Estate of Halbach v. Commissioner
| Decision Date | 12 August 1980 |
| Docket Number | Docket No. 7099-76. |
| Citation | 1980 TC Memo 309,40 TCM (CCH) 952 |
| Parties | Estate of Helen Wodell Halbach, deceased, John Poinier, Executor v. Commissioner. |
| Court | U.S. Tax Court |
Wallace B. Liverance, Jr., Geoffrey J. O'Connor, J. Frederic Taylor and Thomas C. Crane, 31 Rockefeller Plaza, New York, N.Y. for the petitioner. Steven I. Klein and Bernard Wishnia, for the respondent.
Supplemental Memorandum Findings of Fact and Opinion
By letter dated April 30, 1976 respondent determined a deficiency in estate tax due from petitioner in the amount of $9,619,033.53. This deficiency was claimed on the basis that decedent Helen Wodell Halbach's "Disclaimer and Renunciation" of her remainder in the testamentary trust established by her father was (1) a transfer (2) in contemplation of death, thereby includable in her estate under the provisions of section 2035, I.R.C. 1954, as in effect on the decedent's death.
On September 22, 1977, petitioner filed a motion to sever issues. This motion was based upon petitioner's claim that its petition raised three main substantive issues: (1) whether decedent's disclaimer and renunciation was a "transfer" within the meaning of section 2035, (2) if so, whether the transfer was in contemplation of death within the meaning of section 2035, and (3) if the transfer was in contemplation of death, whether the proper valuation date of a disclaimed interest for estate tax purposes was the date the disclaimer was executed or the date of decedent's death. Petitioner was of the view that the first and third issues were ones of law and the second issue one of fact. If the Court were to hold that the disclaimer was not a transfer for estate tax purposes, then the second and third issues would be rendered moot. Petitioner therefore moved that the transfer issue be severed from the other two issues for briefing and opinion. While this motion was opposed by respondent because of delay such severance would cause in obtaining a final determination of the case, petitioner's motion was granted by Order of the Court dated October 12, 1977.
Our opinion with respect to the transfer issue was filed November 9, 1978. Estate of Helen Wodell Halbach v. Commissioner Dec. 35,517, 71 T.C. 141 (1978). In this opinion we held that decedent's disclaimer and renunciation was a "transfer" within the meaning of section 2035. On brief in this matter, petitioner has abandoned its valuation date claim. Thus we are here left with only the factual question of whether decedent's transfer was one in contemplation of death.
Some of the facts were stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.
Petitioner John Poinier is executor of the will of Helen Wodell Halbach. Petitioner was a resident of Gladstone, New Jersey at the time he filed the petition herein. Decedent Helen Wodell Halbach, petitioner's mother-in-law, was born in New Jersey on August 29, 1890 and died August 5, 1972, a resident of Short Hills, New Jersey at the age of 81. Decedent's father Parker Webster Page, died in 1937 at the age of 87. Her mother, Nellie A. H. Page, died in 1970 at the age of 100. Decedent's sister, Lois Page Cottrell, was born July 26, 1895 and is still alive.
For the most part decedent lived a comfortable life. As a young girl she grew up in a large house in Summit, New Jersey. Her father was a patent attorney who provided an above-average standard of living for his children. Mrs. Halbach spent her girlhood days, during the summer, swimming and sailing at her family's cottage on the New Jersey shore at Bay Head. Her family had a pony at their home in Summit and boats at Bay Head. The habits of athleticism decedent formed as a girl were carried on throughout life.
Decedent married Ruthven A. Wodell on June 11, 1914. They had two children, Lois Page Wodell (now Poinier), born July 14, 1916, and Webster Page Wodell, born December 12, 1921. Mr. Wodell was an attorney like decedent's father. However, starting in the early 1930's, Mr. Wodell was afflicted with a debilitating case of rheumatoid arthritis which rapidly incapacitated him from the practice of law. He died in January, 1945. From the early 1930's through 1948, when decedent remarried, she supported herself and her family through the operation of a garden and landscape consulting business under the name of Wodell and Cottrell. Mrs. Cottrell handled the financial side of the business, while decedent worked the designer side.
Decedent had always enjoyed gardening. The Wodell and Cottrell firm rendered decedent's heretofore hobby into a paying business. This income was supplemented by gifts from her mother. While decedent's income during these years was adequate, it was insufficient to provide her children with the same life-style that she had enjoyed while growing up. It was also insufficient to maintain the Wodell home which, at least for part of the time, was rented. On various occasions during this period and in her later years decedent indicated her wish that her children could have had the same advantages that she had enjoyed as a girl. For example, she expressed the wish that her daughter could have had the same trips abroad that she had made.
In 1941 Mrs. Page gave decedent a gift that made a deep impression upon her. In that year Mrs. Page's uncle Adolphe de Bary died leaving Mrs. Page certain trust funds. Mrs. Page, however, wrote decedent the following letter:
Decedent married Ernest K. Halbach in 1948. Mr. Halbach was, apparently, at the time an officer of General Dyestuff Corporation of New York (General Dyestuff). De cedent's financial condition improved markedly as a result of her second marriage. Mr. Halbach had been the majority shareholder in General Dyestuff starting in 1939. All the stock of General Dyestuff was, however, vested in the United States Alien Property Custodian in 1942 pursuant to the Trading With the Enemy Act.
In this same year, 1942, the Alien Property Custodian seized the stock of General Aniline and Film Corporation (GAF). In 1954, after an exchange of stock, the Alien Property Custodian merged General Dyestaff into GAF. In 1965 the Attorney General sold the GAF common stock for $329,000,000. The propriety of the Alien Property Custodian seizure of General Dyestuff was the subject of a suit starting in 1962 in the Court of Claims. Mr. Halbach died on January 24, 1958. His successors in interest and General Dyestuff's other former shareholders or their successors in interest sued the United States for their allocable share of the GAF sales proceeds.
In early December 1940 Mr. Halbach, for income and estate tax reasons, had contributed all his stock in General Dyestuff to an irrevocable trust. Mr. Halbach's first wife had a life estate in the trust with remainder over to Mr. Halbach's two daughters Mary Kemmerer and Ann Bumsted. On January 3, 1950, Mr. Halbach and his daughters entered into an agreement by which 1/8 of any potential recovery relating to the Alien Property Custodian seizure of Halbach's General Dyestuff stock was vested in John L. Kemmerer, Jr., Mr. Halbach's son-in-law. On December 22, 1957, just before Mr. Halbach's death, Mr. Kemmerer declared himself trustee of his 1/8 interest in any recovery for the benefit of decedent and Mr. Halbach's two daughters. Under this trust, established for valuable consideration flowing from Mr. Halbach, decedent was granted a life estate in this 1/8 interest.
Throughout her life with Mr. Halbach, Mrs. Halbach was confident of the validity of his claim for a return of his stock or its value. The accuracy of Mrs. Halbach's view was borne out, as on January 26, 1970, the Court of Claims Trial Commissioner filed his report allowing recovery to the plaintiffs in their case styled Bonnar, et al. v. United States, an unreported opinion. This opinion was adopted by the Court of Claims on February 19, 1971. Bonnar, et al. v. United States, 194 Ct. Cl. 103, 438 F. 2d 540 (1971). By this decision, Halbach's daughters became entitled to a recovery of over $15,000,000. On August 4, 1971, a payment of $1,180,530 resulting from the satisfaction of the Bonnar judgment was made to the 1957 trust. This payment constituted 62.5 percent of the total of $1,888,848 to be paid to the trust.
Mr. Halbach was a man of some means even without the General Dyestuff stock. On November 5, 1959, after Mr. Halbach's death, decedent owned common stock worth $499,274, tax exempt securities worth $109,100, corporate fixed income securities worth $38,154, and miscellaneous securities worth $5,113, for a total of $651,641.
After her marriage to Mr. Halbach decedent began to make gifts to her children. In the early 1950's decedent made a series of gifts to her daughter Lois Poinier which, in the aggregate, gave the Poiniers full ownership of their residence in Short Hills. In 1958 decedent gave the Poiniers a down payment of $3,000-$5,000 for a vacation home in Rhode Island. At various times throughout her remaining years decedent made gifts to, or for the benefit of, her family.
Decedent was active throughout her life. She continued her gardening activities after her marriage to Mr. Halbach and, for example, designed a garden at her home. She worked in the garden almost every day throughout her remaining years....
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