4 T.C. 125 (1944), 111609, Estate of Vandenhoeck v. Commissioner of Internal Revenue

Docket Nº:111609, 111610.
Citation:4 T.C. 125
Opinion Judge:MELLOTT, Judge:
Party Name:ESTATE OF PAUL M. VANDENHOECK, DECEASED, JEANNE S. VANDENHOECK, EXECUTRIX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. JEANNE S. VANDENHOECK, TRANSFEREE AND BENEFICIARY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Attorney:Vernon L. Stover, Esq., for the petitioners. Brooks Fullerton, Esq., for the respondent.
Case Date:September 30, 1944
Court:United States Tax Court
 
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Page 125

4 T.C. 125 (1944)

ESTATE OF PAUL M. VANDENHOECK, DECEASED, JEANNE S. VANDENHOECK, EXECUTRIX, PETITIONER,

v.

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

JEANNE S. VANDENHOECK, TRANSFEREE AND BENEFICIARY, PETITIONER,

v.

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Nos. 111609, 111610.

United States Tax Court

September 30, 1944

         A citizen of Brazil, domiciled in France, was married in France in 1911 and continued to be domiciled there until his death in 1939. Under the law of France all movable property owned at the time of the marriage and all acquired thereafter belongs to the marital community unless there is an ante nuptial agreement to the contrary. No ante nuptial contract had been executed by decedent and his wife. Also, under the French law, no change in the property relations of the spouses can be made during marriage— except by civil death, divorce, judicial separation, etc., none of which occurred— nor may the spouses, by contract or other means, change the status of the conjugal property. At the time of decedent's death shares of stock in corporations chartered in the United States were found in his safe, some of which had been registered in his and his wife's names as ‘ joint tenants.‘ He died testate, bequeathing all of the property to his wife. After his death she took possession of all of the stock, although there has been no administration of the estate. Held:

         (1) The stock was community property and only one-half of the value thereof may be included in decedent's gross estate;

         (2) The value of stock of the Houdry Process Corporation on the date of the death of the decedent was $40 per share; and

         (3) The surviving wife is liable, as a transferee, for the estate tax.

          Vernon L. Stover, Esq., for the petitioners.

         Brooks Fullerton, Esq., for the respondent.

         These proceedings, duly consolidated, involve a deficiency in estate tax of the estate of Paul M. Vandenhoeck in the amount of $75,614.43. In Docket No. 111609 decedent's widow, though not having been formally appointed executrix of his estate, resists imposition of the tax and seeks to recover an overpayment. In Docket No. 111610 respondent asks affirmance of his determination that the widow is liable, as transferee of the property of the estate of her deceased husband, for the estate tax.

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          The issues are whether respondent erred:

         I. In refusing to recognize ‘ Community‘ holding by decedent and his wife of shares of stock issued by domestic (United States) corporations;

         II. In increasing the value of shares of Houdry Process Corporation from the reported value of $14 per share to $85 per share; and

         III. In determining that petitioner is liable as a transferee.

         The issues will be discussed in the order stated. Most of the basic facts have been stipulated and are found accordingly. Others shown in our findings are based upon documentary evidence and the testimony of witnesses.

         FINDINGS OF FACT.

         Jeanne S. Vandenhoeck is the widow of Paul M. Vandenhoeck and at the time of the hearing had custody and control of all the assets owned by him at the time of his death. She filed a Federal estate tax return with the collector of internal revenue for the first district of Pennsylvania at Philadelphia on May 10, 1940, and paid the tax shown thereon to be due in the amount of $4,090.05.

         Paul M. Vandenhoeck (hereinafter sometimes referred to as the decedent) was born at Santos, Brazil, February 10, 1888, and remained a citizen of Brazil during his entire lifetime. His parents left Brazil and took him to France when he was quite young and he became domiciled in France, where, except for business trips in connection with his export-import business, he remained until his death.

         The decedent and petitioner were married in France October 3, 1911. They did not enter into any ante nuptial agreement. It was always their intention to remain in France. They lived in Paris continuously from the time of their marriage. They owned a home in Paris and a country place in Normandy.

         At the time of the marriage and at the time of the death of decedent the laws of France provided that, unless there is an ante nuptial agreement to the contrary, all movable property owned at the time of the marriage and all property acquired after marriage belongs to the marital community. The French law provides, among other things, that no change as to the property relations of the spouses can be made during marriage and the spouses cannot, either by contract or by any other means, change the status of the conjugal property. Either spouse may devise his moiety.[1]

          The community may be dissolved by death of one of the spouses, by civil death, by divorce, by judicial separation, or by judicial separation of the property. [2] A judicial separation of the property puts an end to the community; but it does not affect the marriage relations of the

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spouses. During marriage the spouses married under the community regime may not change their ownership of property from that of community to joint tenancy. Marsel v. Boyer, Ct. of App. of Lyons, Dalloz, Second Part, p. 220.[3]

         Under the regime of community, as established by the laws of France, the spouses are deemed to be at all times co-owners of an undivided half of all the property which is comprised in the community and at the dissolution of the marriage each of the spouses, or the surviving spouse, is entitled to a partition of the community property and to receive one-half thereof.[4]

         The decedent and his wife, petitioner here, were domiciled in France at the time of their marriage, at the time of decedent's death, and at all times material hereto. Under the French law all of the property now in issue was, at the time of the decedent's death, the community property of the decedent and his wife, Jeanne Amelia Simone Vandenhoeck, each owning one-half thereof.

         The decedent died testate March 21, 1939. He left surviving him, his wife, Jeanne Amelia Simone Vandenhoeck, three daughters, and one son. By his will decedent bequeathed to his wife all the available portion of his estate which the law allowed him to dispose of by testament, and appointed ‘ Mr. Nordling, General Consul of Sweden in Paris,‘ as his executor. No probate proceeding has been instituted in France or in the United States, nor has any person been appointed executor or administrator. Since decedent's death Jeanne S. Vandenhoeck, his widow, has been in absolute possession of his property.

         At the time of his death the decedent had in his possession the following stock, issued to him and registered in his name, which came into the possession of petitioner at his death and was reported in schedule B of the estate tax return.

         One voting trust certificate for 490 shares (par value $10) of Houdry Process Corporation, which was incorporated in the State of Delaware July 25, 1931; one stock certificate for 135 shares of Houdry Process Corporation.

         The Commissioner determined that this stock had a value of $85 per share or an aggregate value of $53,125 on the date of the death of the decedent, one half of which was includible in gross estate.

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          The decedent also had in his possession at the time of his death certificates of stock registered in his name and in the name of his wife, ‘ as joint tenants with right of survivorship and not as tenants in common,‘ as shown in the schedule below. The certificates, at the time of his death, came into the possession of his widow and, in schedule E of the estate tax return, she reported them at the following values:

Description
Voting trust certificate for 5,000 shares (par value $10) Houdry Value
Process Corporation, at $14 $70,000.00
458 shares Sun Oil Co. common, at $60 27,480.00
1,000 shares Socony-Vacuum Oil Co. common, at $11.9375 11,937.50
Total 109,417.50

         One-half of the above amount, or $54,708.75, was included in gross estate since, in the opinion of the widow, expressed in the schedule, ‘ only one-half * * * belonged to * * * (decedent) and upon his death was transmitted by inheritance.‘          Prior to the determination of the deficiency now in issue the Commissioner added to gross estate the other half of the reported value of the property referred to in the preceding paragraph and proposed an additional tax of $7,950.30. This amount, together with interest of $205.37, was paid by petitioner on November 26, 1940. The estate however— i.e., petitioner as ‘ executor‘ — reserved the right to make claim for refund of said amount, or such amount as may be due, and such refund is now sought.          The decedent had purchased the stock of the Houdry Process Corporation, the Socony-Vacuum Oil Co., and the Sun Oil Co. without consulting petitioner and she did not know anything about the registration of it until the certificates were found in the safe after the decedent's death. These certificates were brought by petitioner from France to the United States in May 1939. She has received the dividends on the shares since the death of her husband and has used the amounts so received (the precise amount is not disclosed by the record, but it was in excess of $5,000) for her living expenses.          The Houdry Process Corporation (sometimes hereinafter called Houdry) was organized July 25, 1931, under the laws of the State of Delaware, with its principal office at Wilmington, Delaware. It was organized for the purpose of acquiring all the assets of a French corporation, including patents in respect of the Houdry...

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