Leyman v. Comm'r of Internal Revenue (In re Estate of Leyman)
| Decision Date | 24 April 1963 |
| Docket Number | Docket No. 77075. |
| Citation | 40 T.C. 100 |
| Parties | ESTATE OF HARRY STOLL LEYMAN, DECEASED, HARRY S. LEYMAN, JR., EXECUTOR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
William R. Seaman, R. O. Klausmeyer, and Sherman E. Unger, for the petitioner.
Charles R. Hembree, for the respondent.
Held: (1) The value of 2,309 shares of common stock of Leyman Corporation on May 24, 1954, was $630 per share. (2) The executor of the estate of Harry Stoll Leyman willfully made a false or fraudulent estate tax return. (3) The provisions of secs. 871(i), 894(a), and 3612(d), I.R.C. 1939, and not those of sec. 6653(b), I.R.C. 1954, govern the amount of addition to the tax in case a false or fraudulent estate tax return is willfully filed since the date of decedent's death was prior to the date of enactment of I.R.C. 1954. (4) The addition to the tax provided by I.R.C. 1939 in case a false or fraudulent estate tax return is willfully made is 50 percent of the deficiency and not 50 percent of the entire tax.
Respondent determined a deficiency in estate tax and addition to tax under section 3612(d)(2) of the Internal Revenue Code of 1939 in the amounts of $1,804,228.98 and $1,930,350.45, respectively.
The issues for decision are:
(1) What was the fair market value of 2,309 shares of Leyman Corp. common stock on May 24, 1954, the date of death of Harry Stoll Leyman.
(2) Whether Harry S. Leyman, Jr., as executor of the estate of Harry Stoll Leyman, deceased, willfully filed a false and fraudulent estate tax return on behalf of the estate.
(3) If a false and fraudulent estate tax return was filed by the executor, is the amount to be added to the tax because of the filing of such a false and fraudulent return governed by the provisions of section 6653(b) of the Internal Revenue Code of 1954 or the provisions of section 871(i), 894(a), and 3612(d) (2) of the Internal Revenue Code of 1939.
(4) If the executor filed a false and fraudulent estate tax return and the addition to tax for such filing is governed by the provisions of sections 871(i), 894(a), and 3612(d)(2) of the Internal Revenue Code of 1939, is the amount computed under the provisions of these sections 50 percent of the deficiency or 50 percent of the entire correct amount of the estate tax due.
Some of the facts have been stipulated and are found accordingly.
Harry Stoll Leyman (hereinafter referred to as decedent) died on May 24, 1954. Harry S. Leyman, Jr. (hereinafter sometimes referred to as the executor), is the executor of decedent's estate. The Federal estate tax return for decedent's estate was filed on July 21, 1955, with the district director of internal revenue at Cincinnati, Ohio, and the tax of $2,046,158.28 shown thereon to be due was paid on that date. As the result of a mathematical error on the return, an additional tax of.$10,313.63 was paid by the estate on August 18, 1955.
At the date of his death, decedent owned 2,309 shares of the common capital stock of Leyman Corp., an Ohio corporation, out of a total of 9,400 common shares and 4,300 preferred shares issued and outstanding. The preferred shares had a par value of $100 and a redemption price of $110 per share and provided for cumulative dividends at the rate of 7 percent per annum. The common capital stock of Leyman Corp., other than that owned by decedent's estate, and the preferred shares which were outstanding on May 24, 1954, were owned as follows:
+----------------------------------------------------------------+
¦ ¦ ¦Number of shares ¦
+------------------------------+---------------+-----------------¦
¦Stockholders ¦Relationship to¦ ¦ ¦
+------------------------------+---------------+---------+-------¦
¦ ¦decedent ¦Preferred¦Common ¦
+------------------------------+---------------+---------+-------¦
¦ ¦ ¦stock 7 ¦stock ¦
+------------------------------+---------------+---------+-------¦
¦ ¦ ¦percent ¦ ¦
+------------------------------+---------------+---------+-------¦
¦H.S. Leyman, Jr. ¦Son ¦789 ¦1,178 ¦
+------------------------------+---------------+---------+-------¦
¦Grace L. Lull (trust) ¦Daughter ¦789 ¦1,178 ¦
+------------------------------+---------------+---------+-------¦
¦Elizabeth L. von Weise (trust)¦---do ¦789 ¦1,178 ¦
+------------------------------+---------------+---------+-------¦
¦Susannah L. Atterbury (trust) ¦---do ¦789 ¦1,178 ¦
+------------------------------+---------------+---------+-------¦
¦H.S. Leyman, Jr. (trust) ¦Son ¦286 ¦594 3/4¦
+------------------------------+---------------+---------+-------¦
¦Grace L. Lull (trust) ¦Daughter ¦286 ¦594 3/4¦
+------------------------------+---------------+---------+-------¦
¦Elizabeth L. von Weise (trust)¦---do ¦286 ¦594 3/4¦
+------------------------------+---------------+---------+-------¦
¦Susannah L. Atterbury (trust) ¦---do ¦286 ¦594 3/4¦
+----------------------------------------------------------------+
The officers of Leyman Corp., prior to May 24, 1954, were Harry Stoll Leyman president; Harry S. Leyman, Jr., vice president, secretary, and assistant treasurer; and J. O. Miller, treasurer and assistant secretary. After the death of Harry Stoll Leyman the other officers remained unchanged until October 6, 1954, at which time the following officers were elected: Harry S. Leyman, Jr., president; J. O. Miller, vice president and treasurer; and E. Riemenschneider, secretary. No further change in the officers of the corporation occurred until after 1958.
Leyman Corp., in the form in which it existed on May 24, 1954, was the result of the mergers into it in 1936 of the Leyman Buick Co., the Dayton Buick Co., Walnut-Seventh Realty Corp., and Midland Securities Corp.
During the years immediately preceding decedent's death, Leyman Corp. operated a Buick agency at Dayton, Ohio; owned, invested, and reinvested a portfolio of listed securities; owned and operated various real estate holdings in Dayton and Cincinnati, Ohio, and Miami Beach, Fla.; and owned residential property in Harbor Point, Mich. During these years Leyman Corp. operated a Buick agency in Louisville, Ky., through a subsidiary company, Leyman Motor Co., Inc.; a parking garage in Cincinnati through a subsidiary company, Eastbourne Garage, Inc.; and a parking lot in Cincinnati through a subsidiary company, Central Parkway and Walnut, Inc.
Shortly after decedent's death the Buick agency franchises at Dayton, Ohio, and Louisville, Ky., which were terminable upon his death, were terminated in accordance with their terms by the Buick Motor Division of General Motors Corp.
The following schedule shows the income and expenses of Leyman Corp. for each of the years 1949 through 1956.
+--------------------------------------------------------------------------------------------------------------+
¦ ¦1949 ¦1950 ¦1951 ¦1952 ¦1953 ¦1954 ¦1955 ¦1956 ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+--------------¦
¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+-+------------¦
¦Income: ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+-+------------¦
¦Interest ¦$13,393.63¦$10,833.21¦$10,987.30¦$12,634.36¦$13,402.02¦$12,953.92 ¦$11,927.27 ¦)¦207,572.25 ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+-+------------¦
¦Dividends ¦184,741.43¦213,366.24¦196,155.06¦189,835.39¦189,069.40¦154,549.65 ¦168,900.39 ¦)¦ ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+-+------------¦
¦Rents ¦286,038.41¦312,034.09¦314,839.67¦325,341.30¦341,674.30¦372,794.12 ¦345,578.89 ¦ ¦341,557.52 ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+-+------------¦
¦Sales, stocks ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
¦and ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+-+------------¦
¦bonds ¦(72.12) ¦99,497.34 ¦37,121.96 ¦1,117.91 ¦1,181.62 ¦42,964.79 ¦9,252.24 ¦)¦132,705.51 ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+-+------------¦
¦Sales, capital ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+-+------------¦
¦assets ¦63.32 ¦790.06 ¦42.16 ¦1,676.75 ¦917.89 ¦(62,758.96)¦144,538.41 ¦)¦ ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+--------------¦
¦Sales—GMAC ¦ ¦6,215.97 ¦20,461.12 ¦17,184.03 ¦23,658.34 ¦19,551.39 ¦270.00 ¦ ¦
¦notes ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦ ¦
+---------------+----------+----------+----------+----------+----------+-----------+------------+--------------¦
¦Settlement—Race¦ ¦ ¦ ¦ ¦ ¦ ¦...To continue reading
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