Estate of Huntington v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 22 October 1937 |
| Docket Number | Docket No. 47552. |
| Citation | 36 BTA 698 |
| Court | U.S. Board of Tax Appeals |
| Parties | ESTATE OF HENRY E. HUNTINGTON, DECEASED, SECURITY-FIRST NATIONAL BANK OF LOS ANGELES, SUCCESSOR TO LOS ANGELES-FIRST NATIONAL TRUST & SAVINGS BANK, AND THE PACIFIC SOUTHWEST TRUST & SAVINGS BANK, AND CAROLINE H. HOLLADAY, EXECUTORS, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
E. H. Conley, Esq., Joseph D. Peeler, Esq., Todd W. Johnson, Esq., P. D. Johnston, Esq., and Robert N. Miller, Esq., for the petitioners.
Allen H. Pierce, Esq., Frank T. Horner, Esq., B. H. Neblett, Esq., Harold F. Noneman, Esq., and W. S. Tandrow, Esq., for the respondent.
TYSON:
This proceeding seeks the redetermination of an estate tax deficiency of $73,026.34 which, after allowance of an additional credit for state inheritance taxes, was reduced to a net estate tax deficiency of $50,063.61, which respondent proposed for assessment by his deficiency notice.
Petitioners allege that the estate taxes in controversy amount to approximately $2,000,000, due, mainly, to alleged excessive valuations of certain properties included in decedent's estate, and they now claim a refund of the estate taxes alleged to have been overpaid in that amount. Respondent denies that such alleged amount of tax is in controversy and affirmatively alleges that the decedent's net estate, as determined in respondent's deficiency notice, should be increased by certain amounts because of an alleged undervaluation in the deficiency notice of certain properties included in the decedent's estate. Respondent now claims the increased estate tax deficiency which would result in pursuance of his affirmative allegations.
During the hearing on this proceeding and at the conclusion of petitioners' presentation of their case, the respondent made a motion that the Board dismiss petitioners' assignment of error set forth in subparagraph (f) of subdivision Roman III of paragraph 4 of the amended petition filed April 11, 1931, and reading: "Real estate owned by the Huntington Land & Improvement Company was erroneously valued by the respondent at $14,598,957.81, whereas, the actual value was not in excess of $9,292,399.93, reflecting an excess valuation of $5,306,557.88." Such motion was made on the ground that petitioners had failed to establish that an itemized list of approximately 1,342 parcels of real estate owned by the Huntington Land & Improvement Co. (hereinafter referred to as the Huntington Co.) and submitted as an exhibit attached to stipulation No. 3, constituted all of the real estate owned by the Huntington Co. on May 23, 1927, and, that petitioners had failed to establish that the fair market value of all of the real estate owned by the Huntington Co. on May 23, 1927, was less than the value determined by respondent. The motion was taken under advisement by the presiding Member. No authority in support of this motion was cited either at the hearing or on brief.
In our opinion, the respondent's motion to dismiss the above quoted assignment of error is not well grounded because the fact is established in this record that the real estate embraced in the stipulated list, together with additions thereto and subtractions therefrom made prior to the hearing, constituted all the real estate owned by the Huntington Co. on May 23, 1927. Moreover, in our opinion, the petitioners, under such circumstances, do not have the burden of establishing the negative fact that the Huntington Co. did not own any real estate in addition to the stipulated list of items. Cf. Helvering v. Taylor, 293 U. S. 507. We conclude, therefore, that the said motion to dismiss should be and hereby is denied and that the issue presented by the assignment of error and denial thereof must be considered on the merits. Exception to this ruling is hereby granted respondent.
Included herein by reference are the several stipulations by which the parties hereto have finally disposed of certain issues raised by the pleadings and agreed that certain properties owned by the decedent at the time of his death and constituting a part of his gross estate, had fair market values on that date, as follows:
(1) $2,500,000 bonds of the Newport News Shipbuilding & Dry
Dock Co., including interest __________________________ $2,452,602.74
(2) 17,468 shares of stock of the Newport News Shipbuilding &
Dry Dock Co., $45.50 per share or _____________________ 707,454.00
(3) 23,042 shares of stock of the Newport News Land Co
$82 per share or ______________________________________ 1,889,444.00
(4) Decedent's vested remainder in the Hatzfeldt trust ______ 449,896.49
(5) 16,000 shares of common stock of the Bayside Land Co ____ 96,320.00
(6) A certain parcel of real estate in West Virginia ________ 625.00
Further, we include by reference the stipulations of the parties and the admissions set forth in the pleadings with reference to the deficiencies in income tax on the income of decedent for the years 1925 and 1926 and the period ended May 23, 1927, and interest thereon, paid by the executors of decedent's estate and on account of which petitioners are entitled to a deduction in the amount of $490,946.63.
Also, included herein by reference is stipulation No. 14 which sets forth that the executors of the decedent's estate have paid state inheritance taxes in the total amount of $3,988,599.90, and that the inheritance tax credit against the total Federal estate tax finally determined to be due should be in that amount of $3,988,599.90 or an amount equal to 80 percent of the Federal estate tax, whichever amount is the lesser sum.
Effect to the above stipulations will be given upon the recomputation under Rule 50.
Likewise, included herein by reference are numerous other stipulations, filed or dictated into the record, of certain facts relating to the remaining questions at issue, the pertinent portions of which stipulations will be hereinafter set forth, to the extent we deem necessary, in our findings or conclusions of fact.
The remaining issues as joined by the amended pleadings present to this Board for redetermination the following questions:
1. What was the fair market value, at date of decedent's death, of extensive and scattered parcels of real estate owned by the Huntington Co. and constituting its principal underlying assets? This issue, raised by both parties, is incidental but vitally necessary to the proper solution of the ultimate question of the fair market value of the shares of stock of the Huntington Co. owned by decedent at date of death. Petitioners allege that the value of such real estate, at date of death, was not in excess of $9,292,399.93, whereas respondent determined its value to be $14,627,159.69 and by amended answer affirmatively alleged that its value was $20,500,000, but on brief now contends that its value was $17,307,000. The parties have stipulated the fair market value of certain parcels of this real estate, and of all assets other than real estate, as well as the amount of all of the liabilities of the Huntington Co. at date of death of decedent.
2. What was the fair market value, at date of decedent's death, of 1,000 shares of stock of the Huntington Co. comprising its entire capital stock, owned by decedent at the time of his death? In the Federal estate tax return petitioners reported such stock as having a fair market value of $15,347,000 on the date of decedent's death, the same amount at which the stock was appraised for California inheritance taxes. Respondent determined that the value of such stock was $16,559,668.18, while petitioners allege that its value was not in excess of $10,638,648.31, but on brief now contend that its value was not in excess of $10,000,000. Respondent by amended answer affirmatively alleged that the value was at least $22,700,000, but on brief now contends that the value was $19,239,508.48.
3. What was the fair market value, at date of decedent's death, of extensive parcels of real estate owned by the Redondo Improvement Co. (hereinafter referred to as the Redondo Co.) and constituting its principal underlying assets? This issue, raised by both parties, is incidental but vitally necessary to the proper solution of the ultimate question of the fair market value of the shares of stock of the Redondo Co. owned by the decedent at date of death. The parties have stipulated the fair market value of certain parcels of this real estate and of all assets other than real estate, as well as the amount of the liabilities of that company at date of death of decedent.
4. What was the fair market value, at date of decedent's death, of 3,750 shares of common stock of the Redondo Co. owned by the decedent at the time of his death, the entire capital stock of that company being comprised of 5,000 shares of common stock? In the Federal estate tax return, the executors reported such shares of stock as having a fair market value of $1,350,000 on date of decedent's death. Respondent determined that the value of such stock was $1,735,987.50, while petitioners alleged that its value was not in excess of $1,137,937.50, but on brief now contend that its value was not in excess of $1,100,000. Respondent affirmatively alleged that the value of the said shares of stock was at least $2,275,207.80, but on brief now contends that its value was $1,825,650.
5. Whether or not petitioners are entitled to a deduction, as administration expenses, of the amount of $543,408.88 alleged expenses, discounts, and premiums incurred and paid in connection with notes of the face value of $9,500,000 issued by the estate to obtain funds with which to make payment of Federal estate and state inheritance taxes and other liabilities of the estate.
6. Whether or not petitioners are entitled to deductions, as administration expenses, of alleged additional expenses for attorney fees and expenses of litigation, additional executors' fees, and...
To continue reading
Request your trial