Gist v. United States
| Decision Date | 17 April 1969 |
| Docket Number | Civ. No. 3641-SD. |
| Citation | 296 F. Supp. 526 |
| Court | U.S. District Court — Southern District of California |
| Parties | Alice B. GIST, Plaintiff, v. UNITED STATES of America, Defendant. |
Harrison & Watson, by William J. O'Connell, San Diego, Cal., for plaintiff.
Edwin L. Miller, Jr., U. S. Atty., Southern Dist. of California, by Richard L. Fishman, Sp. Asst. to U. S. Atty., San Diego, Cal., for defendant.
This is an action for the recovery of federal income taxes assessed against and collected from plaintiff for the taxable years ended December 31, 1962, 1963, and 1964.
Federal jurisdiction is invoked by virtue of 26 U.S.C.A. (I.R.C.1954) § 7422, 28 U.S.C.A. § 1346(a) (1) and § 1402 (a) (1) and the Internal Revenue Laws of the United States. Cross motions for summary judgment have been filed.
In the years in question plaintiff was a resident of California. Plaintiff and her deceased husband, Gilman A. Gist, were married in 1926 and during the entire term of their marriage resided in, and were domiciliaries of California.
There were no children of the marriage of plaintiff and Gilman A. Gist, but the latter had issue of a previous marriage: Adele Gist Davis, Marguerite Gist Butler, and Gilman A. Gist, Jr.
Gilman A. Gist died April 29, 1960, and his will was admitted to probate in the Superior Court, County of San Diego, California, on May 20, 1960.
The will provided, in part, as follows:
The will further provided that the entire community property of Gilman A. Gist and plaintiff would, if plaintiff elected to take under the will, after certain specific bequests, pass to the First National Bank of San Diego in trust.
The terms of the trust provided that the entire income of the trust be paid to plaintiff for life, and upon her death income was payable to Adele Gist Davis and Marguerite Gist Butler for their lifetimes, with the remainder to their issue in equal shares.
The executor of the estate, First National Bank of San Diego, and its attorney advised plaintiff that she should seek independent counsel to advise her of her rights under the will and existing California community property law. Plaintiff sought counsel and elected to take under the terms of the will. This election was approved by the Probate Court on September 1, 1961.
Plaintiff paid a gift tax on $198,904.48. This represented the excess of the value of her community property interest transferred to the trust, $343,083.21, over the value of her right to a life estate in the trust, $144,178.73.
Plaintiff filed her tax returns for the taxable years 1962, 1963, and 1964 in the office of the District Director of Internal Revenue, Los Angeles, California. The tax returns disclosed liabilities, which were satisfied, as follows:
Year Amount
1962 $2,208.60
1963 $2,544.17
1964 $3,155.03
Plaintiff filed timely claims for refunds as follows:
Year Amount
1962 $1,754.47*
1963 $2,033.57*
1964 $2,530.67*
The basis of plaintiff's claim is that she is entitled to a $9,611.91 deduction in each year for amortization of the cost basis of her right to receive income from the testamentary trust created by her deceased husband's will.
It is now clear that a taxpayer who purchases a life estate may amortize his cost over the period of the beneficiary's life expectancy by ratable annual deductions. 26 U.S.C.A. (I.R.C.1954) § 167; Rev.Rul. 62-132, 1962-2 Cum. Bull. 73; Bell v. Harrison, 212 F.2d 253 (7th Cir. 1954); Commissioner of Internal Revenue v. Fry, 283 F.2d 869 (6th Cir. 1960). The fact that the life estate here was created upon the exercise of the widow's election does not alter the fact that plaintiff may be a purchaser for value as would be one to whom she sold her life estate for cash.
For purposes of the federal estate and gift tax, the exercise of a widow's election where the estate consists entirely of community property is considered a bargained-for sale or exchange made for consideration, i. e., a purchase. Commissioner of...
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Kuhn v. United States
...amortization and to distinguish those from the situation before it in Early, the Court of Appeals cited the case of Gist v. United States, 296 F.Supp. 526 (S.D.Cal.1968), aff'd, 423 F.2d 1118 (9th Cir. 1970). In Gist, the trial and appellate courts were confronted with the identical factual......
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...Hanover Trust Co. v. Commissioner, 431 F.2d 664 (2d Cir. 1970), affg. a Memorandum Opinion of this Court; Gist v. United States, 296 F. Supp. 526, 528 (S.D. Cal. 1968), affd. 423 F.2d 1118 (9th Cir. 1970); Frank MacBoyle Lewis Trust B v. Commissioner, 83 T.C. 246, 253 n.10 (1984); Elrick v.......
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