Estate of Whitt v. C.I.R.
| Citation | 751 F.2d 1548 |
| Decision Date | 04 February 1985 |
| Docket Number | No. 84-7026,84-7026 |
| Parties | -1562, 85-1 USTC P 13,607 ESTATE OF Elbert B. WHITT, Loyd Whitt, Executor, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (11th Circuit) |
J. Gilmer Blackburn, Blackburn & Maloney, Mark Daniel Maloney, Decatur, Ala., for petitioner-appellant.
Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, Robert A. Bernstein, John A. Dudeck, Jr., Tax Division, U.S. Dept. of Justice, Washington, D.C., for respondent-appellee.
Appeal from the Decision of the United States Tax Court.
Before RONEY and HENDERSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.
This is an appeal from a judgment of the Tax Court upholding the determination of the Commissioner of Internal Revenue ("Commissioner") that there were deficiencies in federal estate and gift taxes paid by the estate of Elbert B. Whitt ("Estate").
Elbert B. Whitt, a resident of Ardmore, Limestone County, Alabama, died June 14, 1969, at the age of 82. On September 12, 1975, the executor of his estate, his son, Loyd H. Whitt, filed a federal estate tax return. The return stated that the decedent owned no real estate at the time of his death and further represented that "[i]n 1959 the decedent and his wife deeded all farmlands owned by them to their children."
Following an investigation, the Commissioner determined that during his lifetime Elbert Whitt had owned 18 parcels of farmland which he had gratuitously conveyed to his children and one grandchild while retaining the actual possession or use of or the right to income from the property until his death. The Commissioner thus determined that these tracts, valued at $417,526 at the time of death, were includable in the As a second alternative position, the Commissioner determined that, although the decedent may have effectively conveyed all of his interest in these parcels to his children, these were gratuitous conveyances for less than adequate and full consideration, and thus constituted gifts subject to the federal gift tax under IRC Sec. 2501 et seq. (26 U.S.C. Sec. 2501 et seq ). The Commissioner further determined that these gifts were not completed until the recordation of the deeds and that consequently the gift tax on each conveyance was due in the year in which the deed was recorded.
decedent's gross estate under Section 2036(a)(1) of the Internal Revenue Code of 1954 ("IRC") (26 U.S.C. Sec. 2036). Alternatively, the Commissioner determined that any of these parcels which were not effectively conveyed before Whitt's death were taxable under IRC Sec. 2033 (26 U.S.C. Sec. 2033) as property in which the decedent had an interest at the time of his death.
The Estate petitioned the Tax Court for review of these deficiency determinations, contending that all of Elbert Whitt's interest in these parcels had been effectively conveyed to the respective grantees during his lifetime. Thus, none of the property was includable in the decedent's estate. Moreover, the land was in every instance conveyed for full and adequate consideration, either in cash or in services performed for the decedent. In any event, even if these conveyances were gifts, they were complete and irrevocable at the time the deeds were delivered to the respective grantees. Thus, each conveyance was subject to the gift tax when the deed was executed and delivered, not when it was recorded.
At the hearing before the Tax Court, the Estate, as the petitioner, introduced into evidence the warranty deeds executed by the decedent conveying 15 of the 18 parcels. Another deed was introduced whereby third parties conveyed one of the parcels to one of the decedent's sons. The Estate proffered only one witness, an attorney, to testify as to the validity and effectiveness of these deeds to transfer title under the laws of Alabama. The Tax Court excluded this testimony. The Estate then rested its case.
The Commissioner called several witnesses, including several of the decedent's children, all of whom were cross-examined by the Estate.
As to 11 of the parcels, the Tax Court sustained the Commissioner's alternative determination that they were includable in the decedent's gross estate pursuant to Section 2033. It also concluded that six of the parcels were gifts subject to gift taxes in the years of recordation, 1963 or 1964. The court found that only one parcel had actually been sold during Whitt's lifetime and was thus not subject to either tax.
At issue are 18 separate tracts of rural land of varying size--14 in Limestone County, Alabama, three in Madison County, Alabama, and one in Tennessee. A summary chart of the conveyances involved is set forth in the margin. 1 It may Elbert Whitt was a farmer who had utilized primarily tenant farmers and mules in cultivating his lands in northeastern Alabama and nearby parts of Tennessee. His sons testified that at his age he felt uncomfortable shifting to the use of tractors and other modern farming equipment and techniques, and so he decided to turn his land over to his children. Some of it was deeded over to three of his sons in 1952. Deeds on Whitt's remaining farmland were executed on August 21, 1959. Each recited the receipt of $10 and other valuable consideration.
be noted that 12 of these deeds were executed on August 21, 1959, and that all of the introduced deeds save one were recorded over a 15-month period between June 21, 1963 and September 11, 1964.
While these deeds appeared to dispose of all of Elbert Whitt's farm properties, he continued to receive commodity program payments from the Agricultural Stabilization and Conservation Service ("ASCS") until his death. Moreover, in his 1967 and 1968 income tax returns, he reported income and expenses from the raising of cattle, swine and cotton. He also claimed depreciation of numerous farm implements, including three tractors, one of which had been purchased in March 1959. The depreciation schedules attached to these returns also indicated that Elbert Whitt had regularly purchased agricultural implements after the execution of the deeds in August 1959, both before and after the recordation of the various deeds.
Following is a recitation of the facts developed with respect to each of the 18 tracts:
On August 21, 1959, Elbert and Nellie Whitt conveyed 118.5 acres in Limestone County by warranty deed to Alton Whitt, their son. Although the deed recited the receipt of $10 and other considerations, Alton did not pay any cash. Alton was unmarried and lived at home with his parents until their deaths. During this time he performed services for his parents, including working around the farm and staying up nights to care for Elbert after his stroke in December 1968. He testified that he would have performed these services anyway, whether or not he had received the land.
Alton did not farm the land which he received from his parents himself. However, he did permit his brothers to farm it. He also cut timber on the property from time to time. At some time prior to Elbert's death, Alton received a check from the Tennessee Valley Authority in payment for a right of way across the land. At no point in his testimony did Alton indicate whether any of these activities took place before his deed was recorded on September 11, 1964.
Approximate Fair Fair
Date Date Stated No. of Market- Market
of Value Value
Tract Deed Recor- Grantee Acres County Date of When
no. ded Death Deed
Recor-
ded
------- ------ ------ ----------- ----------- --------- ------- --------
9 8/21/- 3/13/- Margaret 40 Limestone 12,000 8,967
59 64 Ann
Whitt
10 8/21/- 3/13/- Margaret 40 Limestone 12,000 8,967
59 64 Ann
Whitt
11 8/21/- 3/13/- Margaret 40 Limestone 12,000 8,967
59 64 Ann
Whitt
12 8/21/- 2/25/- Willard 40 Limestone 12,000 8,967
59 64 Whitt
13 8/21/- 3/20/- Willard 40 Madison 12,000 8,967
59 64 Whitt
14 3/1/32 3/20/- Willard 40 Madison 12,000 8,967
64 Whitt
15 -- -- Audry Whitt 60 Limestone 18,000 13,451
(1964)
16 8/13/- 6/21- Willard 110 Limestone 33,000 23,264
52 /63 Whitt
17 8/13/- 11/16- Thomas 97 Limesone 29,100 20,514
52 /63 Whitt
18 8/13/- 12/8- Alton Whitt 191.5 Lincoln & 67,350 --
52 /70
Giles
Tenn
The Tax Court determined that, in light of Alton's testimony, Elbert Whitt had effectively parted with all of his interest in Tract 1 before his death. However, the Tax Court also concluded that Alton did not pay consideration for the conveyance, and that it was therefore a gift which was not completed until the deed was recorded in 1964.
On August 21, 1959, Elbert and Nellie Whitt executed three warranty deeds to Audry Whitt, their son, conveying separate tracts of 63 acres, 70 acres and 50 acres respectively in Limestone County. Each deed recited the receipt of $10 and other...
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