Bordes v. Comm'r of Internal Revenue (In re Estate of Bordes), Docket No. 27045.
| Decision Date | 19 March 1953 |
| Docket Number | Docket No. 27045. |
| Parties | ESTATE OF LOUIS BARTHELEMY ALEXANDRE BORDES, DECEASED, CLEMENCE ANNE MADELEINE BORDES, MARIE THERESE JACQUELINE BEQUETTE, FERNAND FRANCOIS JOSEPH ALEXANDRE BORDES, ROSE MARIE HELENE LATAILLADE, BENEFICIARIES, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Charles Meyer, Esq., and Rene Loeb, Esq., for the petitioner.
Rigmor O. Carlsen, Esq., for the respondent.
The decedent was a citizen and resident of France. He died on September 21, 1943. On the date of his death the decedent and his surviving spouse owned community property under the Civil Code of France which was situated in the United States. Held, the entire value of the community property situated in the United States is includible in the decedent's gross estate under section 811(e)(2) of the Code, as it applied to estates of decedents dying between October 22, 1942, and December 31, 1947, except that part thereof constituting less than one-half which was identified and traced to the separate property of the surviving spouse. Held, further, the estate is entitled to a proportionate deduction under section 861 of the Code for attorney's fees.
The Commissioner has determined a deficiency in estate taxes in the amount of $30,526.86. The decedent was a nonresident alien. The deficiency is due principally to the inclusion in the gross estate by the respondent of the total value of shares of stock situated in the United States and comprising the community property of the decedent and his surviving spouse on the date of his death.
The issues presented for decision are:
(1) To what extent is the community property of the decedent and his surviving spouse, which was situated in the United States on the date of his death, includible in his gross estate under the provisions of section 811(e)(2) of the Internal Revenue Code, as it applied to estates of decedents dying between October 22, 1942, and December 31, 1947?
(2) Is the estate entitled to a proportionate deduction under section 861 of the Internal Revenue Code for attorney's fees?
Other adjustments made by the Commissioner are not in dispute and will be given effect under Rule 50.
The estate tax return was filed with the collector for the second district of New York.
The facts which have been stipulated are found as facts and the stipulation is incorporated herein by this reference.
The decedent died intestate on September 21, 1943, at Paris, France. He was a citizen and resident of France and was not engaged in business in the United States. He was survived by his wife, Clemence Anne Madeleine Bordes, and three children who are the beneficiaries of his estate and the petitioners in this proceeding. No administration of the decedent's estate was necessary under French law, as the estate passed directly to the beneficiaries, and no administration proceedings have been instituted in either France or the United States. The estate tax return was filed by the surviving spouse as a beneficiary and transferee.
The estate tax return disclosed the following assets, which were the community property of the decedent and his surviving spouse under the Civil Code of France, situated in the United States on the date of the decedent's death:
The petitioners included in the gross estate one-half of the value of the shares of stock reported under Schedule B, and one-half of the credit balance with J. P. Morgan & Co. reported under Schedule C. The following notation appears on Schedules B and C of the return:
Mr. Louis Barthelemy Alexandre Bordes and his Wife Clemence Anne Madeleine Bordes, nee Bertera, were married under the system of Community of Goods by virtue of their marriage contract dated May 10th 1893.
By reason of this contract one half of the above assets belongs to the widow as of her own right and the other half only * * * constitutes the assets of the estate.
No deductions whatever were claimed on the estate tax return. The following schedule was, however, attached to the estate tax return:
+------------------------------------------------------------------------+
¦Value of gross estate outside of the United States of America ¦ ¦
+---------------------------------------------------------------+--------¦
¦1. Stocks and bonds other than those in the United States ¦ ¦
+---------------------------------------------------------------+--------¦
¦of America ¦$125,570¦
+---------------------------------------------------------------+--------¦
¦2. Real estate ¦109,406 ¦
+---------------------------------------------------------------+--------¦
¦3. Furniture ¦30,433 ¦
+---------------------------------------------------------------+--------¦
¦4. Cash in bank ¦47,397 ¦
+---------------------------------------------------------------+--------¦
¦ ¦$312,806¦
+------------------------------------------------------------------------+
The respondent, in his notice of deficiency, made certain valuation adjustments not here in dispute which decreased the total of Schedule B to $271,632.38, included the entire sum of $271,632.38 in the gross estate under section 811(e)(2) of the Internal Revenue Code, and excluded from the gross estate under the provisions of section 863(b) of the Internal Revenue Code, the portion of the credit balance with J. P. Morgan & Co. previously included in the gross estate by the petitioners.
The decedent and Clemence Anne Madeleine Bertera were married on May 10, 1893, at Paris, France. Prior to the marriage ceremony, the decedent and his future spouse entered into a marriage contract which recites that they adopt as the basis of their marriage the regime of community of goods as established by the Civil Code of France with one modification, namely, they will not be responsible for each other's debts contracted prior to the marriage. If the parties had not entered into a marriage contract the regime of community of goods, i.e., the community property laws of France would have applied to their matrimonial property without the modification provided for in the marriage contract.
Under the Civil Code of France, the assets of the marital community comprise all personal property owned by the spouses at the time of the marriage together with all personal property acquired by them during the marriage either by succession or donation provided the donor has not expressed a contrary intention, all income from whatever source received, and all real estate acquired during the marriage.1 The husband has the sole management of the community property and of the individual property of the wife, if any. 2 After the marriage the spouses cannot change the status of the conjugal property. Each spouse is considered a co-owner of an undivided half of all the property in the community. Either spouse may devise his moiety. On the death of one, the surviving spouse retains his moiety and is entitled to a partition of the community property and to receive one-half thereof. The other one-half falls in the estate of the deceased spouse. 3
The surviving spouse and children of the decedent, as the sole beneficiaries of his estate, entered into an agreement dated June 1 and 8, 1948, and captioned, ‘Partition of the community of goods between Mr. and Mrs. BORDES and of the estate of Mr. BORDES.‘ The ‘partition,‘ or distribution agreement, provided for a division of the community property and a settlement of the estate among the beneficiaries. Court approval of the agreement was not required under French law as all the beneficiaries were of age.
The agreement recited, inter alia, the following pertinent facts: That the respective contributions of property to the community by the decedent and his surviving spouse at the time of the marriage, and their then value in francs, were as follows:
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