Wells Fargo Bank & Union Trust Co. v. United States
| Decision Date | 23 September 1955 |
| Docket Number | No. 31436.,31436. |
| Citation | 134 F. Supp. 340 |
| Court | U.S. District Court — Northern District of California |
| Parties | WELLS FARGO BANK & UNION TRUST CO., Executor of the Will of Walter D. K. Gibson, Deceased, Plaintiff, v. The UNITED STATES of America, Defendant. |
W. T. Fitzgerald, Clarence E. Musto, Franklin C. Latcham, Morrison, Foerster, Holloway, Shuman & Clark, San Francisco, Cal., for plaintiff.
Lloyd H. Burke, U. S. Atty., George A. Blackstone Asst. U. S. Atty., San Francisco, Cal., for defendant.
The action is one brought under Section 1346(a) (1) Title 28 U.S.C.A. for the refund of federal income taxes alleged to be erroneously assessed and collected.
The essential facts are not in dispute and have been the subject of stipulation: The taxpayer is the executor of the Last Will and Testament of Walter Gibson who died on December 21, 1938. His estate was in the course of administration until August 26, 1941. Under the terms of his Last Will his property was placed in trust. His wife was named as the income beneficiary. The terms of the trust are not immediately important.
His Last Will, among other things, stated that its provisions were conditioned on his wife's waiving her right to take one-half of their community property. Such a waiver was executed by his wife contemporaneously with the execution of the Will.
The Will also gave her the power to withdraw one-half of the amount of the corpus of the trust for any purpose she might desire. This power was exercised by the wife when she assigned to the Crocker First National Bank as trustee one-half of the corpus of the trust established by the decedent. This property was distributed to the Crocker Bank under the Decree of Final Distribution of decedent's estate.
For the period January 1, 1941, through August 26, 1941, one-half of the income attributable to the property subject to administration in the husband's estate was returned by the taxpayer for purposes of federal income tax; the other half was reported on a return filed by the estate of the wife Emily, she having died on November 24, 1941. A deficiency was proposed against the estate of Walter, the husband, on the ground that the entire income for that period was taxable to him. Concurrently, an overassessment was proposed with respect to the tax paid by the estate of the wife Emily. By agreement between the parties the deficiency assessed against the husband's estate was satisfied by setting off against it the overassessment in favor of the estate of the wife and the balance was paid in cash. The wife's estate was reimbursed for the use of this certificate of overassessment. That amount was charged by the husband's estate to his heirs.
Plaintiff taxpayer, executor of the Last Will of Walter Gibson, filed a claim for refund of income taxes on the ground that for the period in question only one-half of the income was chargeable to his estate, the other half being chargeable to the estate of Emily Gibson. The government allowed this claim in the amount of $9,362.58. Such refundable sum was reduced by the amount which thereby became due from the estate of Emily Gibson. The government paid the balance to the taxpayer. In this suit plaintiff seeks to recover that part of the amount of its claim for refund which was not refunded in cash, i.e. $7,100.35.
The foregoing statement of facts is sufficient to focus attention upon the basic legal question involved which centers around the case of Bishop v. Commissioner, 9 Cir., 152 F.2d 389. In the Bishop case the taxpayer and his wife, California residents throughout their married life, had present, existing and equal rights in the community property. During the administration of the estate of the husband half of the income was reported by the estate and half by the widow. The Commissioner sought to tax all the income as that of the estate. The Court of Appeals held that the widow, being the owner of a one-half interest in the community property, owned one-half of the income therefrom. Therefore the estate, it was held, could not be taxed on more than one-half.
The primary distinction between Bishop and the case at bar is apparent. The decedent, Walter Gibson, made and executed a Will in which he purported to dispose of the entire community property. The Will recited that it was conditioned on the assumption that his wife, Emily Gibson, would waive her community property rights in the estate and accept the provisions of the Will. The wife, according to the stipulated facts, agreed to take according to the Will and waived community property rights.
The election engaged in by the wife Emily is binding and enforceable under California law. Flanagan v. Capital National Bank, 213 Cal. 664, 3 P.2d 307; Security First National Bank v. Stack, 32 Cal.App.2d 586, 90 P.2d 337. There is no contention urged that the husband took advantage of his wife or that there was any overreaching or element of estoppel. Upon the husband's death, in view of this election the entire community...
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Wells Fargo Bank & Union Trust Co. v. United States
...of Bishop v. Commissioner of Internal Revenue, 9 Cir., 1945, 152 F.2d 389. As the District Court said in its opinion, reported in 134 F.Supp. 340, at page 341: "In the Bishop case the taxpayer and his wife, California residents throughout their married life, had present, existing and equal ......