Court Opinion

ID: 4634467
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:16:04.850142+00
Date Added: 2024-06-11T08:00:04.633105
License: Public Domain

JUNIUS BEEBE, TRUSTEE OF ESTATE UNDER WILL OF MARCUS BEEBE, DECEASED, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Beebe v. CommissionerDocket No. 52707.United States Board of Tax Appeals26 B.T.A. 190; 1932 BTA LEXIS 1351; May 27, 1932, Promulgated *1351  The testamentary trust herein is an "estate" within the meaning of section 23(c) of the Revenue Act of 1928 and is entitled to deduct inheritance taxes paid to the Commonwealth of Massachusetts.  Thomas H. Ray, Esq., for the petitioner.  James K. Polk, Jr., Esq., and Harold F. Noneman, Esq., for the respondent.  MORRIS*191  This proceeding, for the redetermination of a deficiency in income tax of $2,013.74 for the calendar year 1928, presents for consideration the sole question of whether or not the respondent erred in disallowing a deduction of $15,000 inheritance tax paid to the Commonwealth of Massachusetts upon the distribution of a portion of the estate made to a son of the decedent in accordance with the provisions of his will.  The parties have stipulated, among other things, that: If as a matter of law the Commissioner's position is correct the parties are agreed that the deficiency was correctly computed as set forth in the deficiency letter and that the Board may enter an order of redetermination accordingly.  If as a matter of law the petitioner's contention should be upheld it is agreed that the final order of redetermination*1352  may be entered under rule 50 of the Board's Rules of Practice.  The cause was submitted upon the pleadings and a stipulation of facts entered into between the parties, together with certain exhibits appended thereto and made a part hereof, from which we make the following findings of fact.  FINDINGS OF FACT.  Junius Beebe is a citizen of the United States, a resident of Wake-field, Massachusetts, and at all times hereinafter mentioned resided there.  Marcus Beebe, the decedent, died in January, 1924, and by his will which was probated in Middlesex County, Massachusetts, he gave, devised and bequeathed all of the residue of his estate, in trust, to his brothers, Junius and Frederick Beebe, and after making specific provisions with respect to his estate he provided in paragraph twelfth of his said will: I direct my executors and trustees hereinafter named or their successors or the successor of either of them to pay to my son, Marcus Beebe Jr., * * * when he arrives at the age of thirty years one-third of all the rest and residue of my estate then remaining in their hands; * * * The said Junius and Frederick Beebe were nominated and appointed to serve in the capacity of executors*1353  and also as trustees under the will.  The petitioner, who was also the executor of the estate, filed his account as executor and was appointed as trustee of the estate under the said will on January 26, 1926.  Marcus Beebe, Jr., became thirty years of age on April 27, 1927.  The tax commissioner of the Commonwealth of Massachusetts made an appraisal of the value of the corpus of the estate as of April 27, *192  1927, and assessed inheritance tax due to the Commonwealth in the year 1928 in which year it was paid by the petitioner as trustee under the will of Marcus Beebe, and the tax, amounting to $15,000, was deducted by the petitioner as trustee in determining the net income of the estate for the calendar year 1928.  The respondent disallowed as a deduction the amount of $15,000 paid by the petitioner to the Commonwealth of Massachusetts as an inheritance tax on the distribution of a portion of the estate so made to the son of the decedent in accordance with provisions of the will, on the theory that the tax was not paid by the estate of Marcus Beebe, but by the trust created under his will.  At all times material hereto the petitioner's taxable year corresponded to*1354  the calendar year.  OPINION.  MORRIS: Section 23 of the Revenue Act of 1928 provides that: In computing net income there shall be allowed as deductions: * * * (c) Taxes generally. - Taxes paid or accrued within the taxable year, except - * * * For the purpose of this subsection, estate, inheritance, legacy, and succession taxes accrue on the due date thereof, except as otherwise provided by the law of the jurisdiction imposing such taxes, and shall be allowed as a deduction only to the estate.  The contention of the respondent is, in effect, that since the statute provides that the deduction "shall be allowed * * * only to the estate," and since the petitioner is a trust estate it is not entitled to the deduction.  He argues that the term "estate" as used in section 23 should be construed in the "technical sense" which includes only those estates administered by executors and administrators and not by testamentary trustees.  We find no authority in the general law nor do we find the slightest suggestion associated with the purpose for the enactment of the provision in question which would so restrict the term.  Statutes must be construed so as to give full*1355  effect to the purpose of their enactment and the intention of the body enacting them.  It seems clear that the primary intention of the Congress was to allow a deduction, unqualifiedly, for "estate, inheritance, and succession taxes," which might be at any time imposed upon property of deceased persons falling within the estate, inheritance, legacy and succession tax statutes of the various states.  Can it be said to have made such an allowance on the one hand and on the other to have restricted *193  the deduction to only certain classes of fiduciaries charged with the testamentary distribution of such property, namely, executors and administrators?  We think not.  The word "estate" was used in a sense sufficiently broad to include any and all fiduciaries required by the laws of the state to respond in the payment or estate, legacy, inheritance or succession taxes, whether it be a trust estate or an estate presided over by executors and administrators, usually and commonly referred to as legal representatives.  The Massachusetts statute under which this sum was paid imposed the tax upon "property or interests therein, passing by will or by laws regulating interstate succession*1356  * * * payable by the executors, administrators or trustees in office when such right of possession accrues * * *." (General Laws of Massachusetts, ch. 65, sec. 7.) It so happened that the party in office when this tax became payable was a trustee, the petitioner here, who had, however, already served in the capacity of executor and had filed has final accounting with the court as such officer.  It would be a forced and unreasonable construction of the taxing statute to hold, by reason of the fact that the tax did not fall due against the estate during the term of office of the executor or administrator, the deduction being imposed nevertheless upon the testamentary trustee by the state statute, that the trustee could not take the deduction in the computation of net taxable income of the decedent's estate.  Furthermore, although section 23 specifies to whom the deduction for estate, inheritance, legacy and succession taxes shall be confined, the really substantive purpose of that particular provision was not to define the class or classes of taxpayers entitled to the deduction of such taxes in the computation of net income, but to avoid a confusion which had theretofore existed as*1357  to whether the estate or beneficiaries were entitled to the deduction, based upon the conclusion whether the state tax was levied on the right to transmit or the right to receive the decedent's property.  Therefore, it is our opinion that the term "estate" as used in section 23, supra, is broad enough to include all estates deriving their powers from the will of a decedent which are required by the statutes of the state to pay inheritance, estate, legacy, and succession taxes upon property of deceased persons, whether the person charged with its administration be an administrator, executor, or a testamentary trustee.  Any other interpretation would defeat the clearly intended purpose of the statute, and would in the instant case preclude any deduction whatsoever.  Decision will be entered under Rule 50.