Court Opinion

ID: 4595739
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:15:38.319497+00
Date Added: 2024-06-11T07:51:29.945402
License: Public Domain

ESTATE OF EZRA H. CONNELL, LACKAWANNA TRUST CO. ET AL., EXECUTORS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Estate of Connell v. CommissionerDocket No. 12368.United States Board of Tax Appeals11 B.T.A. 1254; 1928 BTA LEXIS 3646; May 10, 1928, Promulgated *3646  Transfer held not in contemplation of death or intended to take effect in possession or enjoyment at or after death.  Kenneth N. Parkinson, Esq., for the petitioner.  Frank T. Horner, Esq., for the respondent.  SIEFKIN*1254  This is a proceeding for the redetermination of a deficiency in estate taxes in the amount of $4,975.45.  The only issue is whether a transfer of stock made by the decedent to his wife within two years prior to his death was in contemplation of death within the meaning of section 402(c) of the Revenue Act of 1918.  FINDINGS OF FACT.  The decedent, Ezra H. Connell, died testate on November 10, 1921, a resident of Scranton, Pa.  On April 1, 1920, he had made a gift to *1255  his wife, Elizabeth Thomas Connell, of 589 shares of the stock of the Scranton Button Co., having a value of $161,975.  This gift was treated by the respondent as a transfer in contemplation of death and the amount of $161,975 was included in the decedent's gross estate resulting in the deficiency of $4,975.45 asserted.  At the time of the gift to his wife, Ezra H. Connell was 46 years old.  He was a member of the Pennsylvania bar but did*3647  not engage in the active practice of law.  In addition to the stock in question he had property which gave him an income of between $40,000 and $50,000 a year.  For many years it had been his habit to make considerable gifts to his wife, to whom he was devoted.  His life was insured for $150,000 on her account.  In 1915 the private physician of the decedent found that the decedent was suffering from chronic inactive tuberculosis.  A specialist was consulted who confirmed the diagnosis but who assured the decedent that it was nothing to worry about.  His condition in 1920 was not at all alarming and was better than at any time in the previous years.  The decedent was a man of wealth and fond of outdoor life and spent a great portion of his time in fishing and in golf.  He took excellent care of himself.  He died suddenly from heart failure, of which he had no symptoms.  The tubercular condition did not contribute to his death and was not associated with the cause of his death.  The decedent had never been advised by his physician of any heart trouble.  At or about the time of the gift of the stock in 1920, the decedent was engaged in negotiations looking toward a clarification of*3648  the provisions of his father's will and engaged counsel to institute proceedings designed to compel the trustees to turn over to him his interest in the principal of his father's estate.  The father's will provided that the property should be kept within the blood and the decedent and his wife had no children of their own but an adopted daughter.  The trustees had refused to turn over to the decedent his portion of the principal for the reason that if they did, and the decedent should then die, that portion would then pass out of the blood.  Negotiations had been pending for a year and a half when the decedent died and legal steps were contemplated at that time that would take a year and a half to two years to complete.  On the afternoon of his death the decedent was in conference with his attorneys as to such contemplated court proceedings, having played golf in the morning.  At the time of the gift of the stock the decedent delivered the certificate to his wife.  She put it in an envelope and among her papers in her private desk to which she alone had a key.  Later the certificate *1256  was placed by the wife in a safe deposit box in the decedent's name but was put in a*3649  bundle marked with her name which contained others papers belonging to her.  The decedent consulted his attorneys after the delivery to ascertain whether the gift was a binding one.  He did not assign the certificate or have it transferred on the books of the corporation to his wife's name because he did not want his family to know of the gift because of the effect that it might have in strengthening their opposition to the distribution of the principal of his father's estate to him.  Checks for the dividends from the stock were received by the decedent each month and were delivered to his wife.  The taxing officials of the Commonwealth of Pennsylvania sought to subject the shares of stock in question in this proceeding to inheritance taxes under section 1, Act of June 30, 1919, P.L. 521.  The Orphans' Court of Lackawanna County, on April 25, 1924, set aside the assessment and the Supreme Court of Pennsylvania for the Eastern District affirmed the decision in an opinion reported in 282 Pa.St. 557. Both courts held the gift valid and in praesenti.The transfer of the stock by the decedent to his wife on April 1, 1920, was not made in contemplation of death nor was*3650  it intended to take effect in possession or enjoyment at or after death.  OPINION.  SIEFKIN: The gift of the shares of stock involved in this proceeding was within two years prior to the decedent's death and is, therefore, presumed to be in contemplation of death by the provisions of section 402(c) of the Revenue Act of 1918.  That presumtion is not conclusive, however, and we are satisfied from the evidence that the transfer was not either in contemplation of death or intended to take effect in possession or enjoyment at or after death, both of which contentions are made by the respondent.  We come to this conclusion on the record before us and it is not necessary for us to decide the interesting points raised by the petitioner based upon the proposition that the decisions of the Pennsylvania courts as to the nature of this transfer under a statute similar to the Federal statute constitute a rule of property which is binding on the Board and should not be disturbed because of the full faith and credit clause.  We can not refrain from mentioning, however, that the full faith and credit clause of the Constitution of the United States refers to dealing between the States.  Article*3651  IV, section 1.  Judgment will be entered on 15 days' notice, under Rule 50.