Estate of Bond v. Commissioner, Docket No. 218-64.
| Decision Date | 26 January 1966 |
| Docket Number | Docket No. 218-64. |
| Citation | 1966 TC Memo 21,25 TCM (CCH) 115 |
| Parties | Estate of Jessie E. Bond, Franklin P. Bond, Executor v. Commissioner. |
| Court | U.S. Tax Court |
Robert J. Richards, Jr., for the petitioner. Frederick A. Griffen, for the respondent.
Memorandum Findings of Fact and Opinion
The petitioner is the Estate of Jessie E. Bond, deceased. The respondent determined a deficiency in estate tax in the amount of $6,953.40. Two issues are presented for decision: (1) Whether certain cash gifts made by decedent to her children within three years prior to her death were made in contemplation of death within the meaning of section 2035 of the Internal Revenue Code of 1954; and (2) whether the value of decedent's residence at the time of death was $18,000, as reported on the estate tax return, or $20,000, as determined by respondent.
Some of the facts are stipulated.
The stipulation of facts and exhibits attached thereto are incorporated by this reference.
Jessie E. Bond was born January 5, 1883, and died on February 4, 1961, at the age of 78. She was survived by three children: Franklin Pierce Bond, Marguerite (Bond) Stafford, and Cynthia (Bond) Joyce, then of the approximate ages of 50, 40, and 48, respectively.
The decedent left a will dated April 6, 1956. After a specific bequest, it left the remainder of the estate in equal shares to her three children. Her son Franklin P. Bond is the duly appointed and qualified executor of the estate. The estate tax return was filed April 26, 1961, with the district director of internal revenue at Portsmouth, New Hampshire.
During her lifetime Jessie E. Bond made gifts of securities or cash to each of her three children named above in the following amounts:
December 6, 1955 .......... $8,844.33
February 21, 1956 ......... 6,650.00
May 1, 1959 ............... 3,000.00
January 26, 1960 .......... 3,000.00
November 17, 1960 ......... 3,000.00
January 26, 1961 .......... 3,000.00
The transfers of funds made on January 26, 1961, were made by Franklin pursuant to instructions given by the decedent in December 1960. A gift tax return was filed by Franklin for decedent covering the gifts made in 1960.
During the period from May 1, 1959, to January 24, 1961, Jessie E. Bond lived alone in her eight-room house in Rochester, New Hampshire, which she kept and maintained without assistance of employed help. She did her own shopping until her last illness. The house was a frame structure of two stories with one bathroom.
Franklin P. Bond is president of the Wolfeboro National Bank, Wolfeboro, New Hampshire. He is married and has no children. In 1955 and 1956 he was an assistant cashier of the bank and later was executive vice president thereof. At the time of the decedent's gifts to him in 1955 and 1956 his salary was low and the gifts were helpful. In 1959 and 1960 he was buying a farm to live on and the gifts were helpful to him in acquiring it. At that time his earnings were approximately $11,000 to $12,000 per year. He transferred funds, in accordance with instructions from the decedent, from her account to his account and those of Marguerite and Cynthia.
The husband of Marguerite was in the undertaking business in 1959 and 1960. He also operated a country store in Stowe, Vermont. The Staffords had one son who was in the University of Michigan between 1953 and 1960 and who married while in college. The gifts from the decedent in 1955 and 1956 and also in 1959 and 1960 were helpful to them in assisting their son during these years. The Staffords' income tax returns reported taxable income of $15,437.84 in 1959 and $19,051.97 in 1960.
The husband of Cynthia was in 1959 and 1960 an airplane pilot for the National Life Insurance Company of Vermont. The Joyces had one son who was 14 years old in 1959. The gifts they received from the decedent in 1955 and 1956 were helpful to them as Cynthia's husband had been unemployed for some time. The gifts they received from the decedent in 1959 and 1960 were given in order to enable them to send their son to college and were later so used. They would have been unable to do this without such gifts. The Joyces' income in 1959 and 1960 was approximately $9,800 per year.
From 1947 decedent was under treatment by a physician from time to time for arthritis, hypertension, and arteriosclerosis. The doctor prescribed digitalis in daily dosages as early as 1950 and prescribed paratrate in 1953. She visited the physician twice in 1957, once in 1958, and once in 1960. Her husband and her brother had died from heart ailments.
In June 1960 the doctor found her condition deteriorated, but not alarmingly. He increased one medication because of coronary insufficiency. He did not see the patient again until January 1961.
On January 24, 1961, the doctor was called and found her in circulatory failure, and critically ill. She was admitted to the hospital and placed in an oxygen tent. The cause of death on February 4 was myocardial failure due to arteriosclerotic heart disease and generalized arteriosclerosis.
During her lifetime the decedent was cheerful and did not complain about her health. She did not indicate to her physician an anticipation of death. She expressed to her son an interest in the welfare and happiness of her children and a desire to help them financially.
The estate tax return reported the value of decedent's residence as $18,000. It listed the transfers made by decedent in the years 1955 to 1961 and stated the motive for such gifts as "affection for children." It reported a gross estate of $85,436.67, taxable estate of $18,544.72, and tax of $1,439.92.
Respondent determined that the fair market value of decedent's residence was $20,000 at the time of her death and that the transfers of cash in 1959, 1960, and 1961 aggregating $36,000 were made in contemplation of death.
The transfers of cash made in 1959, 1960, and 1961 were not made in contemplation of death.
The fair market value of decedent's residence at the time of death was $20,000.
OpinionRespondent contends that the cash distributions made by the decedent in 1959, 1960, and 1961 were made in contemplation of death and are includable in the gross estate by reason of section 2035, Internal Revenue Code of 1954.1 Since these distributions were made within three years before the date of death, they are deemed, under subsection (b), to have been made in contemplation of death unless shown to the contrary.
Both parties cite United States v. Wells 2 USTC ¶ 715, 283 U. S. 102 (1931). In that case the governing principles were stated (pp. 117-119):
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