Gagliardi v. Comm'r of Internal Revenue (In re Estate of Gagliardi)
| Citation | 89 T.C. No. 85,89 T.C. 1207 |
| Decision Date | 28 December 1987 |
| Docket Number | Docket No. 3434-86 |
| Parties | ESTATE OF JOSEPH M. GAGLIARDI, DECEASED, RICHARD F. GAGLIARDI AND ELAINE CAMPBELL, EXECUTORS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
Through his son as agent, decedent issued checks, representing gifts, to his children. Also through his son, decedent ordered a broker to transfer funds as gifts to his children. HELD, a valid agency was created so that funds represented by a check drawn on decedent's account and cashed before decedent's death are not includable in the gross estate . HELD FURTHER, the funds represented by checks written on decedent's bank account and not paid until after his death, ar e so includable. Secs. 2031, 2033, I.R.C. Estate of Belcher v. Commissioner, 83 T.C. 227 (1984), distinguished. HELD FURTHER, funds represented by checks of the broker and charged to decedent's account before decedent's death are not so includab le but funds represented by such checks issued and charged after decedent's death are so includable. William J. Hagan, for the petitioner.
Greely Curtis, for the respondent.
Respondent determined a deficiency in petitioner's Federal estate tax of $20,264.10. After concessions by petitioner, the issues for decision are: (1) Whether funds in decedent's bank account against which checks, representing gifts, were written before decedent's death and paid both before and after are includable in the gross estate; and (2) whether other gifts, made through a brokerage account, were completed so as to remove the funds from the estate. The parties have agreed that a third issue, the valuation of certain Flower Bonds in decedent's estate, will depend on the answer to these two questions.
Some of the facts have been stipulated. The stipulation of facts and attached exhibits are incorporated herein by this reference.
Petitioner is the Estate of Joseph M. Gagliardi. Joseph M. Gagliardi is hereinafter referred to as ‘decedent.‘
Decedent died testate at 12:15 a.m. on February 22, 1982. He was domiciled in Pennsylvania at the time of his death. At all times pertinent, he lived in a nursing home because of his physical disabilities; his mental capabilities were unimpaired. His son and daughter, Richard F. Gagliardi (Gagliardi) and Elaine Campbell, were appointed executors by the Register of Wills, Delaware County, Pennsylvania. At the time of his death, decedent had two other surviving children, Joseph Gagliardi, Jr. and Rosalind Schade.
On July 14, 1979, decedent granted Gagliardi a general power of attorney with respect to all of his assets. 1 On March 28, 1980, decedent gave Gagliardi a special power of attorney with respect to a checking account at the Philadelphia National Bank. 2 On February 4, 1982, decedent gave Gagliardi a special power of attorney with respect to assets being held for him by Bache, Halsey, Stuart, Shields Incorporated (Bache). 3 No reference to making gifts is contained in any of these documents.
Decedent intended to make gifts of $10,000 to each of his children during 1982 and gave Gagliardi oral instructions to take the necessary steps to carry out his intent. Decedent gave gifts of $3,000 to each of his children in 1979, 1980 and 1981. On February 4, 1982, Gagliardi wrote checks to himself and his brother and sisters on decedent's Philadelphia National Bank checking account. Each check was for $3,750. The checks were cashed as follows:
+------------------------------------+
¦Payee ¦Date cashed¦
+------------------------+-----------¦
¦Richard Gagliardi ¦2/19/82 ¦
+------------------------+-----------¦
¦Elaine Campbell ¦2/23/82 ¦
+------------------------+-----------¦
¦Joseph M. Gagliardi, Jr.¦2/23/82 ¦
+------------------------+-----------¦
¦Rosalind Schade ¦3/03/82 ¦
+------------------------------------+
An additional check was made out to Joseph Gagliardi, Jr., on February 20, 1982, in the amount of $95.00.
Securities were transferred to decedent's account at Bache on February 16, February 17, February 19 and February 23, 1982. Gagliardi told Bache that the securities were to be sold and gifts of ‘$10,000 or thereabouts‘ were to be given to each of decedent's children and their spouses. Bache required written instructions to issue checks, and all requests to Bache to issue checks were in writing, on forms supplied by Bache and specified the amounts and payees of the checks. 4 Securities were sold on February 18, February 22, February 23, February 24 and February 25, 1982.
On February 17, 1982, Gagliardi requested Bache to transfer funds in the amount of $5,000 to each of the children of the decedent. In accordance with this request Bache issued its checks, dated February 18, 1982, which were cashed as follows:
+------------------------------------+
¦Payee ¦Date cashed¦
+------------------------+-----------¦
¦Richard Gagliardi ¦2/19/82 ¦
+------------------------+-----------¦
¦Elaine Campbell ¦2/23/82 ¦
+------------------------+-----------¦
¦Joseph M. Gagliardi, Jr.¦2/25/82 ¦
+------------------------+-----------¦
¦Rosalind Schade ¦3/03/82 ¦
+------------------------------------+
On February 18, 1982, Gagliardi requested Bache funds in the amount of $7,200 to each of the spouses of the children of the decedent. In accordance with this request, Bache issued checks dated February 22, 1982, which were cashed as follows:
+-------------------------------+
¦Payee ¦Date cashed¦
+-------------------+-----------¦
¦Franklin Schade ¦3/03/82 ¦
+-------------------+-----------¦
¦Betsy A. Gagliardi ¦2/25/82 ¦
+-------------------+-----------¦
¦Lorraine Gagliardi ¦3/08/82 ¦
+-------------------+-----------¦
¦Gordon Campbell ¦3/10/82 ¦
+-------------------------------+
The checks were issued after the death of the decedent earlier on February 22, 1982.
On March 1, 1982, Bache issued additional checks as follows:
+----------------------------------------+
¦Payee ¦Amount ¦Date cashed¦
+------------------+---------+-----------¦
¦Elaine Campbell ¦$2,003.89¦3/04/82 ¦
+------------------+---------+-----------¦
¦Rosalind Schade ¦2,003.50 ¦3/08/82 ¦
+------------------+---------+-----------¦
¦Betsy A. Gagliardi¦2,003.50 ¦3/05/82 ¦
+------------------+---------+-----------¦
¦Lorraine Gagliardi¦2,003.50 ¦3/10/82 ¦
+----------------------------------------+
At the time Bache issued a check, it charged decedent's account with the amount thereof.
Petitioner filed a Federal estate tax return (Form 706) on August 19, 1982. Petitioner filed a partial Form 706 designated as ‘Revised‘ on April 8, 1983. The only change was the reduction in the balance of the Philadelphia National Bank checking account from $13,026.80 to $537.80.
OPINIONSection 2001 5 imposes a tax on the transfer of the taxable estate of all citizen and resident decedents. Section 2051 defines taxable estate as the gross estate less deductions. ‘The value of the gross estate shall include the value of all property to the extent of the interest therein of the decedent at the time of his death.‘ Section 2033. Whether decedent had an interest in property at the time of his death is governed by state law. Estate of Gamble v. Commissioner, 69 T.C. 942, 948 (1978). Petitioner has the burden of proof. Welch v. Helvering, 290 U.S. 111, 115 (1933); Rule 142(a).
Because all the transfers at issue were made by Gagliardi acting under powers of attorney given him by decedent, we must first determine whether, under relevant state law, those transfers were effective. 6 The general rule in Pennsylvania is that a power of attorney does not give the agent the power to make gifts of the principal's property. See Baldwin v. Loesel, 333 Pa. 26, 3 A.2d 389 (1939); Lewis v. Lewis, 203 Pa. 194, 52 A. 203 (1902). 7 The Pennsylvania Supreme Court has held, however, that when intent to give a gift is manifested and a power of attorney is ‘in the circumstances, the most »the donor† could do to effect delivery‘ an effective gift is given by the agent acting under that power. Cost v. Caletri, 483 Pa. 11, 394 A.2d 513, 518 (1978). The circumstances in that case were much the same as in this one — the donor was in a nursing home when he signed the power of attorney and died soon after the gift was made. Because of the similarity of the circumstances and our finding that decedent intended to give gifts to his family, we hold that the powers of attorney were broad enough to authorize the making of gifts on behalf of decedent. We turn now to the question as to whether the gifts were completed prior to decedent's death so as to exclude the amounts involved from his estate.
The first issue is whether the funds represented by the checks drawn by Gagliardi on decedent's bank account on February 4, 1982 are properly excludable from the gross estate. Respondent's regulations provide:
The amount of cash belonging to the decedent at the date of his death, whether in his possession or in the possession of another, or deposited with a bank, is included in the decedent's gross estate. If bank checks outstanding at the time of the decedent's death and given in discharge of bona fide legal obligations of the decedent incurred for an adequate and full consideration in money or money's worth are subsequently honored by the bank and charged to the decedent's account, the balance remaining in the account may be returned, but only if the obligations are not claimed as deductions from the gross estate. » Sec. 20.2031-5, Estate Tax Regs.†
It is clear that, under this regulation, the funds represented by the check written to Gagliardi, which was paid on February 19, 1982, i.e., prior to decedent's death, were properly excluded from the estate since the funds were no longer on deposit or otherwise in decedent's possession. Cf. Cost v. Caletri, supra.
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