Blair v. Commissioner of Internal Revenue
| Citation | 31 BTA 1192 |
| Decision Date | 31 January 1935 |
| Docket Number | 63741.,Docket No. 42313 |
| Parties | EDWARD T. BLAIR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
C. F. Selfridge, Esq., and J. F. Dammann, Esq., for the petitioner.
Bruce A. Low, Esq., for the respondent.
These are proceedings, duly consolidated for hearing and opinion, for the redetermination of deficiencies in income taxes as follows:
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Docket No. | Year involved | Deficiency
------------------------|---------------|-------------
42313 _________________ | 1924 | $7,642.52
42313 _________________ | 1925 | 10,399.94
42313 _________________ | 1926 | 12,876.36
63741 _________________ | 1929 | 14,533.58
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In Docket No. 42313 it is alleged that the respondent erred (1) in including in the income of the petitioner in the years 1924, 1925, and 1926 the respective amounts of $30,000, $65,356.89, and $58,434.96, which, it is alleged, were never received by petitioner or credited to him, but were in fact income of the trust estate created under the will of William Blair, father of this petitioner, which income was properly distributed by the trustees of the estate of William Blair to Edith Blair, Edward Seymour Blair, Lucy Blair Linn, and William McCormick Blair; and (2) in increasing the petitioner's income in the amount of $16,856.89 as a result of the disallowance of deductions by the trustees of the estate of Edward T. Blair William Blair for commissions and legal expenses paid in connection with two leases on real estate which constituted a part of the assets of the estate.
In Docket No. 63741 it is alleged that the respondent erred (1) in including as additional income of the petitioner from the William Blair trust the sum of $57,000 which was paid in 1929 by the trustees of the trust to children of the petitioner pursuant to assignments to such children of part of the petitioner's interest in the trust estate; (2) in increasing the net income of the William Blair trust and increasing the income of the petitioner as the life beneficiary of such trust in the amount of $14,541.34 on account of the disallowance of certain deductions claimed as necessary expense in the operation of a certain building belonging to the trust located at 608 South Wabash Avenue, Chicago, Illinois, such expenditures being $5,580 paid as commission on April 30, 1929, to a real estate broker for services in connection with the consummation of a 10-year lease on the premises, and $10,000 paid for expenditures for repairing such building, a total of $15,580, of which the respondent allowed only $1,038.66, being the portion allocable to the eight months of the year 1929 during which the tenant occupied the premises; and (3) in not allowing the petitioner a deduction of an amount of $762.57, being a part of the sum of $17,619.46 paid out by the trustees in 1925 as commissions to real estate brokers for leases on trust property and legal fees in connection therewith, which amount was claimed by the trustees as a deduction on their return for the year 1925, the respondent holding that the amount should be spread over the period of the lease. This assignment of error is in the alternative; that is, in the event that the respondent's holding that the amount of $17,619.46 should be spread over the period of the lease is sustained by the Board in Docket No. 42313.
These proceedings were submitted upon a stipulation of facts and certain exhibits, all of which we incorporate herein by reference.
FINDINGS OF FACT.
The petitioner is a resident of Chicago, Illinois. His father, William Blair, was also a resident of Chicago, Illinois. The latter died May 10, 1899, leaving a last will and testament, which was duly admitted to probate in the Probate Court of Cook County, Illinois. Such will provided, inter alia, for the transfer of all the deceased's real estate subject to a life estate of his wife in the homestead, and also all stocks and bonds of the deceased to the deceased's nephew, Chauncy J. Blair, and the deceased's son, Edward Tyler Blair (the petitioner herein) in trust. It was provided that the trustees should keep the property in good condition and pay all charges against it. The trustees were directed to pay the deceased's wife one half of the net income from the trust property as it arose or accrued during her lifetime, and to pay the other half to the petitioner during his lifetime. It was provided that upon the death of the wife of the deceased the petitioner should receive the whole of the net income from the trust property as it arose or accrued during his lifetime. It was further provided that after the death of the petitioner the net income should be paid to the wife of the deceased or to the daughter-in-law of the deceased (wife of the petitioner) or the surviving children, under certain circumstances, until the youngest child of the petitioner reached the age of 21 years, whereupon the trustees were to transfer the trust property to such children of the petitioner. The will contained the following provision:
Twenty: I do hereby declare and direct that the income from said trust fund and estate which is herein ordered to be, from time to time as the same shall be received paid to my said wife and to my said son and to his said wife and to their children and descendants of children in the cases aforesaid shall be paid to them directly upon their separate order and receipt therefor, for their sole and separate use respectively, and that the same shall not be nor be made nor held in any manner nor by any proceedings whether in law or equity while yet in the hands of said trustees liable for or subject to the payment of any of the debts or obligations of either of the persons entitled to the same as above herein set forth.
The wife of the deceased died on or about March 13, 1923.
On or about April 2, 1923, the petitioner made, executed, and delivered a certain indenture in which he is the party of the first part and Lucy Blair Linn, his daughter, is the party of the second part. Such indenture provided as follows:
That the said party of the first part, in consideration of love and affection and One Dollar ($1) in hand paid by the party of the second part, the receipt whereof is hereby acknowledged, does hereby sell, assign, transfer and set over unto said party of the second part an interest amounting to Six Thousand Dollars ($6,000) for the remainder of the current calendar year, and Nine Thousand Dollars ($9,000) in each calendar year thereafter in the net income which the said party of the first part now is, or may hereafter be, entitled to receive during his life from the Trustees under the Will of William Blair, deceased, late of the said City of Chicago; and the said party of the first part hereby authorizes and empowers said party of the second part, either in her own name or in the name of the said party of the first part, to receive and receipt to the Trustees under the Will of William Blair, deceased, for Six Thousand Dollars ($6,000) for the remainder of the current calendar year and for Nine Thousand Dollars ($9,000) in each year thereafter of the income and moneys which shall at any time become payable to said party of the first part under or by virtue of the terms and provisions of the said Will of William Blair, deceased.
All payments hereunder shall be made in person to said party of the second part and not upon any written or verbal order nor upon any assignment, nor upon any transfer by operation of law, and shall cease upon the death of either party hereto.
On or about April 2, 1923, the petitioner made, executed, and delivered another indenture, in which he is party of the first part and Edith Blair, his daughter, is the party of the second part. Such indenture is in all material respects identical with the above quoted indenture except that the interest transferred amounted to $9,000 in each and every calendar year.
On or about April 2, 1923, the petitioner made, executed, and delivered a certain indenture in which he is the party of the first part and Edward Seymour Blair, his son, is the party of the second part. Such indenture is identical with that between the petitioner and Edith Blair.
On September 1, 1924, by an indenture entered into between the petitioner and Lucy Blair Linn, his daughter, the petitioner in consideration of love and affection and one dollar, sold, assigned, transferred, and set over to Lucy Blair Linn "an interest amounting to Two Hundred Fifty Dollars ($250) in each month in addition to the assignment made under date of April 2, 1923, in the net income which the said party of the first part, petitioner, now is or may hereafter be, entitled to receive during his life from the Trustees under the Will of William Blair, Deceased." Therein the petitioner empowered Lucy Blair Linn to receive and receipt to the trustees for the money in her own name or in his name. This indenture also provided that payments should cease upon the death of either of the parties thereto.
On December 1, 1925, the petitioner and Lucy Blair Linn entered into another indenture similar in all material respects to the one executed between them on September 1, 1924, whereby the petitioner transferred to her an interest amounting to $500 per month in addition to the assignments already made, in the net income which the petitioner was entitled to receive during his life from the trustees under the will of William Blair, deceased.
By indentures similar in all respects to those entered into between the petitioner and Lucy Blair Linn, the petitioner on each of the dates of September 1, 1924, and May 1, 1925, transferred to Edith Blair, an interest of $250 per month, in addition to the assignments already made, in the net income which the petitioner was entitled to...
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