Estate of Cady v. Commissioner
| Decision Date | 15 August 1979 |
| Docket Number | Docket No. 11664-77. |
| Citation | 1979 TC Memo 318,38 TCM (CCH) 1228 |
| Parties | Estate of Annabel L. Cady, Deceased, Elwyn L. Cady, Jr., Ancillary Administrator v. Commissioner. |
| Court | U.S. Tax Court |
Elwyn L. Cady, Jr., pro se, 1919 Drumm Ave., Independence, Mo., James T. Million, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent has determined an estate tax deficiency of $4,397.62, and a section 6651(a)1 addition to the tax in the amount of $219.88. Concessions having been made, the two issues for our decision are:
(1) Whether the transfers made by decedent Annabel L. Cady of cash within the 28 months immediately preceding her death to her only heir apparent and to his wife are includable in the decedent's gross estate as transfers in contemplation of death within the meaning of section 2035; and
(2) Whether the estate is liable for the additions to the tax imposed under section 6651(a)(1).
Some of the facts have been stipulated and are so found.
Annabel L. Cady (hereinafter decedent) died intestate on August 9, 1974, at the age of 77, while a resident of the Swope Ridge Health Care Center. The ancillary administrator of her estate, Elwyn L. Cady, Jr. (hereinafter petitioner), is decedent's son and only surviving child. He resided at 1919 Drumm Avenue, Independence, Missouri at the time the petition herein was filed. The Federal estate tax return herein was filed with the St. Louis Internal Revenue Service District Director's office, Kansas City Branch.
Prior to the year 1972, decedent had little history of gift giving in her own name. However, Elwyn Loomis Cady, decedent's husband, had made gifts which ranged in size from approximately $1,000 to $6,000 per year, commencing approximately in 1956 and ending with his death on December 15, 1970.
During the years 1972, 1973, and 1974, decedent made the following gifts:
Date Donee Amount
4/27/72 E. L. Cady, Jr. ........ $ 3,000.00
7/18/72 Jane E. Cady (wife of
E. L. Cady, Jr.) ...... 3,000.00
10/13/72 E. L. Cady, Jr. ........ 5,000.00
11/23/72 E. L. Cady, Jr. ........ 5,000.00
12/26/72 E. L. Cady, Jr. ........ 1,400.00
5/13/73 E. L. Cady, Jr. ........ 3,000.00
10/ 9/73 Jane E. Cady ........... 3,000.00
10/11/73 E. L. Cady, Jr. ........ 1,000.00
11/ 7/73 E. L. Cady, Jr. ........ 775.85
11/15/73 E. L. Cady, Jr. ........ 2,000.00
12/24/73 E. L. Cady, Jr. ........ 6,224.15
12/27/73 E. L. Cady, Jr. ........ 2,500.00
7/11/74 Jane E. Cady ........... 3,000.00
7/11/74 E. L. Cady, Jr. ........ 3,000.00
__________
$41,900.002
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All of the aforementioned gifts were made by checks drawn on decedent's account at the City National Bank and Trust Company, Kansas City, Missouri. Decedent executed a document on July 18, 1972, authorizing petitioner, as her son, to sign checks on this account. This signature authority was never revoked by decedent.
Prior to 1972, decedent's history of hospital and institutional care was negligible; however, she was admitted to the Menorah Medical Center (hereinafter Menorah) in Kansas City, Missouri, on March 29, 1972, for treatment of a mental condition known as paranoid delusions. Decedent entered Menorah with the assistance of her son. At the time of her admission to Menorah decedent was taking medication for hypertension, leg cramps and pain.
During the month preceding her admission to Menorah in March 1972, decedent had protrayed irrational fears, including the feeling that her neighbors were trying to break into her apartment. She also felt unsafe in her bathroom.
On April 3, 1972, decedent was given an EEG3 at Menorah. The results of this test disclosed an abnormal brain wave pattern indicative of an inefficient blood supply to the brain. Decedent was fearful of impending danger and was upset by the recent suicide of a distant cousin at this time.
Decedent was given a physical examination on March 29, 1972, by Dr. B. Milgram at Menorah. The results show apparent arteriosclerotic narrowing in an obese woman. Decedent was diagnosed as having psychotic depression. She was also becoming increasingly aware of her own physical decline.
Decedent was discharged from Menorah on April 18, 1972. At that time she was taking, and continued with various medications. She then moved to the Defenders Townhouse (Defenders), a retirement center located in Kansas City, Missouri. Decedent stayed in Defenders from April 18, 1972, until May 31, 1972. She was then moved to the Swope Ridge Health Care Center, also located in Kansas City, where she remained until her death on August 9, 1974.
On April 24, 1974, decedent was diagnosed as deteriorating of natural causes. During the gift-giving period in question, decedent required assistance in eating, walking, and dressing herself. Decedent was age 77 at the time of her death and the immediate cause of death was diagnosed as arteriosclerotic disease due to, or as a consequence of, Parkinson's disease.
Decedent did not, and was not required to, file a Federal income tax return for the calendar year 1971. However, Federal income tax returns were filed for decedent for the calendar years 1972 and 1973, and for the period of January 1 through August 9, 1974. The returns showed the following:
Adjusted Gross Total Medical
Period Income Expenses
1972 ......... $11,150.07 $ 6,758.19
1973 ......... 10,811.60 8,630.18
Jan. 1 through
Aug. 9, 1974 3,781.00 4,869.17
__________ __________
$25,742.67 $20,257.54
========== ==========
Decedent's son was the donee of 12 of the 14 gifts here at issue. He was decedent's sole heir at the time such gifts were made. The donee of the remaining two gifts was his wife. Decedent's son decided on the amounts, dates, and donees of all 14 of the gifts in question.
OpinionFrom April 27, 1972 through July 11, 1974, less than three years prior to her death on August 9, 1974, decedent transferred $41,900 from her checking account on 14 separate occasions to her son or to his spouse. Whether these transfers were made in contemplation of death within the meaning of section 20354 depends upon the dominant motive of the decedent which we must determine on the basis of all of the facts and circumstances. United States v. Wells 2 USTC ¶ 715, 283 U.S. 102 (1931); Estate of Hunt v. Commissioner Dec. 17,691, 14 T.C. 1182 (1950); Allen v. Trust Co., 326 U.S. 630 (1946); Estate of Ford v. Commissioner Dec. 29,809, 53 T.C. 114 (1969), affd. per curiam 71-2 USTC ¶ 12,813 450 F. 2d 878 (2d Cir. 1971). A rebuttable presumption in respondent's favor exists under the statute.5 Section 2035(b); Estate of Honickman v. Commissioner Dec. 31,352, 58 T.C. 132, 135 (1972), affd. without opinion 481 F. 2d 1399 (3d Cir. 1973); Cleveland Trust Co.v. United States 70-1 USTC ¶ 12,649, 421 F. 2d 475 (6th Cir. 1970).
Section 20.2035-1(c), Estate Tax Regs., defines some of the relevant factors to be considered in determining whether a transfer was made "in contemplation of death." These factors include any disposition of property: "(1) made with the purpose of avoiding death taxes; (2) made as a substitute for a testamentary disposition of the property; or (3) made for any other motive associated with death." Moreover, "the bodily and mental condition of the decedent and all other attendant facts and circumstances are to be scrutinized in order to determine whether or not such thought prompted the disposition."
A careful review of the record in the instant case convinces us that the transfers here were a substitute for testamentary disposition, and that the thought of death was the impelling cause of the transfers. United States v. Wells, supra; Estate of Johnson v. Commissioner Dec. 16,355, 10 T.C. 680 (1948).
In addition to the factors included in the regulations, this court, in Estate of Johnson v. Commissioner, supra at 688, stated that among the factors to be considered in determining the dominant motive of a decedent in making an inter vivos transfer of property are:
(a) The age of the decedent at the time the transfers were made; (b) the decedent's health as he knew it, at or before the time of the transfers; (c) the interval between the transfers and the decedent's death; (d) the amount of the property transferred in proportion to the amount of property retained; (e) the nature and disposition of the decedent, e.g., whether cheerful or gloomy, sanguine or morbid, optimistic or pessimistic; (f) the existence of a general testamentary scheme of which the transfers were a part; (g) the relationship of the donee or donees to the decedent, i.e., whether they were the natural objects of his bounty; (h) the existence of a long established gift-making policy on the part of decedent; (i) the existence of a desire on the part of the decedent to escape the burden of managing property by transferring the property to others; (j) the existence of a desire on the part of the decedent to vicariously enjoy the enjoyment by the donees of the property transferred; and (k) the existence of the desire by the decedent of avoiding estate taxes by means of making inter vivos transfers of property. * * *
While his mother was less than fully capacitated in the last years of her life, her son decided...
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