Sohosky v. CIR

• Decision Date: 14 February 1973
• Docket Number: No. 72-1195.,72-1195.
• Citation: 473 F.2d 810
• Parties: Henry W. SOHOSKY et al., Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

473 F.2d 810 (1973)

Henry W. SOHOSKY et al., Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.

No. 72-1195.

United States Court of Appeals, Eighth Circuit.

Submitted November 14, 1972.

Decided February 14, 1973.

L. Thomas Elliston, Webb City, Mo., for appellants.

Richard Halberstein, Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., for appellee.

Before GIBSON and LAY, Circuit Judges, and DURFEE,^* Court of Claims Judge.

GIBSON, Circuit Judge.

Appellants appeal an adverse decision of the United States Tax Court reported at 57 T.C. 403.

The appellants (taxpayers) had sought to amortize a life estate per autre vie in certain corporate stocks as a wasting asset. The Commissioner found tax deficiencies in the amount of the deduction and that determination was found to be correct by the Tax Court in an opinion authored by the Honorable Bruce M. Forrester.

Taxpayers'¹ father, John Sohosky, Sr., died testate in 1963. At the time of his death he owned 1498 of the 1500 outstanding shares of The Lewis Motor Supply Company. The stock passed to his wife, Eva, for life with power of disposal in the residuary clause of the will, which read as follows:

"I give and bequeath all of the rest, residue and remainder of my estate, whether real, personal or mixed and wherever it may be situated to my wife, Eva Sohosky, for and during her life, with full power to sell or dispose of all or any part thereof as she may see fit during her lifetime. After her death, or if she should die first or concurrently with me, all of my estate, or all that may remain of my said estate, whether real, personal or mixed or sic wherever it may be situated, shall be divided equally among my four children, John J. Sohosky, Jr., Louis O. Sohosky, Henry W. Sohosky and Laura Virginia Emrich, per stirpes and not per capita."

On April 1, 1965, the following agreement was made between Eva Sohosky as seller, and taxpayers, John, Jr. and Henry Sohosky, two of the three sons of Eva and John Sohosky, Sr., as buyers:

"Eva Sohosky, the Seller, does hereby sell, set over, transfer and convey unto the Buyers above named her life estate and her power of disposal in all of the shares of common stock of the Lewis Motor Supply Company and agrees to transfer said stock to the Buyers by endorsement and transfer of all stock certificates now registered in her name."

However, on May 14, 1966, the same parties entered into a second agreement which provided in pertinent part:

"Now Therefore it is agreed between the parties hereto as follows, to-wit:

"1. That the contract above described dated April 1st, 1965 be and is hereby cancelled and terminated and in lieu thereof the parties have now entered into the following agreements.

"2. The Seller agrees to sell and the Buyers agree to buy 1494 shares of the common stock of the Lewis Motor Supply Company * * *.

* * * * * *

"4. Seller\'s previous transfer and endorsement of the stock certificates previously held by her are hereby ratified and confirmed and the parties agree that the Buyers are the unconditional owners of said stock without restriction of any kind.

"5. All other obligations or conditions contained in the original contract are hereby terminated, cancelled and rescinded by this agreement."

The Commissioner contends and the Tax Court found that by the bequest in the will of John Sohosky, Sr., Eva had received a life estate in the stock coupled with the power to sell and convey full title to the stock. The Tax Court further found that by the instrument dated May 14, 1966, Eva had transferred absolute ownership of the stock to the taxpayers. On appeal taxpayers contend that (1) the contract did not transfer absolute ownership to them; (2) a life tenant under Missouri law may not transfer absolute ownership of the property; and (3) that if a life tenant has such power, the property may not be sold for less than a full and adequate consideration.

The Government concedes that if taxpayers received only a life estate in the transaction they would be entitled to the deduction.²

As to the first argument, the phrase in the May 14, 1966 contract that "the parties agree that the buyers are the unconditional owners of the stock without restriction of any kind" is unequivocal in granting absolute ownership of the stock. Taxpayers argue that the reference to the sale of the life estate in the contract of April 1, 1965, shows an intent to sell only a life interest. This argument fails to give effect to the clause in the later contract which provided that the contract of April 1, 1965, was "cancelled and terminated" and that the May 14, 1966 agreement was to be in lieu of the earlier contract. The parties are bound by the clear provisions of the written contract of May 14, 1966, as to the interest conveyed by that instrument. The Tax Court did not err in finding that the contract purported to transfer absolute title to the stock to the taxpayers.

Having determined this threshold issue, we must proceed to the second point raised, that Eva did not have the power under Missouri law to transfer absolute title to the stock and to thus destroy the remainder interest.

Missouri has recognized that a grant of a power to a life tenant to dispose of the fee is not repugnant to either the life estate or the remainder interest. Graham v. Stroh, 342 Mo. 686, 117 S.W.2d 258, 261 (1938). The life tenant can convey a larger interest than he possesses himself where "there are words clearly indicating that the larger power was intended." Gaven v. Allen, 100 Mo. 293, 13 S.W. 501, 502 (1890). Accord, Geyer v. Bookwalter, 193 F.Supp. 57 (W.D.Mo.1961); Graham v. Stroh, supra; Schneider v. Kloepple, 270 Mo. 389, 193 S.W. 834 (1917); Priest v. McFarland, 262 Mo. 229, 171 S.W. 62 (1914); Gibson v. Gibson, 239 Mo. 490, 144 S.W. 770 (1912).

Here the fact finder must determine the intent of the testator with regard to the disposal of the property in the will. We recognize, as did the Tax Court, that:

"By reason of the

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