Court Opinion

ID: 4621798
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:45:24.806845+00
Date Added: 2024-06-11T07:56:03.930412
License: Public Domain

ROBERT M. GREEN, JR., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Green v. CommissionerDocket No. 13834.United States Board of Tax Appeals12 B.T.A. 1046; 1928 BTA LEXIS 3408; June 30, 1928, Promulgated 1928 BTA LEXIS 3408">*3408  The petitioner, having failed to introduce sufficient evidence to enable us to base our decision on section 703 of the Revenue Act of 1928, the fiduciary under the will of the decedent is the only one entitled to deduct Pennsylvania inheritance and Federal estate taxes in the computation of net income for 1921, notwithstanding the decedent specified in his will that the petitioner should pay the tax upon his share of the estate.  Milton A. Kamsler, Esq., for the petitioner.  Leroy L. Hight, Esq., for the respondent.  MORRIS12 B.T.A. 1046">*1046  This proceeding is for the redetermination of deficiencies in income tax of $324.04 for the year 1920 and $1,766.52 for the year 1921.  The sole question presented for consideration is whether the respondent erred in refusing to allow the petitioner to deduct Pennsylvania inheritance and Federal estate taxes paid by him in accordance with the terms of his father's will.  FINDINGS OF FACT.  The petitioner is an individual and is a resident of Pennsylvania.  Robert M. Green, Sr., father of the petitioner, died testate, and after having bequeathed sums to certain beneficiaries, including the petitioner, provided1928 BTA LEXIS 3408">*3409  in his will as follows: I direct that all inheritance and succession taxes on so much of my estate as consists of my interest in the business of Robert M. Green & Sons, shall be paid by my sons Robert M. Green, Jr. and Edgar L. Green, as a condition of the 12 B.T.A. 1046">*1047  bequest to them.  All inheritance and succession taxes on the balance of my estate shall be paid out of my residuary estate and not deducted from the legacies.  The decedent left all the residue and remainder of his interest in the firm of Robert M. Green & Sons to the petitioner and Edgar L. Green, two-fifths thereof to the petitioner and three-fifths thereof to Edgar.  On May 20, 1921, Edgar L. Green gave the partnership's check for $2,938.74 to the register of wills in payment of Pennsylvania inheritance taxes, and thereafter on May 21, 1921, a like check for $2,639.45 was given to the collector of internal revenue at Philadelphia, Pa., in payment of Federal estate taxes.  In addition to those amounts the fiduciary of the estate paid $6,071.53, $5,063.79 in cash, and the petitioner having a two-fifteenths interest in the remainder of the estate claimed a deduction of that amount (2/15 of $5,063.79) in the computation1928 BTA LEXIS 3408">*3410  of his net income for 1921, together with his pro rata portion of the amounts paid by the partnership to the register of wills and to the collector of internal revenue.  The total deduction claimed by the petitioner, which was disallowed by the respondent, is computed as follows: 2/5 of $2,938.74, amount paid to Pennsylvania$1,175.502/5 of $2,639.45, Federal estate tax1,055.782/15 of $ 5,063.79, Federal estate tax and State inheritance tax on the remainder of the estate which was paid by the estate in cash675.17Total2,906.45The reason assigned by the respondent for the disallowance of the sums paid by the petitioner is that tax imposed by the Federal and State taxing statutes is upon the right to transfer property and, therefore, the deduction is allowable only from the gross income of the estate.  OPINION.  MORRIS: Upon motion of counsel for the respondent, and with the express consent of counsel for the petitioner, so much of this proceeding as relates to 1920 is hereby dismissed.  Sections 210 and 211 of the Revenue Act of 1921 specify the amounts of normal and surtaxes that shall be levied and collected upon the net income of every individual1928 BTA LEXIS 3408">*3411  subject to the tax, and section 214 of the Act specifies the deductions that may be taken in the computation of net income.  Subdivision (a)(3) of that section provides for a deduction of, "Taxes paid or accrued within the taxable year except (a) income, war-profits, and excess-profits taxes imposed by authority of the United States, * * *." 12 B.T.A. 1046">*1048  The pertinent provisions of section 219 of the Revenue Act of 1921 are: (a) That the tax imposed by sections 210 and 211 shall apply to the income of estates or of any kind of property held in trust, including - (1) Income received by estates of deceased persons during the period of administration or settlement of the estate; * * * (b) The fiduciary shall be responsible for making the return of income for the estate or trust for which he acts.  The net income of the estate or trust shall be computed in the same manner and on the same basis as provided in section 212, * * * That section of the Act provides further that in cases coming within the provisions of paragraph (a)(1) above, "the tax shall be imposed upon the net income of the estate or trust and shall be paid by the fiduciary." 1928 BTA LEXIS 3408">*3412 It is definitely settled that the estate tax imposed by Title IV of the Revenue Act of 1918, which for our purpose is the same as the Revenue Act of 1921, and the Pennsylvania inheritance tax, are laid upon the transfer of property upon the death of the owner, and not upon the property itself, nor upon the right of succession thereto.  ; ; ; and . In , the court, after considering the tax imposed by the Revenue Act of 1918, said: * * * What was being imposed here was an excise upon the transfer of an estate upon death of the owner.  It was not a tax upon succession and receipt of benefits under the law or the will.  It was death duties as distinguished from a legacy or succession tax.  What this law taxes is not the interest to which the legatees and devisees succeeded on death, but the interest which ceased by reason of the death.  1928 BTA LEXIS 3408">*3413 . The petitioner contends that because of the terms of the will under which he took, the tax payments made by him were on his right to receive the inheritance and that, therefore, the tax is a deductible item in the computation of his net income for 1921, and he quotes article 134 of Regulations 62, promulgated under the Revenue Act of 1921, as authority for his contention.  That article of the regulations provides: Estate, succession, legacy, or inheritance taxes, imposed by any State, Territory or possession of the United States, or foreign country, are deductible by the estate, subject to the provisions of section 214, where, by the laws of the jurisdiction exacting them, they are imposed upon the right or privilege to transmit rather than upon the right or privilege of the heir, devisee, legatee, or distributee, to receive or to succeed to the property of the decedent passing to him.  Where such taxes are imposed upon the right or privilege of the heir, devisee, legatee, or distributee, so to receive or to succeed to the property, they constitute, subject to the provisions of section 214, an allowable deduction from1928 BTA LEXIS 3408">*3414  his gross income. (Italics supplied.) 12 B.T.A. 1046">*1049  The petitioner strees the underscored portion of the above article in support of his contention.  The word "imposed" as used in the last sentence of the above quoted paragraph is used in the same sense as in the first sentence and has no reference to obligations or conditions imposed upon the heir, devisee, or legatee by the will.  In order for a taxpayer to avail himself of the deduction provided for in that sentence the estate or inheritance tax imposed must be by law upon the right to receive the property and not upon the right to transfer it.  In the appeal of , where the question was whether the respondent erred in refusing the petitioner the right to deduct from his gross income the amount of Pennsylvania transfer taxes which had been paid during the taxable year by the executor and deducted by him during that year from the share of each petitioner before payment of the transfer, it was held that said amounts were not deductible by the petitioner under the provisions of section 214(a)(3) of the Revenue Act of 1921.  1928 BTA LEXIS 3408">*3415  In , the petitioner contended that being the devisee of real estate he represented the estate as to such property, and having paid the estate tax he is entitled to a deduction therefor in the computation of his net income.  The petitioner there based his contention upon the law of Illinois, that real estate passes direct to the devisee and not through the hands of the executor.  The Board in that case, in holding that the estate tax paid by the devisee to prevent the sale of the realty was not deductible, said: If the Federal estate tax were imposed on the right of a devisee to receive property or on the interest to which he succeeds there might be some merit to the contention made.  But it is not such a tax.  Since the Federal estate tax and inheritance tax of Pennsylvania are levied upon the transfer of the property of the decedent the fiduciary is the only taxable entity entitled, under the Revenue Acts of 1918 and 1921, to the deductions provided for by the statute, irrespective of the fact that the testator designated who should pay the tax.  Since the hearing of this proceeding the Revenue Act of 1928, containing section1928 BTA LEXIS 3408">*3416  703, relating to the deduction of estate and inheritance taxes, has become law.  On the record, we can reach no different result, notwithstanding the provisions of that section.  Reviewed by the Board.  Judgment will be entered for the respondent.