Estate of Chemodurow v. Commissioner, Docket No. 1451-00.
| Decision Date | 23 January 2001 |
| Docket Number | Docket No. 1451-00. |
| Citation | 81 T.C.M. 1041 |
| Parties | Estate of Theodore C. Chemodurow, Deceased, Gail C. Williams, Executor, v. Commissioner. |
| Court | U.S. Tax Court |
This case involves the Federal estate tax. The decedent is Theodore C. Chemodurow (sometimes, Theodore). By notice of deficiency dated December 1, 1999 (the notice), respondent determined a deficiency in Federal estate tax of $2,648,640, an addition to tax for failure to file tax return of $132,432 under section 6651(a)(1), and an accuracy-related penalty of $529,728 under section 6662(a). The case is before us on respondent's motion for partial summary judgment (the motion). Petitioner objects.
Unless otherwise noted, all section references are to the Internal Revenue Code in effect at the time of decedent's death, and all Rule references are to the Tax Court Rules of Practice and Procedure.
A summary judgment is appropriate "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Rule 121(b). A summary judgment may be made upon part of the legal issues in controversy. See Rule 121(a).
Respondent asks for summary adjudication in his favor that, at the time of decedent's death, decedent had an interest in certain real and personal property (sometimes, the property), the value of which, by virtue of such interest, is includable in the gross estate. Respondent's grounds are that the ownership of the property was previously litigated by Gail C. Williams (sometimes Gail or Ms. Williams), individually, and as personal representative of decedent's estate, and that a final determination was reached adverse to Ms. Williams' position, as executor, in the instant case, which affords respondent the defense of collateral estoppel and precludes petitioner from relitigating ownership of the property.
In support of the motion, respondent has filed the declaration of Frederick J. Lockhart, Jr., respondent's attorney in this case (the Lockhart declaration). Attached to the Lockhart declaration is a copy of the United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706 (the Form 706), filed on account of decedent's death, and copies of various documents filed in two State court actions (which we detail infra). In support of petitioner's opposition to the motion, petitioner has filed the declaration of Ms. Williams (the Williams declaration). We rely on those declarations to the extent that they are undisputed. In particular, we rely on the Form 706 and State court documents attached to the Lockhart declaration, since their authenticity has not been disputed by petitioner. We also rely on two attachments to the motion, which petitioner also relies on. Finally, we rely on certain uncontested averments in the pleadings.1 Principally, the facts on which we rely to decide the motions are as follows.
Decedent died on January 8, 1996. His domicile at the time of his death was in Yellowstone County, Montana.
Ms. Williams (nee Chemodurow), personal representative of the estate of decedent, signed the petition. Her address, as shown in the petition, is in Bozeman, Montana.
Schedule A to the Form 706 (Schedule A) is a schedule requiring a description of all real estate owned by the decedent. The following item is described on Schedule A: "80 acres in Gallatin County, Montana near Bozeman" (the subdivision land). Schedule A does not include any description of approximately 390 acres of ranch land adjacent to the subdivision land and constituting the greater part of what was known as the Abagail ranch (the Abagail ranch).
There is no accompanying schedule to the Form 706 that describes certain personal equipment used in connection with the Abagail ranch (the ranch equipment).
Among the adjustments giving rise to respondent's determination of a deficiency in Federal estate tax are adjustments increasing the value of the gross estate for the value of the Abagail ranch and the ranch equipment. Respondent made those adjustments on the basis that decedent owned the Abagail ranch and the ranch equipment on the date of his death.
Among petitioner's assignments of error in the petition are the following:
(a) The Commissioner erroneously determined that the gross estate includes the value of the land, improvements and water rights of the real property known as the Abagail Ranch, which real property was sold to the decedent's daughter on November 16, 1981.
(b) The Commissioner erroneously determined that such sale to the decedent's daughter was null and void.
* * * * * * *
(e) The Commissioner erroneously determined that the gross estate includes the value of farm machinery and equipment which was sold to the decedent's daughter on or before August 18, 1995.
Among the facts upon which petitioner bases the assignments of error are the following:
On November 16, 1981, * * * [decedent] sold the Abagail Ranch to his daughter Gail Chemodureau * * *.
From November 16, 1981, until August 30, 1995 * * * title to the Abagail Ranch remained in the names of * * * [decedent] and his wife * * *. On August 30, 1995 * * * [decedent and his wife] executed and delivered a Warranty Deed conveying Abagail Ranch to Gail. Because of a minor error in such deed * * * [decedent and his wife] executed and delivered a corrected Warranty Deed dated December 20, 1995. * * *
Gail is the true owner of the Abagail Ranch * * *. The Abagail Ranch is not an asset of the Estate and its value is not properly included in the gross estate for estate tax purposes.
* * * * * * *
In conjunction with formalizing the sale of the Abagail Ranch to Gail * * * [decedent] executed and delivered to Gail a General Assignment of all farm equipment and machinery located at the Abagail Ranch. Consequently, Gail is the true owner of the equipment; it is not an asset of the Estate; and its value is not properly included in the gross estate for estate tax purposes.
Relevant to this proceeding are two actions brought in the Montana Eighteenth Judicial District Court, Gallatin County, Montana (the State court). The first action is styled "CYNDI JAKUBEK and PAUL JAKUBEK, Plaintiffs, vs. GAIL SUZANN CHEMODUREAU aka GAIL WILLIAMS individually and in her capacity as Personal Representative of the ESTATE OF THEODORE CHEMODUROW, Defendants", Cause No. DV 96-60 (Cause No. DV 96-60). Cause No. DV 96-60 was initiated by complaint (the Second Amended Complaint and Demand for Jury Trial in Cause No. DV 96-60 (second amended complaint) is dated February 12, 1997). Ms. Williams answered and made a counterclaim (the answer and counterclaim). The second action is styled "GAIL SUZANN CHEMODUREAU WILLIAMS, Plaintiff, vs. GEORGIA DARIA HOHENSEE, CYNTHIA JAKUBEK, PAUL JAKUBEK, the heirs et al., Defendants", Cause No. DV 96-109 (Cause No. DV 96-109). Cause No. 96-109 was initiated by complaint filed April 1, 1996 (the complaint). A cross-complaint (the cross-complaint) was brought in Cause No. DV 96-109, styled "GEORGIA DARIA HOHENSEE, Plaintiff, vs. GAIL SUZANN CHEMODUREAU, et al., Defendants."
Cause No. DV 96-60 involves several causes of action based upon agreements plaintiffs claim they entered into with decedent, including an agreement entitled "LIVESTOCK AGREEMENT" (the livestock agreement). Among the averments made by plaintiffs in support of their causes of action are that (1) by the livestock agreement, decedent had (A) leased the Abagail ranch to them and (B) agreed to provide and maintain necessary equipment (i.e., the ranch equipment) for ranch operations, and (2) Ms. Williams, individually and as a personal representative of decedent's estate, had breached those agreements. Among the counts in Ms. Williams' counterclaim are counts alleging that plaintiffs are unlawfully in possession of, and have refused to return to Ms. Williams, the ranch equipment.
In Cause No. DV 96-109, Ms. Williams averred that she was the sole owner of the Abagail ranch and sought to quiet her title as against the claims of the identified defendants and others. Among defendants identified in the complaint are "the heirs and devisees of [decedent]". With respect to unidentified defendants, the complaint avers that there might be persons unknown to Ms. Williams claiming, or who might claim, an interest in the Abagail ranch, adverse to her interest as the fee simple holder of the title to the property. The complaint states that each and all of the identified defendants, as well as any unknown persons, "are without any right, title, estate, or interest in, or lien or encumbrance upon, the Property [Abagail Ranch], and therefore have no valid estate, right, title, or interest in or to, or lien or encumbrance upon, the Property or any portion thereof." By the cross-complaint, cross-complainant set forth a cause of action against Ms. Williams individually, and in her capacity as personal representative of the estate of decedent, for specific performance of a land transaction involving the Abagail ranch.
Cause Nos. 96-60 and 96-109 were consolidated and a nonjury trial was held in each, from July 14 through July 18, 1997, in Cause No. 96-60, and on November 12 and 13, 1997, in Cause No. 96-109.
On April 8, 1998, in connection with Cause No. 96-109, the State court issued its "Findings of Fact, Conclusions of Law and Order" (the Cause No. 96-109 report), together with attendant Judgment (the Judgment in Cause No. 96-109). Two conclusions reached by the State court were that the Abagail ranch was property includable in the probate estate...
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