Goodstein v. Comm'r of Internal Revenue (In re Estate of Collino)
| Decision Date | 10 February 1956 |
| Docket Number | Docket No. 46913. |
| Citation | 25 T.C. 1026 |
| Parties | ESTATE OF MICHAEL COLLINO, DECEASED, MORTIMER J. GOODSTEIN, ADMINISTRATOR D.B.N., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
1. The decedent's mother paid all of the premiums on 8 policies of insurance on decedent's life. She was the beneficiary and received the proceeds upon decedent's death. The evidence establishes that the decedent possessed an incident of ownership in the policies. Petitioner has failed to establish that decedent did not possess other incidents of ownership. Held, the proceeds of the insurance, $61,266.72, are includible in decedent's gross estate under the provisions of section 811(g)(2)(B) of the 1939 Code.
2. Upon the facts, held that failure to file the estate tax return within the time prescribed by law was due to a reasonable cause and not to willful neglect. Mortimer J. Goodstein, Esq., for the petitioner.
S. Jarvin Levison, Esq., and Emil Sebetic, Esq., for the respondent.
The Commissioner determined a deficiency in estate tax in the amount of $31,484.09. In addition, he imposed a 25 per cent addition to the tax, in the amount of $7,871.02, under the provisions of section 3612(d)(1) of the 1939 Code because the estate tax return was not filed within the time prescribed by law.
The Commissioner now concedes that two classes of property are not includible in the gross estate of the decedent, and he has agreed that the estate is entitled to deductions for debts of the decedent, consisting of Federal and State income taxes, penalties, and interest, if any, and for administration expenses, the amounts of which are to be computed under Rule 50.
The questions to be decided are as follows: (1) Whether the decedent, at the time of his death, possessed any of the incidents of ownership in 8 insurance policies insuring his life, purchased with premiums paid by his mother, so as to bring the proceeds thereof within his gross estate under section 811(g)(2) (B) of the 1939 Code; (2) whether the failure to file the estate tax return within the time prescribed by law was due to a reasonable cause and not to willful neglect.
The stipulation of facts and attached exhibits are incorporated herein by this reference, and all of the stipulated facts are found as stipulated.
The general facts, in brief, and those pertaining to the issues to be decided, are as follows:
Michael Collino, hereinafter referred to as the decedent, died intestate on October 30, 1947, at the age of 47 years, a resident of Bronx County, New York. Mortimer J. Goodstein is the duly appointed and acting administrator of the decedent's estate. He succeeded Helen Collino Kovacs who was removed as administratrix.
The decedent was survived by his widow, Helen Collino, now Helen Kovacs, an incompetent son, and his mother, Grace Collino.
Grace Collino is an immigrant of Italian extraction who, after many years of residence in New York, cannot read or write English. She immigrated to New York when she was 18 years of age. She is now about 80 years old. She is the widow of Frank Collino who died in 1940.
Frank Collino established and owned the Frank Collino Monument Works. Upon the death of Frank Collino, his entire estate was conveyed to Grace Collino, as the sole beneficiary, by the will of Frank Collino which was probated in Bronx County. After the death of Frank Collino, a certificate of doing business under the name of Frank Collino Monument Works was filed in 1940 by Grace Collino in the Bronx County Clerk's office, and thereafter, until November 1947, Grace Collino was the sole proprietor of the business. She sold the business on about November 15, 1947.
Michael Collino worked in the Collino Monument Works business prior to 1940 and until his death on October 30, 1947. Grace Collino depended upon Michael to supervise the family monument business.
Between 1931 and 1937, Grace Collino applied to an insurance broker for the purchase of 8 policies of life insurance upon the life of her son, Michael, and 8 policies of insurance were issued in the total fact amount of $57,500. The policies of insurance were issued by Metropolitan Life Insurance Company. Each policy was a 20-year endowment policy. In each policy, Michael Collino was the insured, and Grace Collino was named the beneficiary. The dates of issuance and the amounts of each policy were as follows:
+-------------------------+
¦Date of issue ¦Amount ¦
+----------------+--------¦
¦Dec. 18, 1931 ¦$10,000 ¦
+----------------+--------¦
¦Feb. 3, 1936 ¦5,000 ¦
+----------------+--------¦
¦Jan. 18, 1937 ¦( 5,000 ¦
+----------------+--------¦
¦ ¦(10,000 ¦
+----------------+--------¦
¦June 1, 1937 ¦5,000 ¦
+----------------+--------¦
¦July 1, 1937 ¦10,000 ¦
+----------------+--------¦
¦Aug. 4, 1937 ¦10,000 ¦
+----------------+--------¦
¦Aug. 19, 1937 ¦2,500 ¦
+----------------+--------¦
¦Total ¦$57,500 ¦
+-------------------------+
Grace Collino told the insurance broker that she would pay all of the premiums on all of the policies and that she was going to keep the policies. Grace Collino paid all of the premiums. Either she made payments of the premiums, or her son, Michael, paid them with funds which she provided. In 1947, Grace Collino made prepayment of the balance of all of the premiums required under all of the policies in the amount of above $20,000. The total amount of premiums paid on all of the policies was $50,408.66, of which amount Metropolitan refunded $13,940.10 to Grace Collino after the death of Michael Collino. The net amount of the retained premiums was, therefore, $36,468.56.
When the first policies of insurance on Michael's life were purchased, Frank Collino was living; he was an aged and a sick man.
Grace Collino retained the physical possession of the 8 policies of insurance on Michael's life. No one ever borrowed on the policies.
The decedent, Michael Collino, purchased 3 policies of insurance in which is wife, Helen, was named the beneficiary. The total amount of these policies was $28,400.48. Over one of these policies, in the amount of $17,930.37, issued in 1939 by Security Mutual Life Insurance Company, Michael Collino exercised control.
Under agreement with Metropolitan, the interest, the accumulated dividends, and refund of prepaid premiums were paid to the beneficiary of the 8 policies which are involved in this proceeding.
After the death of Michael Collino, Metropolitan paid Grace Collino, the beneficiary of the 8 policies, the face amount thereof, $57,500, plus interest and accumulated dividends, $3,766.72, and it also refunded to her $13,940.10 for prepaid premiums.
The total sum of the above payments was $75,206.82. No part of such amount was included in the gross estate of the decedent in the estate tax return. The Commissioner determined that the proceeds of the 8 insurance policies are includible in the decedent's gross estate, and he included in the value of the gross estate, as insurance, $75,206.82, which amount included the refunded, prepaid premiums of $13,940.10. The respondent now concedes that $13,940.10 represents property of Grace Collino and that such amount is not includible in the gross estate of the decedent. Accordingly, the net amount of the insurance represented by the 8 policies issued by Metropolitan is $61,266.72, only.
On February 14, 1948, letters of administration were issued to the decedent's widow, Helen, appointing her administratrix of the estate. Helen's occupation was that of a housewife and she had not had any business experience. Also, she knew very little about the business activities and transactions which her deceased husband had carried on both for himself and for his mother. She had not had any previous experience with the administration of any estate. Shortly after her husband's death, she employed an attorney whom she had known socially for many years, Dante R. Cappa. He obtained letters of administration appointing her administratrix, and he acted as her attorney in all of the matters she had to deal with as administratrix. Helen put in Capps's hands all of the matters pertaining to the administration of the estate and she relied wholly upon Cappa for his advice and guidance.
Soon after the funeral for the decedent, Helen arranged a meeting which was attended by her attorney, Cappa, and by Bernard Wolf, the attorney who had served and represented Grace, Frank, and Michael Collino since 1932, and by Grace Collino, and other members of the Collino family. Thereafter, Helen and Cappa undertook to locate and assemble all of the properties and assets of the decedent. To do this was difficult for several reasons, namely, because Michael Collino had not kept personal accounting records, complete accounting records for his mother's monument business, or complete accounting records for his mother's monument business, or complete accounting records of his mother's property. Furthermore, there were savings bank accounts in the name of the decedent which were ‘in trust’ for Grace Collino; there was a joint checking account of Michael and Grace Collino; there were brokerage accounts in the name of Michael and Grace Collino, or the survivor; there were some properties which were jointly held by Michael and Helen Collino; there was a brokerage account which was a joint survivorship account of Michael and Helen Collino; and there were some claims against the decedent.
To assemble the assets and liabilities of the estate of the decedent was a complicated undertaking. Grace Collino had inherited assets from her husband in addition to the monument business. It had been necessary for Grace to have Michael look after the monument business and her bank accounts and investments. Grace claimed that moneys were held ‘in trust’ for her by Michael, and that assets held in joint and survivorship accounts had been her own separate...
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