Moreover, we find that section 265, Revised Code Arizona 1928, particularly provides that: Whenever a husband and wife open a joint account with any bank, and either one dies, such bank shall pay to the survivor the amount standing to their joint credit and upon making such payment such bank shall be released from all further liability for such amount.  This section places the savings account in the Tucson bank in the same category as the other accounts where "survivor" is used.  Since all bank accounts shown to enter into the computation of the estate, except those which we have above concluded represent joint estate, are in the name of the decedent, and certificates therefor were apparently in the joint safe deposit box, we conclude and hold that no sufficient showing of community estate therein has been made, and that error on the part of the respondent is not shown.  Decision will be entered under Rule 50.Footnotes1. SEC. 302.  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 - * * * (e) To the extent of the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than an adequate and full consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further,↩ That where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so acquired by the decedent and any other person as joint tenants and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants.