Gwinn v. Comm'r of Internal Revenue (In re Estate of Gwinn), Docket No. 48095.
| Decision Date | 18 October 1955 |
| Docket Number | Docket No. 48095. |
| Citation | 25 T.C. 31 |
| Parties | ESTATE OF D. BYRD GWINN, DECEASED, JAMES A. GWINN, ADMINISTRATOR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
25 T.C. 31
ESTATE OF D. BYRD GWINN, DECEASED, JAMES A. GWINN, ADMINISTRATOR, PETITIONER,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Docket No. 48095.
Tax Court of the United States.
Filed October 18, 1955.
[25 T.C. 31]
L. E. Woods, Jr., Esq., and Robert K. Emerson, Esq., for the petitioner.
Alvin J. Ivers, Esq., for the respondent.
At the date of his death, January 15, 1951, D. Byrd Gwinn owned 360 shares of the common stock of Gwinn Bros. & Co. He also owned life insurance policy No. 2358883 issued by the New England Life Insurance Co. in the face amount of $10,000. His wife, Caroline A. Gwinn, was designated primary beneficiary of the policy. On January 15, 1951, this policy, along with other life insurance policies of decedent, was pledged with a bank as collateral security for an indebtedness of decedent to the bank in the amount of $20,000. After decedent's death his administrator paid the indebtedness out of the property of the estate and the widow received the proceeds of policy No. 235883. Held, the fair market of Gwinn's stock owned by decedent at his death was $21,600 or $60 per share. Held, further, the proceeds of policy No. 235883 qualify for the marital deduction afforded by section 812(e), Internal Revenue Code of 1939.
This proceeding involves a deficiency which the Commissioner has determined in estate tax in the amount of $21,657.42 of which approximately $13,143.17 is in dispute.
The issues for decision are:
1. What was the value at the time of the death of the decedent of 360 shares of stock in Gwinn Bros. & Co.?
2. Do the proceeds of a life insurance policy which was pledged with a creditor as collateral security for an indebtedness of decedent qualify for the marital deduction afforded by section 812(e), Internal Revenue Code of 1939?
Some of the facts were stipulated and are incorporated therein by reference.
James A. Gwinn is the duly appointed, qualified, and acting administrator of the estate of D. Byrd Gwinn who died intestate a resident of Huntington, West Virginia, on January 15, 1951.
[25 T.C. 32]
At the time of his death the decedent owned, among other properties, 360 shares of the common stock of Gwinn Bros. & Co. (hereinafter sometimes referred to as Gwinn). In filing the estate tax return with the collector of internal revenue for the district of West Virginia petitioner valued this stock at $14,400 or $40 per share. In determining the deficiency in estate tax respondent valued the stock at $70,200 or $195 per share.
Gwinn Bros. & Co., a West Virginia corporation, was organized in 1901 as an outgrowth of a partnership formed by decedent's brothers in 1887. Since its organization it has engaged in the business of milling, selling, and distributing flour, grain, meal, and feed. Its only mill and office are located in Huntington, West, Virginia.
The products of Gwinn are sold principally to wholesale grocers in the so-called Tri-State area surrounding the cities of Ashland, Kentucky, and Huntington, West Virginia. Most of Gwinn's flour is sold outside Huntington, Its market for bakery flour is very limited. Its principal competitors are Pillsbury Mills, American Milling Company, and Kasco Mills. Gwinn is the only flour mill in West Virginia, the others in Bluefield, Clarksburg, and Charleston having been forced out of business.
The capital stock of Gwinn has at all times consisted of 2,000 shares of common stock of the par value of $100. At decedent's death all 2,000 shares were outstanding and were held as follows:
+-------------------------------------------------+
¦ ¦Relationship ¦Number of ¦
+---------------------+---------------+-----------¦
¦Shareholder ¦to decedent ¦shares ¦
+---------------------+---------------+-----------¦
¦D. B. Gwinn, Decedent¦ ¦360 ¦
+---------------------+---------------+-----------¦
¦James A. Gwinn ¦Son ¦786 ¦
+---------------------+---------------+-----------¦
¦Mrs. James A. Gwinn ¦Daughter-in-law¦175 ¦
+---------------------+---------------+-----------¦
¦Caroline A. Gwinn ¦Widow ¦55 ¦
+---------------------+---------------+-----------¦
¦Elizabeth G. Stillman¦Daughter ¦100 ¦
+---------------------+---------------+-----------¦
¦Hugh D. Stillman ¦Son-in-law ¦1 ¦
+---------------------+---------------+-----------¦
¦Mrs. Minnie Holloway ¦Sister ¦178 ¦
+---------------------+---------------+-----------¦
¦Martine E. Wickline ¦Sister ¦120 ¦
+---------------------+---------------+-----------¦
¦R. G. Whitten ¦Nephew ¦25 ¦
+---------------------+---------------+-----------¦
¦Sara Marr ¦None ¦130 ¦
+---------------------+---------------+-----------¦
¦R. D. Wylie ¦None ¦45 ¦
+---------------------+---------------+-----------¦
¦Philip W. Chambers ¦None ¦10 ¦
+---------------------+---------------+-----------¦
¦Mrs. Julia Stone ¦None ¦5 ¦
+---------------------+---------------+-----------¦
¦Mrs. Lucile Von Pechy¦None ¦5 ¦
+---------------------+---------------+-----------¦
¦Wm. S. Smith ¦None ¦5 ¦
+-------------------------------------------------+
At the time of his death decedent was president and treasurer of Gwinn and James A. Gwinn was vice president, secretary, and general manager. Since decedent's death James A. Gwinn has become president of the company.
The following is a list of all the sales of stock of Gwinn for the period June 1948 through August 1951:
+--------------------------------------------------------------------------+
¦ ¦ ¦Seller's ¦ ¦ ¦ ¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦ ¦ ¦relation to ¦ ¦ ¦ ¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦ ¦ ¦decedent ¦ ¦ ¦ ¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦ ¦ ¦and/or Gwinn¦Number¦ ¦ ¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦Date ¦Seller ¦Bros. & Co. ¦of ¦ ¦ ¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦ ¦ ¦ ¦shares¦Price¦ ¦Buyer ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦6-24-48¦Sue Gwinn Jones ¦Niece ¦13 ¦$60 ¦)¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦9-28-48¦Chauncey R. Crutcher¦None ¦5 ¦40 ¦)¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦12-6-48¦Robert H. Wylie ¦---do ¦14 ¦50 ¦)¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦1-7-49 ¦Chloe Edith Wylie ¦---do ¦24 ¦50 ¦)¦D. Byrd Gwinn. ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦3-18-49¦Ruth W. Wylie ¦---do ¦24 ¦50 ¦)¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦5-12-49¦Belle Groverman ¦---do ¦10 ¦40 ¦)¦ ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦3/50 ¦R. D. Wylie ¦Director ¦5 ¦50 ¦ ¦Wm. S. Smith. 1 ¦
+-------+--------------------+------------+------+-----+-+-----------------¦
¦8/51 ¦R. D. Wylie ¦---do ¦5 ¦50 ¦ ¦W. E. Gayle. 2 ¦
+--------------------------------------------------------------------------+
[25 T.C. 33]
Though offered to him, Gayle refused to buy the entire number of shares then owned by R. D. Wylie because he considered $50 too high a price. None of the buyers or sellers of the stock above mentioned were under any compulsion to buy or sell such stock. The 90 shares above mentioned purchased by the decedent were part of the 360 shares owned by decedent at his death.
At the time of the sales vendors Sue Gwinn Jones, Chauncey R. Crutcher, Robert H. Wylie, and Chloe Edith Wylie resided in California, Mexico City, California, and Florida, respectively. Vendor R. D. Wylie was over 80 years of age, dying April 29, 1952.
The real estate owned by Gwinn on January 15, 1951, consisted of the following parcels all located in Huntington, Cabell County, West Virginia and the assessed values placed thereon by the Assessor of Cabell County, West Virginia, as of January 1, 1951, are as follows:
+-----------------------------------------------------------------------------+
¦ ¦Assessed value ¦
+---------------------------------------------------------+-------------------¦
¦ ¦Land ¦Buildings ¦
+---------------------------------------------------------+-------+-----------¦
¦1. A lot 42 X 300 ft. Second Ave., between Ninth and ¦ ¦ ¦
¦Tenth Streets on which the flour mill building and two ¦ ¦ ¦
¦elevators are located. The mill was built in 1915. One ¦ ¦ ¦
¦grain elevator was constructed in 1889 and the other in ¦ ¦ ¦
¦1921. All of these are single-purpose buildings. The ¦$10,240¦$41,840 ¦
¦elevators because of their limited capacity are useful ¦ ¦ ¦
¦only in connection with an operating flour mill and ¦ ¦ ¦...To continue reading
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