First Nat'l City Bank v. Comm'r of Internal Revenue (In re Estate of Henning), Docket No. 1181—75.
| Decision Date | 13 June 1977 |
| Docket Number | Docket No. 1181—75. |
| Citation | 68 T.C. 374 |
| Parties | *ESTATE OF GUSTAV HENNING, DECEASED, FIRST NATIONAL CITY BANK, DAVID T. GIBBONS, GUSTAV E. HENNING AND PAUL G. REILLY, JR., EXECUTORS, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Held, executors' commissions under New York law which are deductible under sec. 2053, I.R.C. 1954, are limited to amounts computed under New York statute even though decedent's will provided that each executor should be entitled to one full commission computed under laws of New York with certain modifications and if commissions were to be allowed in accordance with this provision of the will, the result would be commissions being paid to executors in an amount in excess of the statutory commissions. Paul G. Reilly, Jr., for the petitioner.
L. William Fishman, for the respondent.
Respondent determined a deficiency in estate tax in the amount of $45,525.43. Some of the issues raised by the pleading have been disposed of by agreement of the parties, leaving for our decision only whether petitioner is entitled to deduct as executors' commissions any amount in excess of the $35,378.16 allowed by respondent on the basis of a computation made pursuant to the provisions of the laws of the State of New York with respect to allowable executors' commissions.
All of the facts have been stipulated and are found accordingly.
Gustav Henning (hereinafter decedent) died on March 13, 1971, a resident of Point Lookout, N.Y. The executors of the estate of decedent are First National City Bank, David T. Gibbons, Gustav E. Henning, and Paul G. Reilly, Jr., all legal residents of New York State on the date of the filing of the petition in this case. An estate tax return was filed with the District Director, Internal Revenue Service, Brooklyn, N.Y., on December 13, 1971.
The total gross estate reported on the return was $783,811.49. Decedent's will, dated May 12, 1970, and a handwritten codicil thereto bearing the same date was filed for probate on June 23, 1971, in the Surrogate's Court, Nassau County, Mineola, N.Y. Decedent's will made provisions for several specific bequests as following with the value indicated:
+-----------------------------------------------------------------------------+
¦Item ¦Value ¦
+---------------------------------------------------------------------+-------¦
¦ ¦ ¦
+---------------------------------------------------------------------+-------¦
¦Clothing, jewelry, other articles of a personal nature, automobile, ¦$1,912 ¦
¦and boat ¦ ¦
+---------------------------------------------------------------------+-------¦
¦Stock of Henning Bros. & Smith, Inc. ¦49,264 ¦
+---------------------------------------------------------------------+-------¦
¦Release of indebtedness ¦200,000¦
+-----------------------------------------------------------------------------+
Decedent's estate had outstanding a loan of $200,000 which was secured by various stocks and bonds owned by decedent of a total reported value of $474,795.52. The specific bequest forgiving the indebtedness of $200,000 was contained in article Sixth, which provided as follows:
In the event my son, GUSTAV E. HENNING, is indebted to me at the time of my death, I release and discharge him from such debt except as to the amount of the estate and inheritance taxes as may be occasioned by the inclusion of such debt in my taxable estate.
There was included in the gross estate as reported on the estate tax return the note of Gustav E. Henning to decedent which was listed at a value of $200,000.
Article Tenth of decedent's will provided as follows:
I nominate, constitute and appoint FIRST NATIONAL CITY BANK, a national banking association, the HON. DAVID T. GIBBONS, and my attorney, PAUL G. REILLY, as Executors of and Trustees under this, my Last Will and Testament, without any security being required of them in any jurisdiction. If, for any reason, either DAVID T. GIBBONS or PAUL G. REILLY fail to qualify or cease to act as Executor or Trustee hereunder, then I nominate and appoint PAUL G. REILLY, JR. in the place and stead of the one not qualifying or ceasing to act no security shall be required of him.
Each Executor shall be entitled to one full commission computed under the Laws of the State of New York in effect at the time of my death on all real and personal property (other than property held by me in joint tenancy) whether or not specifically devised or bequeathed. Commissions shall be computed on the gross fair market value of the property without regard to any lien or charges against it.
Each Trustee shall be entitled to one full commission from time to time allowed by the Laws of the State of New York and such commissions shall be charged against the principal of the fund. If, for any reason, FIRST NATIONAL CITY BANK fails to qualify or ceases to act as Executor or Trustee hereunder, in such event the persons or person then accepting such appointment or then acting hereunder shall appoint such other Bank or Trust Company qualified to do business in the City of New York as they or he in their or his sole discretion shall determine, to act as Co-Executor or Co-Trustee hereunder.
Insofar as here pertinent, the codicil to decedent's will, dated the same day as the will, provided as follows:
I hereby amend Article Tenth of said Will as follows:
I constitute and appoint my son Gustav E. Henning as an executor of my said Will to serve with the persons named thereon and direct that he serve without bond and that he have all of the powers conferred on said Executors as though he were named in said Will dated May 12, 1970.
I hereby ratify and confirm my said Will in all other respects.
Sometime prior to November 7, 1973, the executors of decedent's estate filed a petition in the Surrogate's Court of Nassau County for advance payment of commissions. This petition recited the facts of decedent's will being filed for probate; that the United States estate tax return had been filed showing a gross estate of $783,811.49; that all bequests specifically provided for in the will had been paid or distributed; that the estate tax shown to be due on the estate tax return had been paid; that an amount had been paid on account of New York estate tax; that the funeral expenses and all debts of decedent and all administrative expenses, other than commissions and attorney's fees, had been paid to the extent they had been fixed; and that the will provided that each executor is entitled to one full commission computed in accordance with the laws of the State of New York in effect at the time of decedent's death on all real and personal property, other than that held in joint tenancy, whether or not specifically devised or bequeathed. The petition then contained a computation showing that, on the basis set forth in the will, a full commission for each executor for receiving principal would be $9,775.61. The petition further stated that the executors were desirous of receiving on account of the commissions to which they would be entitled if a final accounting were filed and settled the sum of $9,775.61 each and prayed that an order be entered permitting each executor to then receive such sum.
On November 7, 1973, a decree was entered by the judge of the Surrogate's Court of Nassau County which recited the facts of the filing of the application and the provisions of the will and codicil thereto and concluded:
The application is accordingly granted and each executor is awarded the sum of $9,775.61 on account of commissions. The decree shall provide that each individual executor is to file a bond in the amount awarded.
Thereafter, on the same day, the judge of the Surrogate's Court of Nassau County entered an order stating as follows:
FIRST NATIONAL CITY BANK, GUSTAV E. HENNING, DAVID T. GIBBONS and PAUL G. REILLY, JR., as executors of the Last Will and Testament of GUSTAV HENNING, deceased, having presented their petition verified August 21, 1973, Sept. 20, 1973; August 21, 1973 and October 3, 1973, wherein they prayed for an order pursuant to SCPA 2311 permitting them to receive the amount of $9775.61 each on account of commissions,
Now, on motion of REILLY, FLEMING & REILLY, attorneys for the petitioner, it is
ORDERED, that pursuant to the provisions of SCPA 2311, the petitioners, as executors of the Last Will and Testament of GUSTAV HENNING, are authorized to pay to FIRST NATIONAL CITY BANK, GUSTAV E. HENNING, DAVID T. GIBBONS and PAUL G. REILLY, JR. the sum of $9775.61 each on account of their commissions as such executors, and it is further
ORDERED, that GUSTAV E. HENNING, DAVID T. GIBBONS and PAUL G. REILLY, JR. execute and each file with this Court a separate bond with good and sufficient surety in the sum of $9775.61 each pursuant to SCPA 2311 to secure the return of the $9775.61 heretofore directed to be paid to them in the event the commissions that are ultimately allowed to them by the Decree on Accounting should be less than the sum of $9775.61, and it is further
ORDERED, that the petitioners bear the costs of this proceeding.
In determining the taxable estate, among the deductions claimed from the gross estate was $78,200 of ‘executors' commissions.’ Respondent, in his notice of deficiency, disallowed $42,821.84 of the deduction claimed for executors' commissions with the following explanation:
It is determined that executors commissions claimed on the return in the amount of $78,200 is unallowable in the amount of $42,821.84 because the claimed commissions are greater than the amount allowable by the laws of the State of New York and section 2053 of the IRC. Accordingly, the gross...
To continue reading
Request your trial