Court Opinion

ID: 4498635
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:16:03.102075+00
Date Added: 2024-06-11T08:49:29.224605
License: Public Domain

Hareon,
dissenting: Petitioner, himself, and through his agent Baldwin, did no more than carry out the traditional duties of an executor in managing the estate of the decedent and in carrying out the directions in the will, the terms of which are not set forth. ' The making of inventories, the attending of conferences, and the straightening out of trusts do not amount to carrying on a’ business, and the disposition of some stock and real estate, ordinarily, would amount to no more than managing and preserving the estate, or carrying out the terms of the will. There appears not to have been sufficient activity in the disposition of some property in the estate to constitute *754those transactions a carrying on of a business. Petitioner has failed, I believe, to show that he was engaged in a’ business as the term is used in section 23 (a). The Supreme Court has made it clear in United States v. Pyne, 313 U. S. 127, that estate administration per se is not a business, and has said, “Executors who engage actively in trade and business are the exception and not the rule.” • Therefore, petitioner must show that he did more than engage in the activities which are the “traditional duty of executors.” He must show that, in addition to such activities, he engaged in more extensive activities which constitute the carrying on of a business. Furthermore, the Supreme Court has stated that the very broad definition of “business” in Flint v. Stone Tracy Co., 220 U. S. 107, 171, is not controlling in the determination of what constitutes carrying on a business within the meaning of section 23 (a). Higgins v. Commissioner, 312 U. S. 212; United States v. Pyne, supra. Accordingly it is not determinative that petitioner received compensation for his services or that he engaged in the activities of an executor for profit. In as much as the court in Wallace's Estate v. Commissioner, 101 Fed. (2d) 604, held that an executrix was engaged in a business when she performed the duties of that appointment with intent to secure compensation therefor very largely because of the Flint v. Stone Tracy Co. case, definition of business, it appears evident that the rule in Wallace's Estate v. Commissioner, supra, is no longer good law; that it has been overruled by recent decisions of the Supreme Court. I believe we should not regard the case of Wallace's Estate v. Commissioner, supra, as controlling.
The holding reached appears to be that petitioner’s activities in administering the estate of the decedent, as carried on by himself and his agent, constitute the carrying on of a business, because petitioner performed services for fees. Most executors receive fees. If administering an estate per se is not a business, under the rule of the Pyne case, the conclusion reached above is wrong. If the holding is that the petitioner’s activities extended further than the traditional functions of an executor in administering and preserving the estate, so as to extend into the area of business activity, then I believe the facts here do not support the holding. There is much to indicate that the expenditures in question were made to suit the personal convenience of petitioner, who had to be away frequently. To the extent that such is true, the expenditures are personal and are not deductible. Miller v. Commissioner, 102 Fed. (2d) 476; Kane v. Commissioner, 100 Fed. (2d) 382. Petitioner was inexperienced and Baldwin, a lawyer, had experience. Baldwin’s services were of value, of course. But that is not sufficient to support the claimed deduction. In the *755Pyne case, the Court of Claims dwelt upon the fact that the executors were inexperienced and that an attorney who was engaged in business helped the executors. (See Pyne v. United States, 35 Fed. Supp. 81.) The Supreme Court did not agree that the fact that the counselor to the executors was engaged in business contributed to a holding that the executors were engaged in business. Under the facts, if petitioner had paid his counselor and secretary out of funds of the estate, instead of out of his fees received from the estate, and if he had claimed deduction therefor from the estate’s income in computing the estate’s net taxable income, I think we would have to deny the deduction under the rule of the Pyne case. See also, Estate of Mary R. Donald, 43 B. T. A. 1114; White Trust v. Commissioner, 119 Fed. (2d) 619. To say that under the facts petitioner, as an individual taxpayer, was engaged in business in doing what he did, as an executor, and, therefore, is entitled to the deduction as a business expense; but that petitioner as a fiduciary in doing what he did as executor, under the same facts, is not engaged in a business and that, therefore, the estate—a taxable entity—is not entitled to the deduction as a business expense, points out the illogic. Petitioner’s burden of proof is, in my opinion, exactly the same whether he claims as a fiduciary or as an individual that his activities as executor extended into the area of business activity for purposes of a business expense deduction.
I believe petitioner has failed to show that his activities as executor extended into the area of business activity and that, therefore, he is not entitled to the deduction for the expenditures in question. Therefore, I respectfully dissent.
Sternhagen, Van Fossan, and Arnold agree with this dissent.