11 T.C. 1 (1948), 11494, T. Rickenberg v. C. I. R.

Docket Nº:11494.
Citation:11 T.C. 1
Opinion Judge:DISNEY, Judge:
Party Name:T. RICKENBERG, EXECUTRIX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
Attorney:Charles J. Munz, Jr., Esq., and Sidney R. Reed for the petitioner. A. J. Hurley, Esq., for the respondent.
Judge Panel:HILL, J., dissenting: LEECH and JOHNSON, JJ., agree with this dissent. JOHNSON, J., dissenting: HILL, J., agrees with this dissent.
Case Date:July 07, 1948
Court:United States Tax Court
 
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11 T.C. 1 (1948)

T. RICKENBERG, EXECUTRIX, PETITIONER,

v.

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

No. 11494.

United States Tax Court.

July 7, 1948

1. Held, on the facts, that decedent and his wife held their property in community.

2. Held, on the facts, that agreement and conveyances executed by decedent and his wife dividing their community property into tenancy in common were with intent to escape estate tax and in contemplation of death within section 811 (c) and (d)(5) of the Internal Revenue Code.

3. Held, that the agreement and transfers were not made for adequate and full consideration in money or money's worth under section 811(c) of the Internal Revenue Code. Revenue Code.

Charles J. Munz, Jr., Esq., and Sidney R. Reed for the petitioner.

A. J. Hurley, Esq., for the respondent.

This case involves estate tax. A deficiency was determined in the amount of $40,548.81. The questions presented, after abandonment of some minor issues, are (a) whether an agreement between the decedent and his wife on December 2, 1942, dividing their property into tenancy in common, was in contemplation of death within the meaning of section 811(c) and (d)(5) of the Internal Revenue Code; (b) whether, if the agreement was in contemplation of death, it was made for adequate and full consideration in money or money's worth within the meaning of section 811(c); and (c) whether the decedent and his wife, prior to December 2, 1942, held the property as community property, bringing the agreement within section 811(c) and (d)(5) of the code. From allegations admitted and evidence adduced we make the following findings of fact.

FINDINGS OF FACT

Petitioner is the estate of Edwin W. Rickenberg, deceased. His widow Loraine T. Rickenberg, is the executrix. The decedent and Loraine T. Rickenberg were married on July 17, 1913, and lived together continuously mostly within the State of California as husband

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and wife until decedent's death on August 23, 1944, at the age of 58 years. Two children born of the marriage were 32 and 29 years old, respectively, at the date of the hearing. His death was caused by coronary thrombosis, commonly known as heart attack. He had had one previous heart attack on August 25, 1943. After the first heart attack he responded to treatment and made good recovery, and, after being confined to his room for several months, was able to be up and to go to town during 1944.

He had, at his request, been examined on October 14, 1942, by a competent physician because, as he told the doctor, he felt tired at the end of the day's work and had an occasional attack of dizziness.

No disease of the heart or other organs could be discovered by the doctor and the doctor informed the decedent that his heart was normal, with the exception of a somewhat rapid rate, a condition which decedent had had for many years and did not cause him any particular concern. His blood pressure was below normal.

The doctor obtained a reading of the decedent's basic metabolism on his examination of October 14, 1942, and found it was low. Thyroid treatment, only, was given, i.e., additional amounts of thyroid extract, and on December 2, 1942, when the doctor again examined the decedent, his basic metabolism reading was within normal limits.

The decedent did not have any old infirmity or disease of any kind which could have brought about his heart attacks. He was mentally sound and to the doctor seemed physically sound.

On December 2, 1942, decedent's general systemic condition was apparently normal and the doctor was unable to find any organic heart lesion. The anatomical condition which precedes an attack of coronary thrombosis is practically impossible to discover. The decedent had a rapid heart rate, indicating muscular fatigue and muscular weakness. He told the doctor that it was not a new thing for him; that he had had it for a good many years. The doctor assured him that he was not able to detect any evidence of organic lesion, but told him that he should slow down in his activities. This was the only advice given him.

The decedent and his wife went on a vacation in July 1943, renting a cottage above a lake, where they remained three weeks. During that time the decedent went down to the lake every day to get the mail. The path was steep. By the end of the vacation he reported to his wife that he could walk up to the cottage without noticing it.

The decedent did not on or before December 2, 1942, make any statement to the doctor to indicate that he was in fear of impending death, nor did that doctor or any other ever tell him that from his physical condition he might apprehend death in the near future. He never said anything to his wife or any of the parties who testified in the case to

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indicate that he anticipated dying, either on December 2, 1942, or at any other date. His eyes had given him a great deal of trouble for a number of years and for some time prior to May 16, 1943, had been very bad.

During the period of the marriage the parties accumulated the properties involved in this proceeding, consisting of four parcels of real estate of an agreed total value of $70,700, 1,675 shares of common stock of the J. C. Penny Co. of an agreed value of $177,712 40 shares of capital stock of Home Builders Loan Association of Pomona, California, of an agreed value of $9,000, U.S. Treasury bonds of an agreed value of $6,397.13, bank account in the amount of $23,988.66 two Chrysler automobiles of the respective agreed values of $1,415 and $1,280, household furniture of the agreed value of $1,500, and life insurance of the agreed value of $53,703.84.

The property was all acquired by the decedent during the marriage. For a number of years after marriage decedent and his wife had practically nothing, merely enough to pay household running expenses. None of the property accumulated by the decedent and his wife was received as compensation for personal services actually rendered by his wife or derived originally from such compensation or from any separate property of hers. The real estate stood in the name of decedent and his wife as joint tenants, with rights of survivorship, prior to December 2, 1942; and to that date the certificate of ownership of the 1,675 shares of J. C. Penny Co. stock stood in the name of the decedent. The certificate of ownership of the 40 shares of stock in Home Builders Loan Association of Pomona stood in the name of the decedent. The certificates of both stocks were kept in a safe deposit box held jointly by the decedent and his wife. The $23,988.66 cash was in a joint banking account in the First National Bank of Pomona, California.

They did not know or understand the legal difference in respect of property ownership. They never discussed a division of the property because they had accumulated it together and considered that they owned it together, half and half, so that it was theirs, and had no reason to argue about any division, for they were happily married.

The decedent had been for many years an employee of the J. C. Penny Co., and for at least five years prior to his retirement on July 1, 1943, was the manager of the company's store at Pomona, California. He worked long hours, usually from eight o'clock in the morning until nine o'clock at night and until ten or eleven o'clock on Saturday. He was rarely absent. He had for several years before his retirement on July 1, 1943, been planning to retire, often mentioning it to his friends and associates, and had been saving and building an estate to provide adequate income for himself and his wife upon

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retirement. He kept working after he had acquired a competency because he liked it and wished to keep busy. Retirement was compulsory at 60 years of age with J. C. Penney Co.

He has as a very close friend one Walter W. Jones, a life insurance agent, with whom for several years he had discussed the matter of retirement and the amount of insurance and annuities he would need.

Most of Jones' clients were either in the higher income brackets of the professional and executive class, or people of substantial estates. He furnished practically all of them what he called an estate analysis. He subscribed to services to keep abreast of changes in Federal and state law as to taxation, and about four times a year sent out a brief containing comments on estate planning particularly as it concerned life insurance as it ties in with estate planning.

Jones expected to sell both decedent and his wife insurance in connection with the decedent's planned retirement. In order to properly plan a program of insurance for a client, Jones always made it a part of his service to ascertain the total amount of all property of the client and the manner in which title was held. During 1942 Jones sold decedent $20,000 life insurance on his wife's life.

During the autumn of 1942 the decedent told Jones that he and his wife owned everything together, share and share alike. Jones asked the decedent, ‘ Do you realize that some recent information that I have been given here that the Federal Government has been taxing that somewhat differently in the event of a man's death?‘ ; and decedent was urged by Jones to straighten out his titles. Jones ‘ told him how, in the event of a man's death, they would tax the whole thing as against, well * * * .‘ These discussions went on for weeks. The decedent told Jones to put the things he, Jones, had been telling him, in writing so that decedent could digest it. At decedent's request, on October 30, 1942, Jones wrote him a letter, outlining the things they had talked about, and in pertinent part stating that in recent months he, Jones, had seen several estates arranged so that substantial...

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