Court Opinion

ID: 4608538
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:42:55.551412+00
Date Added: 2024-06-11T07:53:43.508936
License: Public Domain

JOHN M. BROWN, EXECUTOR, ESTATE OF HELEN S. PENNELL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Brown v. CommissionerDocket No. 8801.United States Board of Tax Appeals11 B.T.A. 1203; 1928 BTA LEXIS 3656; May 8, 1928, Promulgated *3656  1.  Claim for deduction from income of the petitioner on account of salary due a financial secretary at date of decedent's death disallowed.  2.  Tax attorneys employed by the decedent.  At date of death service of such attorneys had not been completed nor had any fee been fixed.  During the taxable period such service terminated and a fee was agreed to, which was paid by the petitioner.  Held, that such fee should not be deducted from the income of the petitioner for the period here involved.  Phil D. Morelock, Esq., for the petitioner.  L. A. Luce, Esq., for the respondent.  LANSDON *1203  This is a proceeding for the redetermination of a deficiency in income tax for the period beginning March 19 and ending December 31, 1923, amounting to $1,229.40.  The controversy arises from respondent's *1204  disallowance of deductions on account of salary due the financial secretary of the decedent for services performed prior to her death and an attorney's fee for services performed both prior and subsequent to her death, payment for both having been made by her executor some months subsequent to her death.  FINDINGS OF FACT.  The following*3657  stipulation made by the parties is accepted and adopted as our findings of fact: "1.  The petitioner is the executor of the estate of Helen S. Pennell, who died March 19, 1923.  The petitioner rendered an income-tax return for the period from January 1, 1923, to date of death, March 19, 1923, and another income-tax return from the date of death, March 19, 1923, to December 31, 1923.  "2.  The decedent had in her employ at the date of death a financial secretary to whom was due at the of death as salary for services $2,361.07.  It is agreed that on October 1, 1923, the executor paid the $2,361.07.  The respondent, in computing the deficiency, disallowed this item as a deduction against income.  On November 20, 1922, the deceased employed attorneys to represent her in adjusting with the Commissioner of Internal Revenue a proposed additional estate tax involving certain penalties with reference to an estate in which Mrs. Pennell was interested as a beneficiary.  The services of said attorneys were concluded in June, 1923, subsequent to the death of decedent.  The fee of the attorneys for services rendered, amounting to $7,000, was agreed upon by the executor in September, 1923.  This*3658  fee of $7,000 was paid by the executor upon authorization of the Probate Court, November 26, 1923.  Said item was claimed as a deduction in the return of the petitioner for the period from March 19, 1923, the date of the decedent's death, to December 31, 1923." OPINION.  LANSDON: The services of the financial secretary were rendered to the decedent and remuneration therefor in the amount of $2,361.07 was due at date of her death when, obviously, it became an obligation of the estate.  We agree with the respondent's determination that such amount was not a proper charge against the income of the petitioner for the taxable period, and that it should have been claimed as a deduction from the corpus of the estate in the computation of the estate tax thereon.  The tax attorneys were retained by the decedent, but their work was not completed nor their compensation fixed at the date of her death.  The record does not disclose whether they were employed on a time contract or a contingent fee basis.  Whatever amount was due *1205  them, if any, at March 19, 1923, was an obligation of the decedent and became a charge against the corpus of her estate, allowable as a deduction in computing*3659  the net value thereof.  If any of the amount of $7,000 was remuneration for services rendered after the decedent's death, it may have been an obligation of the petitioner, payable out of the income of the estate or an administration expense payable from the corpus thereof.  In the absence of any information concerning the terms of the contract of employment, we are unable to say that the respondent erred in disallowing the amount of $7,000 as a deduction from the income of the petitioner for the taxable year.  Judgment will be entered for the respondent.