Estate of Elliott v. Comm'r of Internal Revenue, Dockets Nos. 5731-69— 5736-69.
Decision Date | 28 October 1971 |
Docket Number | Dockets Nos. 5731-69— 5736-69. |
Citation | 57 T.C. 152 |
Parties | ESTATE OF MAE ELLIOTT, MRS. J. E. CRABTREE, A.K.E. MRS. MARY KATHRYN CRABTREE, EXECUTRIX, ET AL.,1 PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
Court | U.S. Tax Court |
57 T.C. 152
ESTATE OF MAE ELLIOTT, MRS. J. E. CRABTREE, A.K.E. MRS. MARY KATHRYN CRABTREE, EXECUTRIX, ET AL.,1 PETITIONERS
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
Dockets Nos. 5731-69— 5736-69.
United States Tax Court
Filed October 28, 1971.
[57 T.C. 152]
Joe H. Staley, Jr., and A. E. Aikman, for the petitioners.
Roy E. Graham, for the respondent.
Decedent purchased U.S. savings bonds (series E) with her own funds. The bonds were registered in co-ownership form in the name of decedent or her daughter or grandchildren. The bonds were kept in a bank safe-deposit box rented by decedent in her name and to which she had access until her death. About 6 years before she died, decedent gave the keys to the safe-deposit box to her daughter and after that time never entered the box again. Delivery of the keys was recorded in decedent's diary. The bonds remained in the safe-deposit box until the decedent's death. Held: (1) The Treasury regulations making U.S. savings bonds ‘non-transferable’ apply to transactions between registered coowners and, therefore, a valid inter vivos gift cannot be made by actual or constructive delivery of the bonds from one coowner to the other unless they are surrendered and reissued in the name of the donee pursuant to such regulations; (2) notwithstanding the Treasury savings bond regulations, the decedent did not make valid inter vivos gifts under Texas law; (3) the value of the bonds is includable in the decedent's gross estate under sec. 2040, I.R.C. 1954; and (4) the assessment of an estate tax deficiency is not barred by the statute of limitations because there was omitted from decedent's gross estate an amount in excess of 25 percent of the gross estate reported in the Federal estate tax return.
DAWSON, Judge:In these consolidated cases the respondent determined a Federal estate tax deficiency of $79,266.31 against the Estate of Mae Elliott, Mrs. J. E. Crabtree, a.k.a. Mary Kathryn Crabtree, executrix, in docket No. 5731-69. In respect of such determination, respondent also asserted, pursuant to section 6901, I.R.C. 1954,2 the following fiduciary and transferee liabilities:
+---------------------------------------------------------------------------+ ¦Petitioner ¦Docket No. ¦Amount ¦ +---------------------------------------------------+------------+----------¦ ¦ ¦ ¦ ¦ +---------------------------------------------------+------------+----------¦ ¦Mrs. J. E. Crabtree, sole heir, a.k.a. Mary Kathryn¦ ¦ ¦ +---------------------------------------------------+------------+----------¦ ¦Crabtree, sole heir of Mae Elliott ¦5732-69 ¦$79,266.31¦ +---------------------------------------------------+------------+----------¦ ¦Mrs. J. E. Crabtree, a.k.a. Mary Kathryn Crabtree ¦5733-69 ¦79,266.31 ¦ +---------------------------------------------------+------------+----------¦ ¦Mrs. J. E. Crabtree, transferee a.k.a. Mary Kathryn¦ ¦ ¦ +---------------------------------------------------+------------+----------¦ ¦Crabtree, transferee ¦5734-69 ¦79,266.31 ¦ +---------------------------------------------------+------------+----------¦ ¦Elliott Edley Crabtree, transferee in the Estate of¦ ¦ ¦ +---------------------------------------------------+------------+----------¦ ¦Mae Elliott ¦5735-69 ¦14,000.00 ¦ +---------------------------------------------------+------------+----------¦ ¦Mrs. Mary Elaine Crabtree Aduddell, transferee in ¦ ¦ ¦ +---------------------------------------------------+------------+----------¦ ¦the Estate of Mae Elliott ¦5736-69 ¦14,000.00 ¦ +---------------------------------------------------------------------------+
[57 T.C. 153]
The values of certain properties for estate tax purposes have been agreed to by the parties in their stipulation of facts. At issue is whether the value of certain U.S. savings bonds (series E), registered in co-ownership form to the decedent or her daughter or her grandchildren, should be included in the decedent's gross estate for Federal estate tax purposes under the provisions of section 2040 of the Code. The resolution of this issue will determine whether the respondent has met his burden of proving under section 6501(e)(2) that there was omitted from the decedent's gross estate an amount in excess of 25 percent of the gross estate reported in the Federal estate tax return.
Some of the facts have been stipulated by the parties. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.
The petitioner in docket No. 5731-69 is the Estate of Mae Elliott. Mrs. J. E. Crabtree is the executrix of the estate. The Federal estate tax return for the Estate of Mae Elliott was timely filed on October 8, 1963, with the district director of internal revenue at Dallas, Tex.
Mrs. J. E. Crabtree, who is also known as Mary Kathryn Crabtree (hereinafter referred to as Kathryn), is the petitioner in docket Nos. 5732-69 through 5734-69 and is the sole heir of Mae Elliott and the fiduciary and transferee in law and equity of the property of the Estate of Mae Elliott. At the time she filed her petitions herein she resided in Dalhart, Tex.
Elliott Edley Crabtree (hereinafter referred to as Elliott) is the petitioner in docket No. 5735-69 and is transferee in the Estate of Mae Elliott. At the time his petition was filed herein he was a resident of Dalhart, Tex.
Mary Elaine Crabtree Aduddell (hereinafter referred to as Elaine), the petitioner in docket No. 5736-69, is also a transferee in the Estate of Mae Elliott and was a resident of Dalhart, Tex., at the time her petition was filed in this proceeding.
Mae Elliott was the mother of Mrs. J. E. Crabtree (Kathryn), and the grandmother of Elliott and Elaine.
Mae Elliott died testate on July 6, 1962, at which time she was a resident of Stratford, Tex. Her sole heir, Kathryn, survived her. Her estate has not been probated. From January 27, 1950, until her death on July 7, 1962, Mae Elliott rented a safe-deposit box in her
[57 T.C. 154]
own name at the First State Bank of Stratford, Tex. The rental agreement between the bank and Mae Elliott provided, in part, that—
no person other than the renter, his duly appointed deputy, as shown by the records of the Safe Deposit Department, or the legal representative of the renter in the event of his death, incompetency, insolvency or other disability, shall have access to the box as hereinafter expressly stipulated.
There is no evidence that Mae Elliott ever appointed a deputy who had a right to enter her safe-deposit box. There is also no evidence that Mae Elliott at any time authorized the bank in writing to admit anyone to her safe-deposit box. Mae Elliott paid the rental on the safe-deposit box from January 27, 1950, until her death on July 7, 1962. There were only two keys to the safe-deposit box and, according to the contract with the bank, both of them were received by Mae Elliott when she rented the box.
From November 1949 through October 1959, Mae Elliott purchased with her own funds various U.S. savings bonds, series E, which were issued and registered in her name jointly with her daughter, Kathryn, or one of her grandchildren, Elliott and Elaine. The bonds always remained in co-ownership form. At the time of Mae Elliott's death, the bonds, having a total value of $95,105.60, were unredeemed and located in the safe-deposit box at the First State Bank of Stratford, Tex. The contents of the box were inventoried on July 10, 1962, and turned over to Kathryn.
Kathryn lived close to her mother, Mae Elliott, and often visited her. Kathryn was familiar with a diary which was kept by Mae Elliott for a number of years. The diary was found by Kathryn in her mother's home shortly after her death. The diary contained an entry dated August 23, 1956, which reads: ‘Gave Kathryn keys to safety box since bonds belong to her— Elliott & Elaine.’ The keys were manually delivered to Kathryn. Both keys were in her dominion and control from August 23, 1956, until Mae Elliott's death. On several occasions Mae Elliott told Kathryn, Elliott, and Elaine the bonds in the box were theirs. After delivery of the keys to Kathryn, Mae Elliott never entered the safe-deposit box again, nor did she...
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