Court Opinion

ID: 9454547
Source: CourtListenerOpinion
Date Created: 2023-08-04 18:49:42.142902+00
Date Added: 2024-06-11T17:34:09.801048
License: Public Domain

SKELTON, Judge
(dissenting):
I respectfully dissent, because I think the majority opinion is contrary to the decision of the Supreme Court in Brewster v. Gage, 280 U.S. 327, 50 S.Ct. 115, 74 L.Ed. 457 (1930) and also is in conflict with Section 1014 of the Internal Revenue Code (1954).
The case before us is a New York case and we must be governed by the laws of that state with respect to title to property. The above case of Brewster v. Gage was likewise a New York case and is squarely in point here.
While it is true that in that case the court stated that in the State of New York upon the death of the owner, title to his real estate passes to his heirs or legatees and that a different rule applies to personal property, the title to personal property does not vest at once in the heirs or legatees. But upon the death of the owner there vests in each of them the right to his share in the property after administration and the right to have it delivered upon entry of the decree of distribution. The court goes on to say that the title to all personal prop*771erty belonging to the estate vests in the administrators or executors but that such title is taken not for themselves, but in the right of others for the proper administration of the estate and for distribution of the residue. The court said that the decree of distribution confers no new right, but merely identifies the property remaining and requires the administrators or executors to deliver it to the legatees. The court then said, “The legal title so given relates back to the date of the death.” [Emphasis supplied.] The court said that at the time of the testator’s death, the legatee became enriched by the worth of the property left to him and that notwithstanding the postponement of transfer of the legal title to him, Congress had the power to fix the value at the time title passed from the decedent as the basis for determining gain or loss upon sale of the right or of the property before or after the decree of distribution. The court held that there was no reason to differentiate between the value of real estate and specific bequests at the time of death and value of other property at the date of the decree of distribution and that the Act of Congress indicates an intention that the value at the time of death of the decedent was to be taken as the basis in all cases. The court said “There appears to be no reason why gains or losses to the estate should be calculated on one basis and those to the residuary legatees on another.”
It will be remembered that in that case the decedent left stocks to a legatee by will. The stocks were disposed of in due course to the legatee and he later sold them. In his income tax returns, he computed profit or loss by comparing the selling price of the stocks with its value at the date of the decree of distribution instead of at the date of the death of the testator. The court held that the date of death of the decedent was the controlling date and the stocks must be valued as of that time and not at the time of the date of distribution.
Applied to the case before us, this means to me that at the time of Mrs. Wood’s death, the stock was worth $65,871.47, and we must accept that value for the stock at the time of her death. At the time of Mr. Wood’s death, the securities were worth $159,-766.63, and we must accept that value as being the true value at the time of his death. The securities were later sold for $160,742.09. Consequently, the only tax due would be the difference between the value of the stock at Mr. Wood’s death and its value at the time the securities were sold.
In my opinion, it matters not that the executors of Mrs. Wood’s estate had not distributed the stock to Mr. Wood before his death, nor to his estate after his death before the stock was sold. Under the authority of the above case, Mr. Wood had the equitable title to the stock at the moment of Mrs. Wood’s death. The executors of Mrs. Wood’s estate took title in trust for the benefit of Mr. Wood. The sale made by them could only have been made for him or for his estate. The above case specifically states that when the 'distribution is made, the title of the legatee relates back to the date of the death of the decedent. Applied to our case, this means that when the proceeds of the sale of the stock, which was later reinvested in bonds and then sold and the proceeds distributed to Mr. Wood’s estate, the title of his estate to the stock related back to the date of the death of Mrs. Wood and although the sale of the stock was made by the executors in the name of Mrs. Wood’s estate, in truth and in fact it was made for his estate and for his legatees.
In other words, the title in Mr. Wood and later in his estate and legatees, to the stock left to him by his wife related back to the date of Mrs. Wood’s death at the time of the distribution to him of the proceeds of the sale of the stock. Therefore, in my opinion, the position of the government is wrong and that of the plaintiff is correct.
It seems significant to me that the government has admitted that if the executors of Mrs. Wood’s estate had dis*772tributed the stock to Mr. Wood immediately after her death, that plaintiff would be entitled to recover in this case. By this argument, the government is contending that the date of distribution is the controlling date. This is not the law, because Mr. Wood’s title to the stock related back to the date of death of Mrs. Wood, according to the above case, regardless of the date of the distribution of the stock.
This is in accord with Section 1014 of the Internal Revenue Code, which says that the basis of property acquired by a person from a decedent shall be the fair market value of the property at the date of the decedent’s death. The confusing aspects of this case are that we have two deaths and two administrations with the same executor. It is necessary to consider the value of the property at the date of each death to get the proper basis for each successive owner. When we do this, we see that at the date of Mrs. Wood’s death, the property had a value of $65,871.47. All parties agree to this. Therefore, Mr. Wood, the legatee, had the equitable title to the property at this value, subject to the payment of any debts of Mrs. Wood. At oral argument, it was made clear that the administration of her estate was independent of the court and that there were no unpaid debts. Consequently, there was no need for further administration and Mr. Wood was entitled to the property with the above basis. But for some unknown reason, the executor did not distribute it to him. In my opinion, this did not affect his equitable title and right to the property. He could have forced its distribution. At this point, he died leaving the property to his children by will as his sole legatees. This is the second death, and we now have a new date of death and a new basis of the property for his legatees who hold the equitable title, subject to the payment of his debts, if any. This gives rise to the real question in the case, which seems to have been overlooked by the parties and the majority, and that is, what is the basis of Mr. Wood’s estate and legatees in the property and how do you determine it? The answer is found in the statute and in Brewster v. Gage, supra. Their basis is the fair market value of the property at the date of the death of the “decedent,” which at this stage is the date of the death of Mr. Wood. This value at the date of his death was $159,766.63. We are no longer concerned with the date of death of Mrs. Wood, nor the value of the property when she died. Also, it is immaterial that the property left by Mrs. Wood was in a different form at the time of Mr. Wood's death.
Accordingly, when the property was sold after Mr. Wood’s death for $160,-742.09, the equitable title was in his legatees, and when distribution was made to Mr. Wood’s estate, its legal title related back to the death of Mrs. Wood. When the property is distributed to the legatees of Mr. Wood, their legal title will relate back to the date of his death, and their basis, which is what we are really concerned with here, will be the fair market value of the property at his death.
Most of the confusion in the case was caused by the way the executor handled the property and filed the tax returns. It erroneously considered that both the legal and equitable title to the property was in the estate of Mrs. Wood until the date of distribution to Mr. Wood’s estate after his death. The government is taking advantage of this situation by making it appear that the date of distribution fixes the value date for the estate of Mr. Wood and his legatees. By this means, it seeks to have the original value determined as of the date of Mrs. Wood’s death and then ignores the value at the date of death of Mr. Wood, notwithstanding the fact that we are concerned only with the value at the time of his death. I think the two deaths and the two values must be considered separately if we are to follow the statute and Brewster v. Gage.
In my opinion, the plaintiff here should be considered as maintaining this suit for the estate of Mr. Wood and for *773his legatees who hold the beneficial title to the property.
I would deny the defendant’s motion for summary judgment and assign the case for trial.