Awtry's Estate v. Commissioner of Internal Revenue

• Decision Date: 26 April 1955
• Docket Number: No. 15181.,15181.
• Citation: 221 F.2d 749
• Parties: ESTATE OF Emmet AWTRY, Deceased, Nellie Awtry, Executrix, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

221 F.2d 749 (1955)

ESTATE OF Emmet AWTRY, Deceased, Nellie Awtry, Executrix, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 15181.

United States Court of Appeals Eighth Circuit.

April 26, 1955.

COPYRIGHT MATERIAL OMITTED

Ned P. Gilbert, Oskaloosa, Iowa, for petitioner.

L. W. Post, Sp. Asst. to the Atty. Gen. (H. Brian Holland, Asst. Atty. Gen., and Ellis N. Slack, Sp. Asst. to the Atty. Gen., were with him on the brief), for respondent.

Before SANBORN, COLLET and VAN OOSTERHOUT, Circuit Judges.

VAN OOSTERHOUT, Circuit Judge.

This case is before this court on petition by the Estate of Emmet Awtry, Deceased, for review of the decision of The Tax Court, 22 T.C. 91, determining a deficiency in estate tax in the amount of $3,823.12. The Commissioner and The Tax Court denied petitioner a marital deduction as to certain property, hereinafter described, held by decedent and his spouse as joint tenants. The court based its decision upon its conclusion that the interest of the surviving spouse, Nellie Awtry, in the joint tenancy property was a terminable interest as defined by 26 U.S.C. § 812(e) (1) (B).¹ The petitioner contends that The Tax Court erred in so holding for the reason that the joint tenancy property passed as the result of the joint tenancy contract, that the surviving spouse did not obtain an interest in any of such property by virtue of the will, and that the interest acquired in the joint tenancy property by the surviving sponse was an absolute and complete interest and not a terminable interest. The decedent, Emmet Awtry, and his spouse, Nellie, were at all times material to this controversy residents of the State of Iowa.

On July 21, 1947, Emmet Awtry and Nellie Awtry executed a joint mutual will which, so far as material to this controversy, provides:

"Article Two.

"Whatever property we own, real or personal, we jointly own whether or not so recorded, and we have agreed and do hereby agree that the survivor of us shall have the full use and income and control of all our property as long as the survivor of us shall live.

"Article Three.

"After the death of the survivor of us all our property, real and personal, shall be sold by our trustees hereinafter named and the net proceeds shall be divided into two equal parts to be distributed amongst our nephews and nieces hereinafter named, to-wit: * * *"

Emmet Awtry died July 31, 1950, survived by his wife, Nellie. The foregoing instrument was admitted to probate on August 23, 1950, as the last will of Emmet Awtry. His spouse, Nellie Awtry, qualified as executrix and elected to take under the will. A timely federal estate tax return was filed. As adjusted the following values are agreed upon:

                  Gross estate (including full
                    value of joint tenancy
                    property upon which marital
                    deduction is being
                    claimed)                       $106,181.62
                  Agreed deductions (excluding
                    specific exemption and
                    marital deductions)              11,608.72
                                                   ___________
                  Adjusted Gross Estate             $94,572.90
                

Deducting the $60,000 specific exemption from the adjusted gross estate leaves $34,572.90 subject to tax, upon which the tax due is the amount determined by The Tax Court. The marital deduction as to the joint tenancy property if allowable is in excess of the amount the Government contends is taxable, and if the estate is entitled to a marital deduction on the joint tenancy property there is no tax due.

The property as to which the marital deduction is claimed and the facts relative thereto are set out in the stipulation of the parties as follows:

"Among the assets making up the gross estate which Petitioner contends qualify for the marital deduction are the following:

"a. United States Savings bonds and United States Defense bonds, Series `E\' in the total value of $39,948.00 and United States Savings bonds, Series `G\' in the total amount of $2,000.00. The serial numbers of such bonds and the dates of acquisition thereof are as set forth in the federal estate tax return, Joint Exhibit 1-A, and the appraisement report of the Iowa State Inheritance Tax Appraisers attached to and made a part of said exhibit. All of said United States bonds were registered jointly in the names of `Mrs. Nellie Awtry or Emmet Awtry\' or `Mr. Emmet Awtry or Nellie Awtry.\'

"b. A checking account in the Pella National Bank, Pella, Iowa in the total amount of $6,718.65 deposited with the bank pursuant to an agreement between the depositors and the said bank that the amounts were deposited to the credit of and should pass to the survivor of either the decedent Emmet Awtry or Nellie Awtry.

"c. Real estate of the value of $10,000.00 acquired by warranty deed on the 28th day of February, 1944, by which warranty deed real estate was conveyed to Emmet Awtry and Nellie Awtry, as joint tenants and not as tenants in common, with full right of survivorship, said real estate described as follows * * *."

Emmet Awtry contributed the consideration for the acquisition of said assets. The petitioner does not claim a marital deduction as to any property of which Emmet Awtry died seized. The instruments creating the joint tenancy are Iowa contracts. The will was executed and probated in Iowa. The effect that these various instruments have upon passing title to the property in controversy must be determined by the Iowa law. The State law creates the legal interests and rights. Helvering v. Stuart, 317 U.S. 154, 161, 63 S.Ct. 140, 87 L.Ed. 154; Kasper v. Kellar, 8 Cir., 217 F.2d 744; Irvine v. Helvering, 8 Cir., 99 F.2d 265.

Joint tenancies in real and personal property have long been recognized and enforced by the Iowa courts. Some of the cases dealing with real estate will first be considered.

In Wood v. Logue, 167 Iowa 436, 149 N.W. 613, real estate was deeded to three joint tenants. Upon the death of the first the administrator of her estate sought to sell the interest of the deceased joint tenant for the payment of debts. The Supreme Court denied this relief holding that upon death the interest of the joint tenant terminated. In the course of the opinion the court stated, 149 N.W. at page 615:

"* * * The survivors do not acquire title through the deceased, but by virtue of the deed. * * * As we have already suggested, neither of the successive survivors takes or receives anything from or through the deceased tenant for the title is derived directly from the grantor through the deed which created the tenancy. * * * Such a disposition of property is not obnoxious to any statute of this state or to any recognized principle of common law, nor can we conceive of a good reason for holding it to be against any accepted rule of public policy. * * * It follows that Sarah Logue, being first of the grantees to die, did not die seized of any heritable interest in the land or of any right or interest therein which could be properly subjected to sale by the administrator of her estate. None of the cases decided by this court and cited by appellee is inconsistent with this conclusion."

In Hruby v. Wayman, 230 Iowa 653, 298 N.W. 639, title was acquired by husband and wife by deed in joint tenancy. The husband died first. The court quieted title in the wife's devisees against the claim of the husband's heirs, stating, 298 N.W. at page 641:

"We conclude the language in the granting clause of the deed, `or the survivor of either,\' is sufficient to clearly manifest an intention to create an estate in joint tenancy with survivorship incident thereto. It follows that upon the death of Grant Wayman no title to the realty passed to his heirs. Instead the title vested absolutely in Lena Wayman under the deed, and subsequently in appellees as devisees under her will. * * *"

In Wernet v. Jurgensen, 241 Iowa 833, 43 N.W.2d 194, at page 197, we find the following:

"* * * Ground D of the motion is based upon the allegations in plaintiff\'s pleadings that Hans and Goldie were joint tenants with right of survivorship. The rule is settled that when Hans died title to the property immediately vested absolutely in Goldie under the 1942 deed. Hruby v. Wayman, 230 Iowa 653, 298 N.W. 639; Switzer v. Pratt, 237 Iowa 788, 23 N.W.2d 837; 48 C.J.S., Joint Tenancy, § 1, p. 911. * * *"

Joint tenancies in bank accounts have been considered and recognized by the Iowa court on a number of occasions. In Hill v. Havens, 242 Iowa 920, 48 N. W.2d 870, the prior decisions involving joint tenancies in bank deposits are analyzed and considered. In that case the beneficiaries under the decedent's will sought to impress a resulting trust upon a joint tenancy bank account and co-ownership Government bonds. This relief was denied. In discussing some of the prior cases involving the same problem, the court stated, 48 N.W.2d at page 875:

"* * * We think it should also be pointed out again that we had not, at the time of the decision of these cases, clearly adopted the contract and joint tenancy theory. * * *"

The present rule is thus stated, 48 N. W.2d at page 876:

"* * * It is now the settled law in Iowa that when a definite written agreement, such as we have here, is made by a depositary bank with its customers, that such agreement is binding upon the bank and the parties signatory, and if it is clear in its terms and meaning, it cannot be changed by parol evidence. The contract is that the bank will, in consideration of the deposit of funds with it and the creation of a debtor-creditor relation between itself and its depositors, consider them as owners in joint tenancy, with right of survivorship, and not as tenants in common; and that upon the death of either depositor any balance in the account shall become the absolute property of the survivor. Language more definite, more explicit, could hardly be devised."

See also McManis v. Keokuk Savings Bank & Trust Company, 239 Iowa 1105, 33 N.W.2d 410; In re Estate of Murdoch, 238 Iowa 898, 29 N.W.2d 177.

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