United States v. Crosby
Decision Date | 30 June 1958 |
Docket Number | No. 16937.,16937. |
Parties | UNITED STATES of America, Appellant, v. Frank A. CROSBY and P. E. Berry, individually and as Administrators of the Estate of Lewis G. Crosby, also known as L. G. Crosby, Deceased, Appellees. |
Court | U.S. Court of Appeals — Fifth Circuit |
L. W. Post, Atty., Dept. of Justice, Washington, D. C., Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, Robert N. Anderson, Attys., Dept. of Justice, Washington, D. C., C. W. Eggart, Jr., Asst. U. S. Atty., Pensacola, Fla., Harrold Carswell, U. S. Atty., Tallahassee, Fla., for appellant.
Wm. H. Watson, Clarence J. Brown, James B. Watson, Pensacola, Fla., for appellees.
Before CAMERON, JONES and BROWN, Circuit Judges.
Lewis G. Crosby was a resident of Escambia County, Florida. He died intestate on February 27, 1950, survived by his widow, Jessie B. Crosby, and by three children. At the time of his death he owned property in Florida, Alabama and Michigan. In Baldwin County, Alabama, he had approximately 20,000 acres of timber land. The appellees were appointed as administrators of the decedent's estate in both Florida and Alabama. Under the law of Alabama the real estate of an intestate decedent survived by children descends, subject to the payment of debts, charges against the estate, and the widow's dower, to his children in equal parts. Alabama Code 1940, Title 16, § 1.
The dower to which Mrs. Crosby was entitled, as the widow of a decedent who left lineal descendants and whose estate was solvent, was an estate for her life in a one-third part of the Alabama lands. Alabama Code 1940, Title 34, §§ 40, 41. The Alabama statutes specify the procedure for the assignment of dower. Alabama Code 1940, Title 34, §§ 51-61.
It was necessary for the administrators to realize upon the Alabama lands in order to provide funds for debts, estate taxes and other charges against the estate. Lands may be sold by the administrators of an intestate estate for the payment of debts when the personal estate is insufficient. Alabama Code 1940, Title 61, § 244. Where the lands which must be sold are subject to a widow's dower interest the statute specifically provides:
The administrators negotiated for a sale of the Alabama lands to a paper company for $1,640,689 upon condition that the land be conveyed free from the widow's dower interest. No purchaser for the lands could be found if they were to be sold subject to the dower interest. Appropriate proceedings were instituted for the sale of the lands, including the widow's dower interest, and Mrs. Crosby, pursuant to Title 61, § 271, supra, filed her consent to the sale of her dower interest. The land, with the dower interest, was ordered sold. Under Title 61, § 272, supra, the Alabama court entered an order valuing the fair equivalent of her dower interest at $546,896.66, and this amount was paid to her from the proceeds of the sale. In computing the Federal estate tax and filing a Federal estate tax return the administrators included as a part of the marital deduction the amount paid to Mrs. Crosby as the equivalent of her dower interest. The Internal Revenue Service disallowed the deduction, asserting that the interest which passed from the decedent to his widow was a life estate or terminable interest and not subject to the deduction. The cash payment to the widow of the equivalent of her dower interest, the Government contended, was a sale and conversion of a terminable interest. The amount of the tax deficiency as determined by the Government was paid by the administrators who, after a claim for refund was made and rejected, brought suit in the district court for the amount in dispute. In the district court a memorandum opinion and a supplemental opinion were filed. Crosby v. United States, D.C., 148 F.Supp. 810, 812. Findings of fact and conclusions of law were thereafter filed. Crosby v. United States, D.C., 151 F.Supp. 497. In its memorandum the district court outlined the question in this manner:
The district court's holding was thus stated:
"Counsel for plaintiffs contend most vigorously in this case that the widow has an election between the provisions of Title 34 and 61 relating to her dower interest in her deceased husband\'s estate; that dower as such never vests until set aside to her and that where she elects to dispose of her dower interest in property under the provisions of Title 61 that must be sold by the estate to secure money with which to pay debts and taxes, the proceeds passing to her are a vested interest and not a life estate, I find myself in accord with this view and find and hold that the proceeds from the sale of this property be set aside for the widow by the Judge of the Circuit Court of Baldwin County, Alabama, passed to the widow and not to the estate and is not subject to the Federal estate tax."
Judgment was entered for the administrators from which the Government has appealed.
The marital deduction, so-called, had its origin in an amendment made by the Revenue Act of 1948 to Section 812 of the Internal Revenue Code of 1939.1
It is the Government's position that the widow was dowable of a life estate in one-third of the lands in question and that this was clearly a terminable interest and as such not eligible for inclusion as a part of the marital deduction. The effect of the transaction whereby the lands were conveyed to the paper company free from dower was nothing more or less, says the Government, than a sale of a life estate terminable interest of the widow. Cf. Rev.Rul. 279, C.B. 1953-2, 275. We think the case cannot be wrapped up and tied with so simple a knot. The Government, citing New Colonial Ice Co. v. Helvering, 292 U.S. 435, 54 S.Ct. 788, 78 L.Ed. 1348, reminds us that deductions are granted as a matter of grace and that those claiming them must bring themselves squarely within the terms of the authorizing statute. The administrators tell us that the marital deduction amendment was a liberalization of the prior law based upon considerations of public policy and is not to be narrowly construed. The administrators support their view with a citation to Helvering v. Bliss, 293 U.S. 144, 55 S.Ct. 17, 79 L.Ed. 246, 95 A.L.R. 207. The marital deduction, so-called, is rather an exclusion than a deduction. H.R.Rep. No. 1274, 80th Cong. 2d Sess., C.B. 1948-1, 241, 244. The purpose of the provision was to extend to married taxpayers in common law states the advantages of residents of community property jurisdictions by permitting a surviving spouse to acquire, free from the estate tax exaction, one-half of what is referred to as the adjusted gross estate of the deceased spouse. Lowndes and Kramer Federal Estate and Gift Taxes 372. To limit the effect to the intended purpose, terminable interests are disallowed in determining the marital deduction. The Tax Court has said:
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