Detroit Bank & Trust Co. v. Comm'r of Internal Revenue (In re Estate of Park), Docket No. 2621-70.
| Decision Date | 28 February 1972 |
| Docket Number | Docket No. 2621-70. |
| Citation | 57 T.C. 705 |
| Parties | ESTATE OF MABEL F. COLTON PARK, DECEASED, THE DETROIT BANK AND TRUST COMPANY, ADMINISTRATOR WITH WILL ANNEXED, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
James E. Beall, for the petitioners.
James C. Lynch, for the respondent.
Mabel F. Colton Park died Mar. 1, 1968. On the day of her death she owned a residence and a cottage. The will admitted to probate left both parcels of real estate to the decedent's four sons. The sons determined that none of them would be interested in retaining the real estate and therefore requested petitioner, Detroit Bank & Trust Co., administrator, to sell the property. In connection with the sales petitioner incurred expenses totaling $4,285.30, which were deducted on the Federal estate tax return. Held, the property was not sold in order to pay expenses of administration, preserve the estate, or to effect distribution, but rather was disposed of solely to benefit the heirs, and therefore the expenses incurred in the sale are not deductible.
The respondent determined a deficiency in the estate tax of the Estate of Mabel F. Colton Park in the amount of $1,505.59. Due to concessions the issues remaining for adjudication are:
(1) Whether the expenses incurred in connection with the sale of real estate were necessary to the administration of the estate so as to be deductible under section 2053(a), I.R.C. 1954,1 or, in the alternative, can such expenses be used to reduce the fair market value of the property for estate tax purposes.
(2) Whether the expenses in connection with the maintenance and preservation of the real estate prior to sale are deductible as administrative expenses.
Sone of the facts have been stipulated and are so found. The stipulation of facts, together with the exhibits attached thereto, are incorporated herein by this reference.
Petitioner Detroit Bank & Trust Co. is the duly appointed administrator with will annexed of the Estate of Mabel F. Colton Park, who died testate March 1, 1968, a resident of Grosse Pointe Farms, Wayne County, Mich. The decedent names two of her four sons, John E. Park and A. Colton Park, to act as coexecutors with power to sell any and all of her property. Decedent's will was duly admitted to probate by the Probate Court of Wayne County, Mich., on March 8, 1968. The executors requested the appointment of petitioner as administrator. Petitioner was so appointed on March 29, 1969, and tax in the amount of $15,257.31 was paid with said return.
On the date of her death, decedent owned a two-story single-family residence (hereinafter referred to as residence) located in Grosse Pointe Farms, Mich., and a one-story frame cottage (hereinafter referred to as cottage) located in Sanilac County, Mich. Both the residence and cottage were included as part of the probate assets and formed part of the residue of the estate, left to decedent's four sons under the terms of the will.
The total probate estate was $123,234.51 on the date of decedent's death. It consisted of the following:
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¦Residence ¦$52,000.00 ¦
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¦Cottage ¦24,750.00 ¦
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¦U.S. savings bonds, series E ¦24,069.62 ¦
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¦350 shares Continental Associates, Inc. common stock ¦350.00 ¦
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¦Cash in bank account ¦1,807.45 ¦
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¦Social Security benefit ¦97.90 ¦
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¦Income on hand and accrued due deceased's estate from trust ¦6,625.55 ¦
¦accounts ¦ ¦
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¦Household furniture at 253 Lewiston Road ¦5,841.25 ¦
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¦Household furniture and personal effects at 2315 Lake Shore Road ¦250.00 ¦
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¦Jewelry ¦2,090.75 ¦
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¦Refund of overpayment of 1967 Federal income tax ¦347.61 ¦
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¦Proceeds from Connecticut General annuity policy ¦5,004.38 ¦
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¦Total ¦$123,234.51¦
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Prior to the decedent's death, her four sons had determined that none of them would be interested in retaining the real estate. Therefore upon the death of decedent the sons requested petitioner to sell the property. In this regard the cottage was offered for sale on or about May 21, 1968, and the residence on or about June 1, 1968.
On August 1, 1968, the cottage was sold for $25,000; $10,000 as a downpayment, the remainder payable in monthly installments of $150. In connection with the sale petitioner incurred expenses of $1,935 which were deducted on the Federal estate tax return. On September 16, 1968, petitioner made a distribution of $14,0-0 to the four heirs.
The sale of the residence was consummated on March 24, 1969, for $53,000. Fifty thousand dollars was paid in cash and the balance was paid by a note given directly to the four heirs. Petitioner incurred expenses of $2,350.30 in connection with the sale of the property, which were deducted on the Federal estate tax return. On April 7, 1969, petitioner distributed $40,000 to the four heirs.
As of decedent's date of death the following constituted claims against the assets of her probate estate:
+---------------------------------------------------------------+
¦Funeral expenses ¦$2,256.75¦
+-----------------------------------------------------+---------¦
¦Various debts contracted by decedent ¦2,230.33 ¦
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¦Federal estate tax liability as disclosed on Form 706¦15,257.31¦
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¦Michigan inheritance tax ¦1,425.00 ¦
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The probate accounting, filed by petitioner for the years ended March 1, 1969, and March 1, 1970, listed deductions from principal at a total figure of $30,753.82, consisting of the following:
+---------------------------------+
¦Administrative expenses¦$9,235.29¦
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¦Claims ¦2,472.24 ¦
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¦Taxes ¦17,910.60¦
+-----------------------+---------¦
¦Miscellaneous ¦1,135.69 ¦
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¦Total ¦30,753.82¦
+---------------------------------+
This figure included costs of selling the residence and cottage properties as well as the claims noted above.
From the date of decedent's death until sale of the residence, petitioner expended from the estate $2,068.20 for real estate taxes and for maintenance of the residence. For maintenance of the cottage a total sum of $169.68 was expended out of estate assets. These expenses were also included within probate accounting noted above.
Respondent in the notice of deficiency disallowed the deduction of the expenses incurred in the sale of the property.
Petitioner in its petition requests a determination that an overpayment be found to exist, asserting that the expenses incurred in maintaining the property prior to sale are deductible and were not deducted as administrative expenses.
OPINIONThe first issue relates to whether the expenses incurred in the sale of real estate are deductible as an administration expense under section 2053(a) 2 or, in the alternative, can such expense reduce the fair market value of the property for estate tax purposes.
The facts which give rise to this controversy are set forth in our findings and may be briefly summarized. Mable F. Colton Park died March 1, 1968. On the date of her death she owned a residence and a cottage. The will admitted to probate left both parcels of real estate to the decedent's four sons as part of the residue estate. The sons determined that none of them would be interested in retaining the real estate and therefore requested petitioner, Detroit Bank & Trust Co., administrator, to sell the property. On August 1, 1968, the cottage was sold, and on March 24, 1969, the residence was sold. In connection with the sales petitioner incurred expenses totaling $4,285.30, which were deducted on the Federal estate tax return.
Respondent contends that the expenses incurred in the sale are not deductible as they were not necessary for the proper administration of the estate, but rather were incurred for the individual benefit of the heirs. In support of this assertion respondent points to the...
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