Miers v. Comm'r of Internal Revenue (In re Estate of Spruill), Docket Nos. 33697-85
| Citation | 88 T.C. 1197,88 T.C. No. 68 |
| Decision Date | 07 May 1987 |
| Docket Number | 16578-85,Docket Nos. 33697-85,16579-85. |
| Parties | ESTATE OF EUIL S. SPRUILL, DECEASED, KATHLEEN SPRUILL MIERS AND WEYMAN E. SPRUILL, EXECUTORS, ET AL., 1 Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
In 1931, Stephen Spruill (Stephen), decedent's father, executed a deed conveying successive life estates in the Ashford-Dunwoody Farm to decedent and his wife (Georgia). Upon the termination of these life estates, the property was to go to decedent's children or to the descendants of any of decedent's children who did not survive the life estates; should decedent die without descendants, the property was to revert back to Stephen's estate. In 1956, Stephen, Georgia, and decedent's two adult children (Weyman and Kathleen) executed quitclaim deeds to decedent of their interests in the Ashford-Dunwoody Farm. In 1960, as a result of an action instituted in a local court, a decree, binding on all persons interested in the property, including decedent's than minor grandchildren, unborn children and unborn grandchildren, was entered authorizing decedent to sell the property.
In 1960, decedent and Weyman constructed a home for Kathleen and her husband on the Ashford-Dunwoody Farm. In 1961, decedent conveyed the homesite to Kathleen and her husband for a price of $20,000. Kathleen was unable to obtain a loan to pay for the house, and in 1962 she and her husband deeded it back to decedent who obtained a $20,000 loan. For 6 years Kathleen and her husband made installment payments on the loan, and in 1968 decedent forgave the balance of the loan. Although requested to do so, decedent declined to dead the property back to Kathleen.
In 1947 or 1948, Weyman and his wife moved into a home which Weyman and decedent constructed on the Ashford-Dunwoody Farm. The house was constructed in part with funds saved by Weyman's wife while he was in the military service during World War II, in part from Weyman's savings, and in part from funds supplied by decedent. Weyman repaid part of the funds advanced by decedent. In 1955, decedent and his wife moved in with Weyman. Decedent's wife died in 1957. Decedent deeded the homesite to Weyman in 1961. Decedent lived with Weyman until decedent died on Oct. 5, 1980.
Charles P. Hanfman and James S. Erie, for the respondent.
Respondent determined a deficiency in the amount of $13,570,174.98 in the estate tax for the estate of Euil S. Spruill and an addition to tax under section 6653(b) 2 in the amount of $6,785,087.49. Also, respondent determined deficiencies in the individual petitioners' 1981 Federal income taxes as follows:
+--------------------------------------------------------+
¦Petitioner ¦Deficiency ¦
+------------------------------------------+-------------¦
¦Weyman E. and Jennie Spruill ¦$2,600,815.56¦
+------------------------------------------+-------------¦
¦Lewis J. Miers, Jr., and Kathleen S. Miers¦2,616,954.34 ¦
+--------------------------------------------------------+
The issues for decision are:
1. Whether the Ashford-Dunwoody Farm (exclusive of two homesites thereon) is includable in decedent's gross estate under section 2033; the answer depends on whether a resulting trust arose in 1956 in favor of decedent's two adult children, who had remainder interests in the property, when they executed quitclaim deeds conveying their interests to decedent.
2. Whether the homesite where decedent's daughter lived on the Ashford-Dunwoody Farm is includable in decedent's gross estate under section 2033; the answer depends on whether decedent's daughter and her husband retained their beneficial interest in the homesite when they conveyed it to decedent in 1961 in order to obtain a loan with which to pay decedent for the homesite. 3
3. Whether the homesite on which decedent's son lived on the Ashford-Dunwoody Farm is includable in decedent's gross estate under section 2033; the answer depends on whether decedent, within the meaning of section 2036(a)(1), retained the right to possession or enjoyment of the homesite for a period which did not, in fact, end before his death when he conveyed the homesite to his son in 1961.
4. What was the fair market value of the Ashford-Dunwoody Farm includable in decedent's gross estate on October 5, 1980, the date of decedent's death.
5. What was the fair market value of the River Farm, another piece of real estate includable in decedent's gross estate, on October 5, 1980, the date of decedent's death.
6. Whether any part of the underpayment of estate tax of decedent's estate was due to fraud within the meaning of section 6653(b).
Euil S. Spruill (decedent) died on October 5, 1980. Under decedent's will, his two children, Weyman E. Spruill (Weyman) and Kathleen Spruill Miers (Kathleen), residents of Georgia, are the co- executors of decedent's estate. A Federal estate tax return was timely filed on July 6, 1981, with the Internal Revenue Service Center, Atlanta, Georgia.
Until his retirement, Weyman had been a farmer all his life. After graduating from high school, with the exception of military service in World War II, Weyman worked fulltime for his father in farming and in a grading and landscaping business that decedent had begun in the mid-1930's to supplement the farm income.
After receiving her high school education, Kathleen began working as a bank teller. For 18 years prior to her retirement in 1978, Kathleen was employed at Citizens and Southern Bank first as a proof operator, then as a teller, and finally as a loan officer.
Stephen T. Spruill (Stephen), decedent's father, purchased between 1889 and 1910 all the real property encompassed in land lots 347 and 348 of the 18th District of DeKalb County, Georgia, north of Atlanta. In 1931, Stephen conveyed various parcels of this land to six of his nine children, including a deed of approximately 102 acres of farmland in lot 347 (102 acres) to decedent, decedent's wife, Georgia Spruill (Georgia), and decedent's children (1931 deed).
Under the 1931 deed, decedent was to receive the income from the property for the remainder of his life, but should he predecease his wife, Georgia, the income from the land would go to Georgia until she died or remarried. Upon the termination of these life estates, the remainder of the property in fee simple was to go to decedent's children or to the descendants of any of decedent's children who did not survive the life estates, or, should decedent die without children or descendants, the property was to revert back to Stephen's estate.
The Ashford-Dunwoody Farm, one of the two subject properties, consists of approximately 41 acres located in the western half of the 102 acres covered by the 1931 deed. It borders on Ashford-Dunwoody Road to the west and on Interstate Highway 285 (I-285) to the south. The recorded deeds to decedent's brothers and sisters covering other parcels were similar in form to the 1931 deed given to decedent.
In the early 1930's decedent and his family moved into a former tenant house located on the 102 acres. Decedent farmed the land over the years with the help of his son, Weyman.
In 1936, Stephen conveyed to decedent for $855 consideration approximately 102- 1/2 acres of land located in land lots 347 and 346, 18th District, DeKalb County, Georgia, lying immediately north of the above-described 102 acres. 4 This parcel of land was previously conveyed by Stephen to decedent's brother, Paul, who later sold the property to DeKalb County for taxes. Stephen purchased the land from the County and sold it to decedent, giving decedent a total of approximately 205 contiguous acres of farmland.
In 1948, and again in 1956, decedent's attorney was advised by the Atlanta Title Company (title company) that a title insurance policy could not be obtained on either the 102 acres received by decedent under the 1931 deed or the land purchased by decedent in 1936 from his father. By letter dated July 26, 1956, the title company advised decedent's attorney that the 1931 deed created life estates in decedent and his wife, Georgia, vested remainder interests in decedent's children subject to being opened to include any after-born children, contingent remainder interests in decedent's grandchildren, and a reversionary interest in Stephen or his estate. The title...
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