Borner v. Comm'r of Internal Revenue (In re Estate of Borner)
| Decision Date | 20 December 1955 |
| Docket Number | Docket No. 39669. |
| Citation | 25 T.C. 584 |
| Parties | ESTATE OF A. CARL BORNER, DECEASED, BERTHA J. BORNER, EXECUTRIX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Where a husband and wife, holding property as tenants by the entireties, transferred such property to an irrevocable trust, reserving the income to themselves for their joint lives and for the life of the survivor, held, such property was includible in the husband's gross estate under section 811(c) of the 1939 Code, both as a transfer in contemplation of death and a transfer in trust with the right to income reserved for life, and held, further, that only one-half the value of such property is includible in decedent's gross estate. Robert R. Batt, Esq., for the petitioner.
Edward Resin, Esq., for the respondent.
The Commissioner determined a deficiency in estate tax in the amount of $11,546.21. The issues are: (1) Whether a transfer made by decedent and his wife, tenants by the entireties, to an inter vivos irrevocable trust, with income reserved for their joint lives and for the life of the survivor, was a transfer in contemplation of death under section 811(c) of the Internal Revenue Code of 1939; (2) if such transfer was in contemplation of death, the value of the property to be included in the gross estate; and (3) in spite of the fact that such property was transferred in trust, whether or not it should be included in decedent's gross estate under section 811(e).
Other issues, namely, an unrelated valuation question and the deductibility of additional counsel fees and other expenses have been agreed to by the parties in the stipulation and shall be given effect under the Rule 50 computation.
All the facts have been stipulated and are found accordingly.
Petitioner is the duly qualified executrix of the Estate of A. Carl Borner, deceased. The Federal estate tax return for the Estate of A. Carl Borner, deceased, was filed with the collector of internal revenue for the first collection district of Pennsylvania at Philadelphia, Pennsylvania.
Decedent died on November 7, 1947, a citizen of the United States and a resident of Philadelphia, Pennsylvania, being survived by his wife, Bertha J. Borner.
Petitioner made a timely election to have the decedent's gross estate valued, for purposes of the Federal estate tax, as of a date subsequent to decedent's death as authorized by section 811(j) of the Internal Revenue Code of 1939.
On May 18, 1938, the decedent and his wife, Bertha J. Borner, both being then 62 years old, transferred in trust certain stock and securities owned by them as tenants by the entireties and having a fair market value as of May 18, 1938, of $85,140.41, together with certain securities owned by decedent's wife alone and having a fair market value as of that date of $8,276.11. The consideration for the stock and securities owned by decedent and his wife, as tenants by the entireties, had been furnished by the decedent alone.
The indenture of trust of May 18, 1939, provided that the net income of the trust was to be paid to the grantors, equally ‘share and share alike’ for their joint lives, with all the income to be paid to the survivor for the balance of his or her life. Upon the death of such survivor, income and principal of the trust were to go to other persons. There was no power of revocation under the trust.
The fair market value of the assets comprising the corpus of the trust as of the optional valuation date was $112,812.81. Of this amount, $102,818.31 was attributable to the entireties property transferred in trust by the decedent and his wife, Bertha J. Borner, on May 18, 1938, and the balance was attributable to the separate property of the wife transferred in trust by her on that date.
Petitioner included in gross estate with respect to the said trust the amount of $55,149.59. In his notice of deficiency, respondent increased the amount includible in gross estate with respect thereto to $102,818.31.
Decedent executed his will on June 30, 1938, leaving his entire estate to his wife, and if she did not survive him the estate would go to the trustees of the 1938 trust to be held upon the terms of said trust.
On May 18, 1938, the decedent was suffering from Parkinson's disease. The initial symptoms of the disease appeared in 1927, at which time the decedent was informed by his physicians that Parkinson's disease was a progressive malady which might be a contributory cause of his eventual death but which would not necessarily shorten his normal life expectancy. By 1936 the decedent's condition was such that he was forced to retire from his business. By May 18, 1938, his condition rendered him incapable of walking or speaking intelligibly and he required the constant attention of a servant. One of the causes of his death on November 7, 1947, was Parkinson's disease.
At the time of his death decedent and his wife owned as tenants by the entireties a certain house on the lot situated at 1723 West Erie Avenue, Philadelphia, Pennsylvania, all of the consideration for which had been furnished by the decedent. The fair market value of said house and lot as of the optional valuation date was $11,500.
The transfer in trust made by decedent and his wife on May 18, 1938, of the stock and securities owned by them as tenants by the entireties was made in contemplation of death within the meaning of section 811(c) of the 1939 Code.
At the time of the transfer in trust, the interest of decedent in the stock and securities transferred was one-half the value of such property. This amount is includible in decedent's gross estate.
Decedent and his wife, Bertha J. Borner, both being then 62 years old, made a transfer in trust of stock and securities owned by them as tenants by the entireties. At the date of such transfer, May 18, 1938, this property had a value of $85,140.41, and at the optional valuation date (sec. 811(j)), the value was $102,818.31. Consideration for the stock and securities owned by decedent and his wife as tenants by the entireties had been furnished by the decedent alone. The trust was irrevocable, and the settlors reserved the income for the joint lives and for the life of the survivor. At the time of the transfer, decedent was suffering from Parkinson's disease. This malady had afflicted him since 1927, when he had been informed by...
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