Court Opinion

ID: 4589753
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:02:09.041877+00
Date Added: 2024-06-11T07:50:20.131659
License: Public Domain

ESTATE OF EDWARD T. KELLEY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Kelley v. CommissionerDocket No. 40019.United States Board of Tax Appeals22 B.T.A. 421; 1931 BTA LEXIS 2121; February 27, 1931, Promulgated *2121  Where decedent made a gift to his wife of a property as her separate property, and such property was subsequently exchanged for other property, title to which was taken and held by decedent and wife as tenants by the entirety, the last acquired property does not fall within the exception of section 302(e) of the Revenue Act of 1924, and should be included in the gross estate of decedent.  Raymond H. Berry, Esq., and Arthur Wood, Esq., for the petitioner.  Arthur Fast, Esq., for the respondent.  VAN FOSSAN *422  This proceeding is for the redetermination of a deficiency in estate tax amounting to $1,301.15.  In the original petition it was alleged that the respondent erred by including in the gross estate certain parcels of real property which were held by the decedent and his wife at the date of his death as tenants by the entirety.  By an amendment to the petition it is alleged that a certain parcel of realty included by respondent in the gross estate had been sold before decedent's death and, therefore, composed no part of his estate.  It is also alleged, in effect, in a further amendment to the petition that Katherine M. Kelley, decedent's*2122  surviving spouse, contributed the whole of the purchase price of a certain piece of real property included by respondent in decedent's gross estate and held by decedent and his wife at the date of his death as tenants by the entirety and, therefore, that the amount of the gross estate as determined by respondent should be reduced by the amount of the value of such property.  Petitioner abandoned its general allegation of error respecting tenancies by the entirety (), and stands on the two assignments set forth in the amendments to the petition.  It was stated by counsel that less than $100 in taxes is involved in these remaining issues.  The parties to this proceeding entered into a stipulation as to certain facts.  From the stipulation and the evidence we find the facts as follows.  FINDINGS OF FACT.  Edward T. Kelley, a resident of the State of Michigan, died testate December 28, 1925.  His wife, Katherine M. Kelley, survived him.  In the Federal estate tax return which was filed by the estate of Edward T. Kelley, there were listed five certain items of real property which, as stated in the return, had been held by*2123  the decedent and his wife as tenants by the entirety.  Among these items were the following: Item 2.  Lot 1033, Resedale Park Subdvn. of the E. 1/2 of the N.W. 1/4 of Sec. 23, and all that part of the N.E. 1/4 of Sec. 23 lying south of Grand River Ave., T. 1, S.R. 10 E., Redford Township, Wayne Co., Mich. - assessed value $1,800.00.  Item 3.  Lots 466, 574, 645 and 646, Russell Woods Subdn. of part of 1/4 Sec. 11 & 12, of the T.A.T. Greenfield Township, Wayne County, Mich. - Assessed value $12,700.  Lot 1033 of the Rosedale Park subdivision listed as item No. 2 in the Federal estate tax return was valued therein at $2,500 and the lost embraced within item No. 3 were valued at the total sum of $15,925.  These valuations were determined by qualified appraisers *423  employed by a trust company which prepared the estate tax return and were accepted by the respondent and included by him in the total value of the gross estate.  The value of lot No. 574 of the Russell Woods subdivision, which was a part of the real property embraced in item No. 3 above referred to, was $4,300.  Lot No. 574 of the Russell Woods subdivision was sold by the decedent and his wife, *2124  Katherine M. Kelley, in June, 1925.  It was included in the Federal estate tax return by mistake.  On June 14, 1917, by a deed duly executed and recorded in the Office of the Register of Wayne County, State of Michigan, Charles E. Letts and wife conveyed to decedent's wife, Katherine M. Kelley, in her sole right certain premises situate in Wayne County, Michigan, namely lot 160 of Holden and Murray Northwestern Subdivision, which is referred to in the evidence as the Vancouver property.  The consideration for the conveyance of this property was $9,500, $6,000 of this amount being paid by the decedent in cash and the balance of $3,500 representing a mortgage for that amount, which was an encumbrance on the property at the date of the conveyance.  Though the consideration for the transfer was furnished by decedent, the conveyance was made to Katherine M. Kelley in her sole right as a gift from her husband.  Under date of September 1, 1925, the decedent and Katherine M. Kelley, his wife, entered into a land contract by which they agreed to sell lot 160, Holden and Murray Northwestern subdivision, known as the Vancouver property, to Charles A. Van Avery and wife, for the consideration*2125  of $16,500.  Of this amount $2,500 was to be paid by the purchasers as a down payment prior to the delivery of the land contract and the balance of $14,000 was agreed to be paid in monthly installments of stipulated amount.  Under date of September 5, 1925, a supplemental agreement was entered into by which it was agreed that the purchaser, Charles A. Van Avery, should make the down payment of $2,500, provided for in the contract for the sale of the Vancouver property, by paying to the seller $600 in cash and by delivering an "equity of approximately $1,900" in lot No. 1033, Rosedale Park subdivision of the east one-half of the northwest one-fourth of section 23 and all that part of the northeast one-fourth of section 23 lying south of Grand River Avenue in Redford Township, Wayne County, Michigan.  In this supplemental contract it was recited that Charles A. Van Avery was purchasing the land described therein on installments at an agreed price of $2,800 and there was still due and unpaid thereon installments amounting to $900.  Thereafter, by deed dated and acknowledged October 5, 1925, the land described in the supplemental agreement was conveyed to decedent and Katherine M. Kelley*2126  by the holders of the *424  legal title thereto, and it was warranted free from encumbrances except certain easements and restrictions.  This property is referred to in the evidence as lot No. 1033 Rosedale Park subdivision and is the same property hereinbefore described as its No. 2 as listed in the Federal estate tax return.  The land contract covering lot 160, Holden and Murray northwestern subdivision, was duly delivered to Charles A. Van Avery and his wife.  Lot No. 1033, Rosedale Park subdivision, was held by the decedent and his wife, Katherine M. Kelley, as tenants by the entirety at the date of his death and was included by the respondent in decedent's gross estate at a valuation of $2,500.  OPINION.  VAN FOSSAN: The first issue is whether or not lot No. 574 of the Russell Woods subdivision was sold before decedent's death.  This is a question of fact and the evidence clearly establishes that the lot was sold by decedent and his wife in June, 1925.  Decedent died in December, 1925.  Lot No. 574 of the Russell Woods subdivision was, therefore, not a part of decedent's estate at the time of his death.  Its value, namely $4,300, should not be included in the value*2127  of the gross estate.  The remaining issue is whether or not, under the provisions of section 302(e) of the Revenue Act of 1924, the whole or any part of lot No. 1033, Rosedale Park subdivision, should be included in the decedent's gross estate.  The applicable portion of section 302(e) of the Revenue Act of 1924 provides as follows: The value of the gross estate of the decedent shall be determined by including the value at the time of his death of the 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 a fair 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*2128  been at any time acquired by such other person from the decedent for less than a fair 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 * * *.  Petitioner contends that the facts prove that Katherine M. Kelley, the surviving spouse, furnished the whole of the consideration with which the lot not in question was acquired and that it is not the *425  intendment of section 302(e) that the value of property so acquired should be included in a decedent's gross estate even though, admittedly, at the date of decedent's death such property was held by him and his surviving spouse as tenants by the entirety.  A prerequisite to the application of the exception contained in that part of section 302(e) immediately preceding the word "Provided" is the original ownership of the property in question by the surviving spouse.  The facts in this case show that the property was not originally owned by the surviving spouse but was acquired by decedent and his wife from Van Avery as tenants by the entirety.  Thus, the property held at decedent's death had not been*2129  previously acquired by the surviving spouse from decedent and there is, therefore, no question so far as the immediate property is concerned as to the payment by the wife to decedent of less than a fair consideration in money or money's worth.  Passing to a consideration of that part of section 302(e) following the word "Provided" it is obvious that if the phrase, "such property or any part thereof" relates, as seems logical, to property comprehended in the language immediately preceding the word "Provided," i.e., property originally belonging to the surviving spouse, then the above is a conclusion of the matter as the property here in question did not originally belong to the surviving spouse.  If, on the other hand, the phrase "such property or any part thereof, or part of the consideration by which such property was acquired" relates back to the general term "interest held therein * * * as tenants by the entirety" it is pertinent to observe that the consideration for the property held at death was the exchange of lot 160, Holden and Murray addition, title to which lot was held by the wife in her own right and was acquired by her from decedent.  This lot 160 was purchased and*2130  paid for by decedent and transferred to his wife as a gift.  Therefore, lot 160, the consideration given for lot 1033 (the property here in question) was acquired by the surviving spouse from decedent for less than a fair consideration in money or money's worth.  The statute provides that in such case "there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by" the wife.  She furnished no part of the consideration for lot 160.  Therefore, no part of the value of the Van Avery property (lot 1033, Rosedale Park subdivision) is to be excepted from the gross estate.  On either interpretation of the statute petitioner's contention fails.  The value of lot 1033, Rosedale Park subdivision, should be included in the gross estate of the decedent.  Reviewed by the Board.  Judgment will be entered under Rule 50.