Greenwood v. Commissioner of Internal Revenue, 10217.

• Decision Date: 06 April 1943
• Docket Number: No. 10217.,10217.
• Citation: 134 F.2d 915
• Parties: GREENWOOD v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Ninth Circuit

134 F.2d 915 (1943)

GREENWOOD v. COMMISSIONER OF INTERNAL REVENUE.

No. 10217.

Circuit Court of Appeals, Ninth Circuit.

April 6, 1943.

John M. Schwartz, of Los Angeles, Cal., for petitioner.

Samuel O. Clark, Jr., Asst. Atty. Gen., Tax Division, and Sewall Key, Helen R. Carloss, Muriel Paul, and Arthur A. Armstrong, Sp. Assts. to Atty. Gen., for respondent.

Before GARRECHT, MATHEWS, and HANEY, Circuit Judges.

GARRECHT, Circuit Judge.

There is presented here a petition for review of a decision of the United States Board of Tax Appeals,¹ wherein it was decided that a deficiency existed in the federal estate tax returned by petitioner, Kenneth R. Greenwood, as administrator with-the-will-annexed of the estate of Charles H. Greenwood, deceased.

Petitioner, who is also the son of decedent, reported the property involved in this case as being community-owned, explaining that in the administration of the estate he was endeavoring to carry out the "ideas" of his father, who had always stated that he believed that one half of the property was his and one half belonged to his wife. The tax returned was based upon one half of the total net value of the property. The Commissioner gave notice of a deficiency, maintaining that the total value of the property was includible in the gross estate of decedent, on the ground that the property either was owned by the spouses as joint tenants or remained the separate property of the husband.

Upon consideration of a petition for a redetermination of the deficiency declared by the Commissioner, the Board, in ruling against the petitioner, determined that the property had been held in joint tenancy by decedent and his wife, and because the wife had given no consideration for her interest therein, that therefore the total value of the property must be included in the gross estate of decedent, as provided for by Section 811 of the Internal Revenue Code (53 Stat. 120), 26 U.S.C.A. Int.Rev. Code, § 811, the pertinent parts of which appear in the margin.²

Petitioner does not dispute that the total value of the property was includible in decedent's gross estate if at the time of his death the property was held in joint tenancy or was separately owned by him. The sole issue presented here is whether all of the property in which the decedent had an interest at the time of death may properly be taxed in its entirety as belonging to his estate or whether he and his wife had transmuted his separate property into community property, thus giving to the wife such an interest therein that when he died, only one half of its value could be properly taken as the measure in computing the tax on his estate.

The evidence taken at the hearing before the Board is not before us; instead there is only the statement of the Board's findings of fact. Petitioner assigns as error the fact that the Board did not "conclude upon its findings of fact that the property involved was community property, because the findings show that the decedent and his wife understood that they owned equal interests therein, and they always referred to the property as community property and so treated it for all purposes".

Following is a statement of the case, which is rather detailed, owing to the nature of the controversy:

It is agreed that all property involved in the instant case was originally the separate property of decedent, and that if at any time the wife acquired an interest therein, she did so without having furnished any consideration. The property is personalty, consisting principally of securities and cash, and was acquired almost entirely through an inheritance received in 1927 by decedent from his mother and through decedent's earnings, accumulated while he was domiciled in New York. At the time of marriage neither he nor his wife had any property. In 1937 the wife received an inheritance of about $1000, which she retained on deposit in her own name. In 1927 decedent removed from New York to Arizona, and at that time he retired from all business activities, and thereafter neither he nor his wife engaged in remunerative occupation. He and his family continued to live in Arizona until his death in 1939.

In 1928 decedent and his wife rented a safe deposit box at an Arizona bank under a rental agreement signed by both parties which contained the following declaration: "We, the undersigned, joint renters * * *, hereby declare and represent that we own as joint tenants, with the right of survivorship, all the property of every kind or character now within said box and that all property which may be deposited therein by either or any of us shall be and is owned by us as such joint tenants."

There was the further recitation that each was to have access to the box without notice to the other; that the bank was authorized to surrender the contents of the box to either or to the survivor; and that each had "read, received a copy and approved of the Bank's rules governing safe deposit boxes", said rules referring to the right of survivorship. Also, decedent established in the same year two accounts with a bank in Tucson, Arizona, both he and his wife signing the signature cards and it being provided that either could draw on the accounts. One, a checking account, was made to the credit of "Greenwood, C. H., or Albertine, Either or Survivor of Either", and the other, a savings account, was credited to "Greenwood, C. H., or Albertine".

At the time of decedent's death there were contained in the safe deposit box stocks and bonds representing a large sum of money; in addition, approximately $8000 were on deposit in the two accounts in the Tucson bank, and nearly $19,000 were in various savings accounts in decedent's name alone, said accounts being with banks located in Massachusetts, California, and Arizona. The findings show that all of the assets, including securities, documents of title, and certificates, held in decedent's name at the time of his death were in the safe deposit box; and although there was no specific finding on the point, the box apparently contained the certificates evidencing the deposits in the banks. The Board proceeded on this assumption, and no objection having been voiced, we shall do likewise.

Aside from the safe deposit box and the two bank accounts in Tucson (and certain real estate in Arizona, which was in the name of both, but not here involved), all other forms of property were carried in the name of decedent. Although the wife had a key to the safe deposit box, she never went to it and never saw the contents thereof. She had seen some of the stocks and bonds, all of which were in the name of the husband. He managed all the property, and never asked his wife for her opinion, permission, or advice about making sales or exchanges. He received the income from all sources and disposed of it as he saw fit. She never received or requested an accounting from him. He provided her with a monthly allowance for household expenses, making these payments to her himself. In his absence she drew checks on the checking account in the usual amount, and on a few occasions issued other checks. The following is quoted from the Board's statement of findings which, as hereinbefore noticed, is uncontroverted: "In a general way the husband and wife discussed their property relations. He consulted her when real estate was bought, but there was no specific occasion upon which property was discussed. He always spoke of his property as being half hers and always referred to the fact that half of everything he had was hers. He used the expression community property, and always referred to the property as community property. It was her understanding that half of the ownership of the bank accounts was hers, that understanding being based upon different things that he told her. * * * About a year before he died, the husband told the wife she was worth one-half of what he was worth, but she never had any written communication or document on the subject. Neither husband nor wife signed any written statement. * * * Once when the husband and wife had a disagreement, about a year before he died, he made the remark, `Well, half of everything I have is yours.' He made that statement several times. He prepared the income tax returns for both, but she signed her own and he signed his. Her income as returned was slightly less than his. The conversations about community property and her interest were only occasional and the subject was not referred to often. The decedent stated to an intimate friend while automobile riding in 1936 that one-half of all of his property belonged to his wife, that they had split everything they had fifty-fifty. On another occasion in 1938, in the course of a family argument the wife said to her husband in the presence of the friend: `You know, Charles, that one-half of all we own belongs to me', and the husband stated: `That is correct, I know it as well as you do.' In 1938 the decedent stated to the same friend that his wife was ill and that he wanted a will prepared so that if she passed away her community interest would not pass to the son, which would be embarrassing to him, and that he would like to have a will so that she could give her half to him, the decedent. At the date of decedent's death, his wife's will provided that all of her property go to him; and his will left all of his property, except a certain trust estate not here involved, to his wife."

In determining the gross estate of a decedent for the purpose of computing the federal estate tax we must look to state law (Lang v. Commissioner, 1938, 304 U. S. 264, 58 S.Ct. 880, 82 L.Ed. 1331, 118 A. L.R. 319; United States v. Goodyear, 9 Cir., 1938, 99 F.2d 523), and in this instance there being only personalty involved, it is with the law of Arizona, the state of decedent's domicile, that we are concerned. Under that law the wife has a present, existing, and equal interest with the husband in the community estate (La Tourette v....