Estate of Dutcher v. Comm'r of Internal Revenue
| Decision Date | 31 August 1960 |
| Docket Number | Docket No. 74685. |
| Citation | 34 T.C. 918 |
| Parties | ESTATE OF LEO J. DUTCHER, JOHN W. DUTCHER, EXECUTOR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Robert W. Tripp, Esq., for the petitioner.
Robert W. Siegel, Esq., for the respondent.
On the facts, held, 3,928 shares of Selected American Shares were includible in decedent's gross estate. Held, further, decedent's estate is entitled to include $13,000 in the estate tax marital deduction as a cash payment made to decedent's widow under a settlement agreement which settled her will contest. Held, further, $6,000 executors' commissions and attorneys' fees and miscellaneous administration expenses in the amount of $10,661.16 were properly disallowed by respondent as administration expenses.
Respondent determined a deficiency in petitioner's estate tax of $18,562.99. The questions for decision are:
(1) Whether 3,928 shares of Selected American Shares, a mutual fund, were includible in decedent's gross estate;
(2) Whether miscellaneous administration expenses in the amount of $10,661.16, disallowed by respondent, are deductible as expenses of decedent's estate.
(3) Whether the estate is entitled to include $13,000 in the estate tax marital deduction for a cash payment made to decedent's widow under a settlement agreement; and
(4) Whether $6,000 of executors' commissions and attorneys' fees, disallowed by respondent, is deductible in decedent's estate.
All the facts have been stipulated. They are found accordingly.
Petitioner John W. Dutcher is the executor of the estate of his father, Leo J. Dutcher (hereafter sometimes called decedent), who died January 31, 1955. The estate tax return for decedent's estate was filed with the district director of internal revenue at Detroit, Michigan, on December 23, 1955.
Decedent lived in Michigan for a number of years and was engaged in the business of operating a funeral home. He and his first wife, Clara, executed a joint will on July 29, 1944. Clara died on April 18, 1949, survived by her husband, Leo, and their children, John W. Dutcher and Mary Jane Towns. We will sometimes refer to the children as John and Mary Jane. Clara's will was entered for probate in the Hillsdale County, Michigan Probate Court. The joint will, after reciting that it was to be irrevocable by the sole act of either party, provided, in part, as follows:
At the time of Clara's death there were 2,250 shares of Selected American Shares, a mutual fund, registered in the name of decedent and Clara as joint tenants with right of survivorship and not as tenants in common. In July 1949 the old share certificates were canceled and a new certificate representing the 2,250 shares was issued in decedent's name alone. In December 1949 decedent purchased an additional 450 shares in his name alone. In February 1950 the certificates for 2,700 shares were canceled and two new certificates, each representing 1,350 shares, were issued. One was issued in the names of decedent and John and the other in the names of decedent and Mary Jane, each as a joint tenant with the right of survivorship and not as tenants in common. By about January 19, 1955, decedent, either by purchase or by stock dividend, had received a total of 3,928 shares, half of which were registered with his son as a joint tenant and half of which were similarly registered with his daughter as joint tenant. There is no indication in the record that any part of the consideration paid for the shares came from either decedent's son or daughter.
In October of 1950 the decedent married Florence Sunderlin (hereinafter sometimes called Florence) and took up residence in Florida. Prior to this marriage he entered into an antenuptial agreement with his prospective wife which was recorded in Michigan. The agreement gave her an interest as tenant by the entirety in certain property then owned by the decedent and also provided for her to relinquish all rights she might otherwise have as decedent's wife in certain other specified real and personal property. Later decedent created an interest in his second wife as a tenant by the entirety in certain land, and contracts, mortgages, notes, and shares of stock in which an interest had been specifically denied her under the agreement.
In December 1953 decedent sold the funeral home, its furnishings, and other assets to his son who thereafter operated it.
In December 1954 decedent executed a writing purporting to be a new will which, on its face, renounced the antenuptial agreement and gave one-half of the gross value of his estate to Florence and one-quarter each to John and Mary Jane. The manner for computing the gross value of his estate was described in the will as follows:
In computing the gross value of my estate, it is my will that the shares in the Selected American Shares, now registered in the joint names of Leo J. Dutcher, John W. Dutcher and Mary Jane Dutcher Towne, (Towns) shall be included in computing such gross value; it being my intention that the value of the shares taken by Mary Jane Dutcher Town (Towns) and John W. Dutcher by operation of law at my death shall be included in computing the gross value of my estate in arriving at the value of the one-half of my gross estate hereinabove devised and bequeathed to my said wife, and that such shares so taken by Mary Jane Dutcher Towne (Towns) and John W. Dutcher shall be considered as an advancement to them and given to them by me during my lifetime.
On January 19, 1955, a complaint was filed by decedent and his wife as plaintiffs in the Circuit Court for the Sixth Judicial Circuit of the State of Florida in and for Pinellas County, to partition the shares of Selected American Shares. Decedent's son and daughter, Selected American Shares, Inc., and a transfer agent were named as defendants in the suit. John and Mary Jane filed an answer in the Florida court on February 8, 1955, 8 days after decedent's death, claiming that title to all the shares had vested in them at decedent's death and they counterclaimed against Florence alleging that she was in possession of certain other assets of decedent's estate.
Meanwhile, on February 2, 1955, a petition for probate of decedent's joint will was filed with the Probate Court of Hillsdale County, Michigan. By an order of the Michigan Probate Court dated February 14, 1955, decedent's son, named as executor in the joint will, was granted special administration of decedent's estate. Florence filed objections to the probate of the joint will and decedent's son and daughter filed an answer to the objections. Subsequently, the Probate Court, after consideration of the matter, entered an order directing that the joint will be entered to probate. Decedent's second wife filed a notice of appeal from the Probate Court's order to the Circuit Court for Hillsdale County, Michigan.
At about the same time, on February 4, 1955, a bill of complaint was filed in the Circuit Court for Hillsdale County, Michigan, by decedent's son and daughter and decedent's son as special administrator of decedent's estate against Florence to recover property allegedly transferred to her contrary to the antenuptial agreement. The defendant, by her attorney, appeared specially and moved to dismiss.
On February 17, 1955, Florence petitioned the Florida court to file decedent's December 1954 will.
On May 26, 1955, Florence and John and Mary Jane as parties to the Florida suit entered into a settlement agreement for the several litigations described above. The settlement agreement was joined in by various counsel and by John as special administrator of his father's estate in Michigan. This agreement was filed in the Florida action and subsequently a decree based thereon was rendered by the Florida court. Under this agreement the second wife was to receive certain of decedent's assets located in Florida, certain shares of corporate common stock and the income for life or until remarriage from a trust, the rest of which was to be the shares of Selected American Shares then in her possession. The agreement further provided the sum of $13,000 cash would be paid to Florence.
This agreement also provided that each of the parties to the agreement pay all legal expenses, attorneys' fees, and other expenses incurred by each of them in the several litigations.
The parties filed stipulations with the Michigan courts which resulted in an order of dismissal of the civil action, a dismissal the appeal concerning the objection to the admission of the joint will, and further proceedings of administration in the Michigan Probate Court under the joint will.
Petitioner, on the estate tax return for decedent's estate, filed December 23, 1955—
a. Included the value of 1,964 of the 3,928 shares of Selected American Shares issued to decedent and his children. The said shares were valued to decedent and his children. The said shares were valued at $16.78 per share or $32,955.92 for the total inclusion in decedent's gross estate:
b. Claimed as deductions ‘Miscellaneous expenses incurred in estate litigation as shown on Schedule ‘J’ * * * ‘ as follows:
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