Estate of Mundy v. Commissioner
| Decision Date | 27 December 1976 |
| Docket Number | Docket No. 6392-74. |
| Citation | 35 TCM (CCH) 1778,1976 TC Memo 395 |
| Parties | Estate of Lota C. Mundy, Deceased, Palmer First National Bank and Trust Company of Sarasota, Executor v. Commissioner. |
| Court | U.S. Tax Court |
George W. Ericksen, 512 Florida Ave., First Financial Tower, P.O. Box 1531, Tampa, Fla., for the petitioner. Gerald W. Hartley, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined a deficiency in the Federal estate tax of the Estate of Lota C. Mundy, deceased, Palmer First National Bank and Trust Company, executor, in the amount of $850,907.11.
The only issue for decision is the fair market value of certain corporate stock owned by decedent at her death. In connection with this determination, we must decide the effect on the value, if any, of certain redemption provisions found in the certificate of incorporation.
Some of the facts have been stipulated and are found accordingly.
Palmer First National Bank and Trust Company of Sarasota, as executor of the Estate of Lota C. Mundy, timely filed a Federal estate tax return with the Director, Internal Revenue Service Center, Chamblee, Georgia on July 7, 1971. The executor's principal place of business was located in Sarasota, Florida at the time the petition in this case was filed.
The decedent, Lota C. Mundy, died testate on March 30, 1970. She was the widow of Harry L. Mundy (Mr. Mundy), who died February 7, 1962, and she was survived by three children, Anne Mundy Lazareff, Guthrie Mundy, and Harry L. Mundy, Jr. These children were born in 1912, 1913, and 1914, respectively. Guthrie Mundy suffered brain damage at birth and has required care and supervision throughout his life.
At the time of her death, decedent owned, among her other assets, 77 shares of Class A stock and 6 shares of Class B stock in the Lota Company. The 77 shares of Class A common stock, which she had received from her husband on his death, were still held by the estate of Harry L. Mundy but were under an order of distribution to decedent. The decedent's estate later received the 77 shares in a distribution from her husband's estate.
The Lota Company was a Florida corporation organized to do business in 1937. It was established in a reorganization in which substantially all the assets of a Minnesota corporation, the Lundi Company, were transferred to it. The Lundi Company had been organized by the decedent's husband on October 31, 1930. At all times the capital structure of the Lota Company and restrictions on its stock were set forth, in pertinent part, in the articles of incorporation as follows:
These provisions were essentially the same as those found in the articles of incorporation of Lota Company's predecessor, the Lundi Company.
The stock certificates for the Class A shares of Lota Company stock carried the following legend:
The rights, privileges and restrictions enuring to the benefit of or placed upon the Class A Common Capital Stock are set forth in the Certificate of Incorporation, reference to which is hereby made.
The certificates for the Class B stock carried a similar legend referring to the restrictions upon that class of stock.
Harry L. Mundy, the decedent's husband, was a heavy construction contractor and was involved in the building of some of the early railroads in the United States before 1929. About the time of the Depression, he went into other forms of construction and was involved in the building of the Shasta Dam, the Cascade Tunnel, the Allegheny Highway, a number of other highways, some of the levees on the Mississippi River and mining operations in northern Minnesota. About 1943 Mr. Mundy retired to Florida.
On July 22, 1915, Harry L. Mundy and Charles Ffolliott had formed Ffolliott & Mundy, Inc., a Minnesota corporation, to hold various investments in securities belonging to them. Ffolliott died in 1930, and Ffolliott and Mundy, Inc. was liquidated. On October 31, 1930, Harry L. Mundy formed the Lundi Company, a Minnesota corporation, with substantially the same assets he received in the Ffolliott and Mundy, Inc. liquidation. The assets transferred to the Lundi Company were taken on its books at a value of $455,572.85. The assets transferred are listed below:
________________________________________________________________________________
Number of Indicated
Shares Issue Book Value
________________________________________________________________________________
143 Brooks-Scanlon-O'Brien Co., Ltd. ............ $ 12,155.00
40 Colorado & Southern Ry. 1st pfd. |
> 8,152.50
60 Colorado & Southern Ry. 2nd pfd. |
40 Union Securities Co. ........................ 4,000.00
4 Provident Loan Society ...................... 100.00
35 Old National Corporation Class A |
> 473.33
13 Old National Corporation Class B |
29 Cities Service Co., 6% pfd. ................. 2,112.19
15 Northern Pacific Ry. ........................ 1,293.00
2,071 A. Guthrie & Co., Inc., pfd. ................ 207,100.00
126 Curtiss-Wright Corp. Common |
> 591.17
28 Curtiss-Wright Corp. Class A |
501 Midland United Company ...................... 11,519.22
...To continue reading
Request your trial