Court Opinion

ID: 4605319
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:36:05.552983+00
Date Added: 2024-06-11T07:53:10.215461
License: Public Domain

THOMAS H. FRANKLIN, T. D. ANDERSON, AND M. C. JUDSON, INDEPENDENT EXECUTORS AND TRUSTEES UNDER THE WILL OF GEORGE W. BRACKENRIDGE, DECEASED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Franklin v. CommissionerDocket No. 6515.United States Board of Tax Appeals11 B.T.A. 148; 1928 BTA LEXIS 3862; March 22, 1928, Promulgated 1928 BTA LEXIS 3862">*3862  Fees paid a temporary administrator and his attorney held deductible from the income of an estate as ordinary and necessary expenses.  William M. Williams, Esq., for the petitioner.  Julian G. Gibbs, Esq., for the respondent.  MURDOCK 11 B.T.A. 148">*149  This is a proceeding for the redetermination of a deficiency in income tax for the calendar year 1923, in the amount of $1,330.34.  The deficiency results from the Commissioner's disallowance of a deduction from income of the amount of $10,000 paid by the taxpayer during the year as commissions to a temporary administrator and as fees to the letter's attorney.  FINDINGS OF FACT.  George W. Brackenridge died on December 28, 1920, a resident of Bexar County, Tex.  What was alleged to be his last will and testament was filed and offered for probate on January 17, 1921.  This will consisted of an original testament executed September 8, 1913, to which numerous codicils had been attached, the last codicil being dated August 30, 1918.  By the terms of the will and the codicils he devised and bequeathed his homestead and certain property to his sister and the balance of his estate to four executors who were1928 BTA LEXIS 3862">*3863  also to act as trustees, to pay certain annuities to persons named and to use other properties for educational purposes.  The will also provided that the executors and trustees should annually receive 2 1/2 per cent of the gross income of the estate.  Two of the decedent's relatives contested the will on the ground that it was revoked by a subsequent will which was never found and that therefore the decedent died intestate.  This contest continued for several years, but was finally settled and on April 30, 1925, the will and its condicils was admitted to probate as the decedent's last will and testament.  Until January 28, 1922, no one had acted either as administrator or as executor of the decedent's estate.  His estate was valued at over a million dollars and consisted of bonds, stocks and a number of notes and other obligations, and of real estate in widely separated parts of the United States and in England.  The decedent retired from active business in about the year 1913 and thereafter occupied himself in tending to his private estate.  During this time he employed three of the persons who were named as executors in his will.  One of them he employed to look after his real1928 BTA LEXIS 3862">*3864  estate, another to keep his books and accounts, and another to act as his legal adviser.  On January 28, 1922, while the litigation above referred to was still in progress, the court of Bexar County appointed a temporary administrator of the decedent's estate with full power to - 1.  Take control and reduce to his possession all the estate of the said George W. Brackenridge, deceased, consisting of real and personal property, stocks, bonds, notes, choses in action, moneys and securities of every kind and character; 2.  To callect all stocks and bonds and dividends on all stocks and bonds, when due.  3.  To collect all notes, principal and interest, where due: 4.  To file 11 B.T.A. 148">*150  suits for the collection of all sums due the estate of said Brackenridge, deceased: 5.  To vote all stocks at all stockholders meetings in companies in which the said estate may be interested; 6.  To collect rents and revenues from all real estate: 7.  To take out and keep up insurance and pay therefor upon all buildings and other insurable improvements and personal property owned by said estate.  8.  To pay all taxes and assessments levied against said property.  9.  To continue and conduct all business1928 BTA LEXIS 3862">*3865  or businesses in which the estate may be engaged or in which it may have an interest by corporate stock or otherwise; 10.  To employ and pay such clerical help and otherhelp as may be necessary in the administration of said estate: 11.  To employ and pay attorneys to represent such administrator in the management of said estate at such compensation as may be from time to time fixed by the court: 12.  To rent and lease from month to month all unrented or vacated real estate and to collect all rents accruing from such renting or leasing: 13.  To employ and pay custodians or watchmen when necessary or advisable by reason of property becoming vacant or when otherwise necessary or advisable.  14.  To file inventory of all property so reduced to possession by said administrator; and 15.  To preserve said estate until further orders of this court.  This temporary administrator employed a firm of attorneys to assist and advise him in his duties.  They decided that although a large part of the estate was given under the will for educational purposes, a Federal inheritance tax should be paid pending probate of the will.  They prepared and filed income-tax returns and they entered and prosecuted1928 BTA LEXIS 3862">*3866  several suits for the collection of amounts due the estate.  The temporary administrator made an income-tax return for the calendar year 1923, reporting net income of $19,563.20, after a deduction of $10,000, representing the administrator's fee of $5,000 and his attorneys' fees of $5,000.  These amounts were paid for the year 1923, and were allowed by the probate court.  OPINION.  MURDOCK: The petitioner claims that the amount of $10,000 paid to the temporary administrator and his attorneys for their services was an ordinary and necessary expense of carrying on the business of the estate during the year and was therefore deductible from the income of that business.  An alternative contention was also made, but we need not consider it.  The Commissioner denied the deduction with the explanation that "in accordance with section 215(b) of the Revenue Act of 1921, expenses of the administration of an estate, such as court costs, administrator's fees, and executor's commissions are chargeable against the corpus of the estate and are not allowable deductions." We have heretofore had occasion to consider in this same connection commissions and fees similar to those involved in this1928 BTA LEXIS 3862">*3867  proceeding and we have held that where expenses are paid or incurred in 11 B.T.A. 148">*151  preserving an estate over a period of years, in making sales and collections, and in doing other things which are necessary for the maintenance of the estate and the production of income, the expenses are ordinary and necessary in carrying on the business of the estate and are deductible from income.  See , ; , and . The primary duty of the temporary administrator in this case was to conserve the estate until the pending litigation was settled.  We have but meagre information as to what he actually did during the taxable year.  We were told that his attorneys advised with him generally, represented him in several suits, aided him in the preparation of an income-tax return and advised him to pay Federal inheritance taxes on the estate pending the determination of the question of whether or not the will would be probated.  It might very well be argued that at least some of the services1928 BTA LEXIS 3862">*3868  of the temporary administrator and his attorneys were more properly chargeable against the corpus of the estate than against the income of the estate.  However, the weight of the evidence supports the contention that the amounts paid were reasonable compensation for personal services actually rendered in preserving and maintaining the estate and in producing income from it during the year, and our judgment is for the petitioner.  Judgment of no deficiency will be entered for the petitioner.