Roney v. Comm'r of Internal Revenue (In re Estate of Roney)
| Decision Date | 29 January 1960 |
| Docket Number | Docket No. 65231. |
| Citation | 33 T.C. 801 |
| Parties | ESTATE OF NEWTON B. T. RONEY, DECEASED, GERTRUDE C. RONEY, EXECUTRIX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
William G. Ward, Esq., for the petitioner.
Louis J. DeReuil, Esq., for the respondent.
Held, in computing for Federal estate tax purposes the marital deduction provided for in section 812(e), I.R.C. 1939, the value of property passing to the surviving spouse, which was a residuary legacy, is to be reduced by the amount of administrative expenses chargeable under State law to such residuum even though such expenses were properly deducted on fiduciary income tax returns filed by the executrix.
The Commissioner determined a deficiency in estate tax of $47,512.53.
The only question for decision is whether in computing the marital deduction the value of the property passing to the surviving spouse from the decedent shall be reduced by the amount of administrative expenses which were deducted on the fiduciary income tax returns filed by the executrix rather than allowed as a deduction from gross estate.
All of the facts are stipulated and are so found.
Newton B. T. Roney, hereinafter sometimes referred to as the decedent, died on September 8, 1952.
The decedent, at the date of his death, was a resident of Miami Beach, Florida.
The decedent died testate.
The decedent was survived by his wife, Gertrude C. Roney.
Gertrude C. Roney is the executrix of the Estate of Newton B. T. Roney.
The last will and testament of the decedent contains no direction as to the source from which administration expenses, comprised of attorney, accounting, and appraisal fees, are to be paid.
The Estate of Newton B. T. Roney filed an estate tax return with the district director of internal revenue for the district of Florida on October 7, 1953, and an ‘amended’ estate tax return was filed on March 10, 1954.
The amended estate tax return is identical with the original estate tax return with two exceptions: (a) The amount of $35,000 representing estimated administration expenses claimed as a deduction under Schedule J of the original return was eliminated on the amended return; and (b) the deduction claimed for bequests to the surviving spouse (marital deduction) was increased by this amount under Schedule M of the amended return.
The Estate of Newton B. T. Roney filed fiduciary income tax returns with the district director of internal revenue for the district of Florida for the period beginning September 8, 1952, and ending December 31, 1952, and the years 1953, 1953 as amended, 1954, and 1955.
The executrix elected to deduct the administration expenses on the following fiduciary income tax returns of the Estate of Newton B. T. Roney in the following amounts:
+--------------------+
¦Return ¦Amount ¦
+--------+-----------¦
¦1953 ¦$19,058.67 ¦
+--------+-----------¦
¦1954 ¦13,192.96 ¦
+--------+-----------¦
¦1955 ¦5,000.00 ¦
+--------+-----------¦
¦ ¦37,251.63 ¦
+--------------------+
The executrix executed a waiver, attached to the 1953 Estate of Newton B. T. Roney fiduciary income tax return, of any and all rights to have the foregoing items allowed as a deduction from the gross estate pursuant to section 812(b) of the Internal Revenue Code of 1939.
The N. B. T. Roney Trust filed fiduciary income tax returns for the years 1954 and 1955 with the district director of internal revenue for the district of Florida.
The will directed the payment of all just debts with the exception of estate taxes and, after making specific bequests of $25,000 and $5,000 and setting up a trust hereinafter referred to, the will bequeathed ‘(a)ll of the rest, residue and remainder of my estate, real, personal, and/or mixed, and wheresoever the same may be located,‘ to decedent's wife.
The last will and testament of the decedent created a testamentary trust by the provisions of paragraph four thereof, naming Gertrude C. Roney and E. J. Fitzpatrick as trustees of certain properties hereinafter identified as Town House Hotel properties.
An order was entered by the County Judge's Court, Dade County, Florida, dated January 22, 1954, authorizing and directing the executrix to surrender the Town House Hotel trust properties to the trustees of the N. B. T. Roney Trust.
Paragraph seven of the last will and testament of the decedent provided that the N. B. T. Roney Trust was charged with the payment of all Federal and State estate taxes. In compliance with this direction in the will, the trustees executed a mortgage in favor of the New England Life Insurance Company on February 15, 1954, in the amount of $300,000, the proceeds of which were used to pay the Federal and State estate taxes.
Prior to February 9, 1954, the Estate of Newton B. T. Roney paid all the income taxes on income derived from all sources. Subsequent thereto, the N. B. T. Roney Trust paid the income taxes on income derived from the trust properties only.
As indicated in the following schedule, the value of the interest in the property passing to the surviving spouse, as computed by the petitioner and the respondent, is less than 50 per cent of the adjusted gross estate:
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The proper treatment of administrative expenses: the debate rages on.
...be included in the marital deduction. See S. Rep. No. 80-1013, 80th Cong. 2d Sess., Part II (1948), at 6. (13) Est. of Newton B.T. Roney, 33 TC 801 (1960), aff'd per curiam, 294 F2d 774 (5th Cir. 1961)(8 AFTR2d 6072, 61-2 USTC [paragraph] 12, 040). (14) Richardson, note 2, at 1195. Item IX ......