Du Val's Estate v. Commissioner of Internal Revenue, 11046.
| Decision Date | 26 December 1945 |
| Docket Number | No. 11046.,11046. |
| Citation | 152 F.2d 103 |
| Parties | DU VAL'S ESTATE v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Ninth Circuit |
M. W. Dobrzensky and James H. Anglim, both of Oakland, Cal., for petitioners.
Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, Robert N. Anderson, and Leonard Sarner, Sp. Assts. to Atty. Gen., for respondent.
Before GARRECHT, MATHEWS, and ORR, Circuit Judges.
This is a petition by the executors of the last will and testament of Ethel M. DuVal, deceased, for review of a decision of the Tax Court of the United States sustaining the action of the Commissioner of Internal Revenue holding a deficiency existed in the federal estate tax paid by petitioners on the said estate.
On August 17, 1937, the M. K. Blake Estate Company, secured a loan from the Bank of America National Trust & Savings Association of Oakland, California, in the sum of $162,000, evidenced by the company's promissory note of the same date and secured by a deed of trust executed the same day. At the same time, and at the bank's request, the decedent, Ethel M. DuVal, and her sister, Mary J. Robinson, endorsed the Note.
On November 2, 1941, the said M. K. Blake Estate Company, borrowed an additional $20,000, giving its promissory note therefor which was also secured by a deed of trust endorsed by the decedent and her sister. The sisters, by their endorsements, became primarily liable to pay the debt. Mrs. DuVal died April 9, 1942.
At the time of the decedent's death the unpaid balance of the principal of the two notes was $175,000. After the decedent's death the bank presented its claim for $175,000 against her estate. Said claim was allowed by the executors and probate court for the full amount. The executors of decedent's will claimed a deduction of the $175,000 in the federal estate tax return as a debt against the decedent.
The questions presented are:
May the amount of decedent's asserted liability be deducted from the value of the gross estate under Section 812(b) (3) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 812(b) (3), and, if so, should the value of decedent's rights over against the corporate maker and co-guarantor be included in the gross estate under Section 811 of the Internal Revenue Code, 26 U.S.C.A.Int.Rev.Code, § 811?
If rights over existed in favor of deceased at the time of her death the questions must be answered in the affirmative.1
Petitioners contend there were no rights of contribution, subrogation or reimbursement in existence when decedent died which could be included in her estate or valued as of the date of decedent's death; that no such rights exist in California until the guarantor actually pays the guaranteed debt. This argument was advanced and rejected in the case of Parrott v. Commissioner.2 We think the rights over existing in California in favor of the person secondarily or primarily liable become effective in California upon payment of the obligation as they do in other states.3
It is of no importance whether they are new rights independent of the original contract or old rights emerging from inchoate rights lying dormant. The revenue acts are intended to have a uniform application and to bring into the gross estate what is fundamentally the same in all...
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