Estate of Grinnell v. COMMISSIONER OF INTERNAL REVENUE

• Decision Date: 28 August 1941
• Docket Number: Docket No. 105092.
• Citation: 44 BTA 1286
• Parties: ESTATE OF FRANCIS BROWNE GRINNELL, STATE STREET TRUST COMPANY AND RUSSELL GRINNELL, ADMINISTRATORS WITH WILL ANNEXED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

44 B.T.A. 1286 (1941)

ESTATE OF FRANCIS BROWNE GRINNELL, STATE STREET TRUST COMPANY AND RUSSELL GRINNELL, ADMINISTRATORS WITH WILL ANNEXED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 105092.

Board of Tax Appeals.

Promulgated August 28, 1941.

Samuel H. Batchelder, Esq., for the petitioners.

Martin M. Lore, Esq., for the respondent.

The Commissioner determined a deficiency of $37,869.63 in estate tax. The issue is whether the estate is entitled to a deduction of $156,473.04 as a claim against the estate representing monthly payments to be made to a divorced wife of the decedent pursuant to a divorce decree awarding alimony.

FINDINGS OF FACT.

The decedent died on November 17, 1937. The estate tax return was filed in Massachusetts. The administrators are duly authorized to represent the estate.

Elizabeth M. Grinnell obtained a divorce from the decedent which became absolute in July 1917 under the laws of Massachusetts. The decree contained the following provision for the payment of alimony:

That said libellee shall, on the said decree nisi becoming absolute, and thereafter during the life of the libellant, well and truly pay, or cause to be paid to her, the sum of twelve thousand dollars ($12,000.) annually in installments of one thousand ($1,000.) monthly, each of said installments to be payable on the first day of each month, the first of said installments to be paid as of November 1, 1916:

That the said payments shall constitute full, final and conclusive satisfaction of any and all demands and rights of any and every nature, whether at law or in equity, of said libellant, for or on account of alimony or otherwise, against said libellee.

Provided, however, that in the event of the marriage of said libellant, but not otherwise, further obligations of said libellee to said libellant, as hereinabove fixed and determined, shall be subject to any further order or modification by this Court, upon the motion of either of said parties.

Elizabeth M. Grinnell was born on July 30, 1889. She was living at the date of the hearing and had never remarried. She made claim as a creditor of the estate for payment of the amounts due her under the divorce decree and asked to have assets retained sufficient to meet payments due her. Her claim was valid and enforceable against the estate. An agreement was entered into in 1938 and approved by the Probate Court to liquidate the claim by the payment of $30,000 in cash and monthly payments of $650 so long as she lived and remained unmarried. She had received from the estate a total of $50,800 up to the date of the hearing.

The estate claimed a deduction of $156,473.04 representing the value at the date of decedent's death of monthly payments of $1,000 for life to a person the age of Elizabeth M. Grinnell, calculated in accordance with tables published in Regulations 80, article 10 (i), and table A. The Commissioner disallowed the deduction.

OPINION.

MURDOCK:

The Commissioner contends that no deduction is proper because the claim was founded upon a promise or agreement for which there was not an adequate and full consideration in money or money's worth. See section 303 (a) and (d) of the Revenue Act of 1926 as amended. He points to a recital in Exhibit B, a part of Exhibit 3 in this proceeding, to the effect that the parties, prior to the divorce decree, had entered into an agreement that the decree should require Francis to pay Elizabeth $1,000 monthly for life in full satisfaction of all rights as alimony or otherwise. The respondent cites cases wherein it was held that claims based upon agreements were not deductible under section 303 (a) and (d). Estate of Eben B. Phillips, 36 B. T. A. 752; Weiser v. Commissioner, 39 B. T. A. 1144; affd., 113 Fed. (2d) 486; Meyer's Estate v. Commissioner, 110 Fed. (2d) 367; certiorari denied, 310 U. S. 651. The petitioners argue that this claim was not based upon an agreement and the cases cited are not in point, since they were based...