Linde v. Comm'r of Internal Revenue, Docket No. 24517.

Decision Date04 October 1951
Docket NumberDocket No. 24517.
Citation17 T.C. 584
PartiesROSE J. LINDE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
CourtU.S. Tax Court

17 T.C. 584

ROSE J. LINDE, PETITIONER,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 24517.

Tax Court of the United States.

Promulgated October 4, 1951.


In the year 1944, the estate of petitioner's deceased husband received from cooperatives proceeds from the liquidation of certain of their ‘wine pools‘, in which decedent had held interests, and payment of certain sums of money due and owing the decedent on the date of his death. The administration of the estate was terminated in 1944. In the same year these amounts were distributed to the petitioner as sole legatee under the decedent's will, and in the year 1945 the cooperatives paid to the petitioner other proceeds from the 1945 liquidation of certain of the wine pools. The total proceeds received in 1944 and 1945 on liquidation of some of the wine pools exceeded the appraised value for Federal estate tax purposes of decedent's interests therein. Held, (1) that section 126 income is taxable to the recipient thereof, so that any such income received by the estate of the decedent is taxable to it and, as such income is not ‘income of the estate,‘ the provisions of section 162(c) are inapplicable thereto; (2) that the proceeds received by the petitioner in 1945 from liquidation of the wine pools did not constitute ‘items of gross income in respect of a decedent‘ taxable under section 126 of the Code, since the liquidation of the wine pools did not take place until after the decedent's death, at which time petitioner held the property interests in the pools; and (3) that the amount by which liquidation proceeds, both those received by decedent's estate in 1944, and currently distributed to petitioner, and those received by petitioner in 1945, exceeded the fair market value of petitioner's interests in any unliquidated portions of the wine pools when she acquired them by bequest constitute capital gains taxable to her when received in 1944 and 1945.

[17 T.C. 584]

Frank C. Scott, C.P.A., for the petitioner.

R. G. Harless, Esq., for the respondent.

Respondent determined deficiencies for the taxable years 1944 and 1945 against the petitioner in the amounts of $274 and $379.97, respectively, computed as follows:

+-----------------------------------------------------------------------------+
                ¦ ¦1944 ¦1945 ¦
                +-------------------------------------------------------+----------+----------¦
                ¦Tax as reported due on return and paid by the ¦ ¦$10,761.47¦
                ¦petitioner ¦ ¦ ¦
                +-------------------------------------------------------+----------+----------¦
                ¦Adjustment in the amount of tax due made by the ¦$12,024.00¦28,391.44 ¦
                ¦respondent (increase) ¦ ¦ ¦
                +-------------------------------------------------------+----------+----------¦
                ¦ ¦12,024.00 ¦17,629.97 ¦
                +-------------------------------------------------------+----------+----------¦
                ¦Amount of tax assessed by respondent October 1947, and ¦ ¦ ¦
                +-------------------------------------------------------+----------+----------¦
                ¦paid by petitioner ¦11,750.00 ¦17,250.00 ¦
                +-------------------------------------------------------+----------+----------¦
                ¦Balance due—amount of deficiency ¦274.00 ¦379.97 ¦
                +-----------------------------------------------------------------------------+
                

[17 T.C. 585]

Petitioner claims as overpayments the additional assessments which she paid in the amounts of $11,750, for the taxable year 1944, and $17,250 for the taxable year 1945 in the amount of $4,336.40.

The following questions are presented:

(1) Are the proceeds from the liquidation of wine pools and other amounts, which were owing petitioner's deceased husband when he died, received in 1944 by the decedent's estate and, upon termination of the administration of the estate in December 1944, distributed to petitioner as sole legatee, taxable to petitioner in 1944 under section 126 of the Internal Revenue Code?

(2) Do the proceeds received by the petitioner in 1945 in liquidation of her deceased husband's interests in certain wine pools, which she had acquired by bequest, constitute items of gross income in respect of the decedent taxable to petitioner, the recipient thereof, pursuant to the provisions of section 126 of the Code?

(3) If the answer to either (1) or (2), supra, is in the negative with respect to the wine pool payments, are the amounts by which any of the liquidation proceeds, both those received by decedent's estate in 1944, and currently distributed to petitioner, and those received by petitioner in 1945, exceed the fair market value of the petitioner's interests in the pools when she acquired them (the appraised value of decedent's interests in the pools for Federal estate tax purposes) taxable to her in the years 1944 and 1945 and, if so, are such amounts taxable to her as ordinary income or as capital gains?

FINDINGS OF FACT.

Part of the facts were stipulated and they are so found.

The petitioner, Rose J. Linde, formerly Mrs. Rose J. Lange, resides at Lodi, San Joaquin County, California. She duly filed her income tax returns for the years 1944 and 1945 with the collector of internal revenue for the first district of California.

Petitioner was the sole beneficiary and executrix of the estate of her deceased husband, Herman C. Lange (sometimes hereinafter referred to as the decedent), who died December 10, 1943.

[17 T.C. 586]

The petitioner filed an income tax return on behalf of the decedent for the period January 1 to December 10, 1943, on the cash receipts basis, the same method as was regularly employed by the decedent. As executrix of the decedent's estate, she filed a fiduciary income tax return for the period December 10, 1943, to November 30, 1944. Both such returns were filed with the collector of internal revenue for the first district of California. The administration of the decedent's estate was terminated December 19, 1944, and in that month all the property of the estate was distributed to petitioner as sole beneficiary under the decedent's last will and testament.

Decedent, during his lifetime, was a farmer. He owned and operated vineyards located in the vicinity of Lodi, San Joaquin County, California. In order better to market wine grapes grown in his vineyards, he acquired membership interests in the East-Side Winery and the Cherokee Vineyard Association, cooperative marketing associations organized under the provisions of chapter 4 of the Agricultural Code of the State of California as nonprofit cooperative marketing associations. Their principal purpose was the processing of their members' grapes into wine and other grape products and the marketing of these products on behalf of its members. Decedent also held memberships in other marketing associations, including the Lodi Winery.

Both the East-Side Winery (hereinafter sometimes called the East-Side) and the Cherokee Vineyard Association (hereinafter sometimes called the Cherokee) operated in a similar manner. In order to market his grapes through these associations, a grower was required to become a member and membership was limited to growers. The rights and duties of the members, as well as those of the associations, were defined in the articles of incorporation and the by-laws of each association, the marketing agreements between the members and the associations and, in the case of Cherokee Vineyard Association, a membership agreement. The relationship between the associations and their members in the actual marketing operations was governed largely by the terms of the marketing agreements. The forms of the marketing agreements of each association read in part as follows:

1. East-Side Winery:

This (marketing) agreement between the EAST-SIDE WINERY, hereinafter called the ‘Association‘ and the undersigned, hereinafter called the ‘Grower,‘ Witnesseth:

(1) That the Association shall buy and the Grower shall sell to the Association each and every year after the date of this agreement, such number of tons of grapes as may be agreed upon from time to time between the Association and the Grower, it being understood and agreed that the Grower shall have the privilege of selling and delivering to the Association from time to time such proportion of all the grapes which the Association shall from time to time, decide to

[17 T.C. 587]

accept and receive, as the number of shares of stock held by the Grower shall bear to the total issued and outstanding stock.

(3) The Association agrees to manufacture such grapes, together with the grapes delivered by other growers, into wine, brandy or such other products as the Association may determine and to sell such wine, brandy or other products and pay over ratably the net amount received therefrom as payment in full to the Grower after making such deductions to cover cost of manufacturing, advances, the cost of receiving, pooling, handling, grading, processing, financing, advertising, storing, insuring, selling, marketing and building assessments, debts and other charges, as determined by the Board of Directors from time to time; and for organization, operating and maintenance expenses...

To continue reading

Request your trial
13 cases
  • Monen v. Comm'r of Internal Revenue (In re Estate of Sidles)
    • United States
    • U.S. Tax Court
    • January 29, 1976
    ... ... COMMISSIONER OF INTERNAL REVENUE, RESPONDENT Docket No. 6563-73. United States Tax Court Filed January 29, 1976 ... As noted in Commissioner v. Linde, 213 F.2d 1, 5-6 (9th Cir. 1954), cert. denied 348 U.S. 871 (1954): there ... ...
  • United States v. Ellis
    • United States
    • U.S. District Court — Southern District of New York
    • August 13, 1957
    ... ... pursuant to Section 3746(b) of the 1939 Internal Revenue Code, 26 U.S.C.A. § 3746(b). The United ... Linde, 9 Cir., 1954, 213 F.2d 1, certiorari denied 348 ... ...
  • Estate of Bickmeyer v. Comm'r of Internal Revenue
    • United States
    • U.S. Tax Court
    • February 6, 1985
    ... ... Commissioner v. Linde, 213 F.2d 1, 4, 5-6 (9th Cir. 1954), remanding 17 T.C. 584 (1951); Estate ... ...
  • Estate of Cartwright v. Commissioner
    • United States
    • U.S. Tax Court
    • June 20, 1996
    ... ... Commissioner ... Docket No. 1447-94 ... United States Tax Court ...       Section references are to the Internal Revenue Code in effect for the year in issue ... which otherwise it would have had." Linde v. Commissioner [54-1 USTC ¶ 9384], 213 F.2d 1, ... ...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT