Estate of Calcagno v. Commissioner

Decision Date27 December 1989
Docket NumberDocket No. 15078-87.
Citation1989 TC Memo 677,58 TCM (CCH) 1042
PartiesEstate of Joseph V. Calcagno, Deceased, Charles M. Bianco, Co-Executor and Emily Raskoff, Co-Executrix v. Commissioner.
CourtU.S. Tax Court

Kevin Patrick McGovern, 7006 Third Ave., Brooklyn, N.Y., for the petitioner. Nancy Chassman Rothbaum and Steven M. Diamond, for the respondent.

Memorandum Opinion

TANNENWALD, Judge:

Respondent determined a deficiency of $17,669.87 in the Federal estate tax of the Estate of Joseph V. Calcagno. The issues for decision are whether the estate is entitled to deduct: (1) a funeral expense in the amount of $38,570 claimed as a payment to the Province of St. Mary of the Capuchin Order and (2) attorney's fees of $28,000 claimed on the estate tax return, of which $9,200 has been allowed by respondent.

All of the facts have been stipulated. The stipulation of facts and the attached exhibits are incorporated herein by reference.

At the time the petition herein was filed, Charles M. Bianco, co-executor, was an attorney at law duly licensed to practice in the courts of the State of New York with offices in Brooklyn, New York. Also at the time the petition herein was filed, Emily Raskoff, co-executrix, resided in Garden City, New York.

Joseph V. Calcagno (decedent) was a resident of Brooklyn, New York, at the time of his death. He died testate on September 30, 1983. A Federal estate tax return was timely filed on behalf of the Estate of Joseph V. Calcagno (the estate or petitioner).

Decedent's last will and testament directs that 10 percent of the residuary estate be given to "provide an appropriate memorial to the deceased members of the CALCAGNO FAMILY" as designated by Ms. Raskoff, who was also a beneficiary under the will, and three of the other beneficiaries. By check dated June 1984, the estate transferred $26,800 to the Province of St. Mary of the Capuchin Order pursuant to the provision of decedent's will. The purpose of the transfer was to establish a fund for the education of priests as a memorial to the deceased members of the Calcagno family.

On the estate tax return, a charitable deduction was claimed in the amount of $38,570 with the named beneficiary being The Province of St. Mary of the Capuchin Order, which respondent disallowed in its entirety. Petitioner now concedes that the claimed charitable bequest of $38,570 was improper as a charitable bequest but contends that it should be allowed as a deduction for a funeral expense "as a suitable memorial allowable as a funeral expense under the New York Surrogate's Court Procedure Act Section 103(22)."

On the estate tax return, a deduction was claimed for attorney's fees in the amount of $28,000. Respondent disallowed $18,800 of the deduction. Mr. Bianco was retained as attorney for the estate under a written fee agreement entered into on October 10, 1983, with Mr. Bianco and Ms. Raskoff as co-executors. The fee agreement provided for Mr. Bianco to receive a flat rate of 6 percent of the gross estate for his services rendered as attorney regardless of the number of hours spent or the extent and difficulty of the work involved.

In an affidavit dated June 1, 1988, Mr. Bianco alleges to have performed the following services as attorney for the estate:

Preparation of Petition for probate together with Depositions of Witness, Notice of Probate, Waivers; filing with Surrogate's Court, Kings County; obtaining Letters Testamentary, obtaining Tax Waiver for bank account, selling stocks. Preparation of income tax return, fiduciary return, estate tax return, federal and state. Preparation of contract of sale for real property and papers for attendance at closing of title.

In that affidavit, Mr. Bianco also alleges that he spent 205 hours in performing his duties as attorney for the estate and that his billing rate is $175 per hour. Mr. Bianco did not keep any records concerning the amount of time he expended working on the estate in his capacity as attorney. Other than the instant case, there has been no litigation involving the estate.

On the estate tax return, a deduction was claimed for executors' commissions in the amount of $35,475.00, of which Mr. Bianco will receive one-half of said amount ($17,737.50) as co-executor of the estate. As co-executor, Mr. Bianco: (1) signed and approved a New York State motion to fix tax; (2) signed documents and checks in his capacity as co-executor of the estate which he prepared in his capacity as attorney for the estate; and (3) acted along with Ms. Raskoff only upon his advice and recommendaton as attorney for the estate.

The assets of the estate consisted of the following:

a. Two-family residence (the residence) valued at $95,000.00,
b. Securities in the amount of $47,424.57,
c. Bank accounts and money market accounts totaling $306,009.55,
d. Insurance on decedent's life in the amount of $1,181.91,
e. Two jointly owned U. S. Series H savings bonds valued at $2,000.00, and
f. Other miscellaneous property in the amount of $8,357.40.

The residence was sold pursuant to a contract of sale dated January 31, 1984. Mr. Bianco received $1,000 as a legal fee for the sale of the residence. This fee was paid in addition to, and apart from, the $28,000 in attorney's fees claimed on the estate tax return.

Initially, we note that the burden of proof is on petitioner as to both issues involved herein. Rule 142(a)1; Welch v. Helvering 3 USTC ¶ 1164, 290 U.S. 111 (1933). The fact that the case is fully stipulated does not relieve petitioner of that burden. Rule 122; Service Bolt & Nut Co. Trust v. Commissioner Dec. 39,036, 78 T.C. 812, 819 (1982), affd. 84-1 USTC ¶ 9127 on other issues 724 F.2d 519 (6th Cir. 1983).

We deal first with petitioner's claimed deduction of $38,570 for a payment to the Province of St. Mary of the Capuchin Order. Clearly as to the excess of the aforesaid amount over the $26,800 payment substantiated in the record herein, the deduction is not allowable. As to the latter amount, section 2053(a)(1) provides for a deduction for funeral expenses "as are allowable by the laws of the jurisdiction * * * under which the estate is being administered." The regulations go on to specify:

A reasonable expenditure for a tombstone, monument, or mausoleum, or for a burial lot, either for the decedent or his family, including a reasonable expenditure for its future care, may be deducted under this heading, provided such an expenditure is allowable by the local law. * * * Sec. 20.2053-2, Estate Tax Regs.

Section 103(22) of the New York Surrogate's Court Procedure Act (McKinney 1967) provides that a funeral expense includes:

reasonable expense of a funeral, suitable church or other services as an integral part thereof, expense of interment or other disposition of the body, a burial lot and suitable monumental work thereon and a reasonable expenditure for perpetual care of a burial lot of the decedent.

We think it clear that the establishment of a scholarship fund for the education of priests as a memorial for deceased members of the Calcagno family cannot be considered a funeral expense either under New York law or the estate tax regulations. Such payment represents no more than a bequest for the benefit of members of the decedent's family, unrelated to his own funeral. See Estate of Tuck v. Commissioner Dec. 45,209(M), T. C. Memo. 1988-560. We hold for respondent on this issue.

We now turn to the question of the deductibility of attorney's fees. Section 2053(a)(2) provides for the deduction of such administration expenses "as are allowable by the laws of the jurisdiction * * * under which the estate is being administered." The regulations provide for the deduction of such expenses "as are actually and necessarily incurred in the administration of the decedent's estate; * * *. The expenses contemplated in the law are such only as attend the settlement of an estate and the transfer of the property of the estate * * *." Sec. 20.2053-3(a), Estate Tax Regs.

The regulations further provide for the treatment of attorney's fees2 and the effect to be given to decrees of state courts.3

We have held that the requirements of both local law and the regulations must be met. Estate of Reilly v. Commissioner Dec. 37,691, 76 T.C. 369, 372 (1981). Since, as subsequently will appear, the applicable standards of New York law and the regulations coincide we need not resolve the dispute among the Circuit Courts of Appeal as to which would control if a disparity existed. See Estate of Posen v. Commissioner Dec. 37,450, 75 T.C. 355, 366 (1980); Estate of Smith v. Commissioner Dec. 31,262, 57 T.C. 650, 661 (1972), affd. 75-1 USTC ¶ 13,046, 510 F.2d 479 (2d Cir. 1975).4

Asserting that the attorney's fees herein were fixed by a New York court, petitioner rests its case on United States v. White 87-1 USTC ¶ 13,710, 650 F. Supp. 904 (W.D.N.Y. 1987), which held that respondent was foreclosed from investigating the deductibility of attorney's fees on a Federal estate tax return because of the prior approval of those fees by the New York Surrogate's Court. Petitioner's position is totally without merit. The only evidence of any action by a New York authority is the following statement in Mr. Bianco's affidavit: "Signed and approved * * * New York State Motion to Fix Tax." There is no evidence as to the contents of said motion, where it was filed, or the circumstances surrounding the action, if any, taken thereon. The instant situation is a far cry from the judicial proceeding which formed the basis of the district court's decision in United States v. White, supra. Beyond this, petitioner has failed to recognize that the district court's decision was reversed in United States v. White 88-2 USTC ¶ 13,777, 853 F.2d 107 (2d Cir. 1988),5 which held, based upon its earlier decision in Estate of Smith v. Commissioner 75-1 USTC ¶ 13,046, 510 F.2d 479 (2d Cir. 1975) (cited as Lowe v. Commissioner at 853 F.2d 114),...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT