Hardenbergh v. Commissioner of Internal Revenue

• Decision Date: 13 October 1952
• Docket Number: No. 14516,14517.,14516
• Citation: 198 F.2d 63
• Parties: HARDENBERGH v. COMMISSIONER OF INTERNAL REVENUE (two cases).
• Court: U.S. Court of Appeals — Eighth Circuit

198 F.2d 63 (1952)

HARDENBERGH v. COMMISSIONER OF INTERNAL REVENUE (two cases).

Nos. 14516, 14517.

United States Court of Appeals, Eighth Circuit.

June 24, 1952.

Writ of Certiorari Denied October 13, 1952.

Leland W. Scott, Minneapolis, Minn. (Robert F. Leach, St. Paul, Minn., and David E. Bronson, Minneapolis, Minn., on the brief), for petitioners.

Melva M. Graney, Special Asst. to the Atty. Gen. (Ellis N. Slack, Acting Asst. Atty. Gen. and L. W. Post, Special Asst. to the Atty. Gen., on the brief), for respondent.

Before GARDNER, Chief Judge, and WOODROUGH and RIDDICK, Circuit Judges.

Writ of Certiorari Denied October 13, 1952. See 73 S.Ct. 45.

RIDDICK, Circuit Judge.

On April 2, 1944, George S. Hardenbergh, a resident of St. Paul, Minnesota, died intestate survived by his widow Ianthe and daughter Gabrielle and a son of a former marriage, George Hardenbergh, as his sole heirs at law. Decedent left an estate consisting of real property of the value of $29,378.08 and personalty of the value of $291,281.33. All of the real estate was sold under order of the State Probate Court for the payment of debts and expenses of the administration, leaving $252,317.63 for distribution to the surviving heirs, of which each of the heirs was entitled to one-third by virtue of the Minnesota law of Intestate Succession, M.S.A. § 525.13 et seq.

Some time prior to his death decedent had proposed leaving practically his entire estate to his son George in order to equalize to some extent the financial worth of his survivors. At that time his wife, Ianthe, was worth $2,000,000 and the daughter, Gabrielle, was worth a large sum in her own right. All of decedent's family agreed to this proposal, and decedent arranged with his attorney for the preparation of his will to carry it into effect. On Saturday, April 1, 1944, the attorney brought the will to decedent for execution, but because the decedent was then seriously ill, it was decided to delay the execution until Monday, April 3. Decedent died April 2 before the will could be executed.

In April 1944 the proceedings for the administration of decedent's estate began in a Minnesota Probate Court, and on September 20, 1944, Ianthe and Gabrielle filed in the administration proceedings a relinquishment of their respective interests in the estate as follows:

"We, Ianthe B. Hardenbergh and Gabrielle Hardenbergh, widow and daughter respectively of the above named George S. Hardenbergh, deceased, do hereby, coincidentally and jointly, definitely and finally renounce and reject, as of April 2, 1944, the date of death of said George S. Hardenbergh, any and all interest which we may then have had or may now have in and to the estate of said George S. Hardenbergh. We do hereby release and forever discharge the said estate and every part thereof from any claim or interest which may heretofore have accrued or might at any time hereafter accrue to us or either of us by reason of the laws of succession of the State of Minnesota; and we further agree that we will not at any time hereafter assert any claim or interest of any kind, nature or description in or to said estate or any portion thereof.

"We further respectfully state to the above named Court and to anyone interested in said estate that our purpose in renouncing any and all interest we may have in said estate is as follows: just prior to the death of George S. Hardenbergh, he, knowing that I, Ianthe B. Hardenbergh, had a large independent estate, and that I, Gabrielle Hardenbergh, had been amply provided for by trusts created by my grandfather, R. H. Bronson, and by my mother, Ianthe B. Hardenbergh, with our full knowledge and consent, had prepared a Last Will and Testament in which he devised and bequeathed substantially all of his estate to certain named trustees in trust for the sole benefit of his son, George Adams Hardenbergh. The provisions of said Last Will and Testament were agreeable to us. However, George S. Hardenbergh died before execution of said Last Will and Testament could be completed. We renounce all of interest in said estate so that the intention of the said George S. Hardenbergh may be carried out without delay or the intervention of other interests."

Thereafter, the Probate Court made its final decree of distribution reading in part:

"* * * that * * * Ianthe B. Hardenbergh and Gabrielle Hardenbergh have filed with this court a renunciation of their interest in the above named estate, and that George Adams Hardenbergh is the person entitled to the residue of said estate of said decedent.

"Now, Therefore, on motion of Matt W. Miller, representative of said estate, and by virtue of the power and authority vested in this court by law, It Is Hereby Ordered, Adjudged and Decreed and the said court does hereby Order, Adjudge and Decree, that all and singular the above described property and all other estate of said decedent in the State of Minnesota, subject to any lawful disposition heretofore made, be and the same is hereby assigned to and vested in George Adams Hardenbergh."

Pursuant to the above decree the net estate was delivered to George Hardenbergh. The Commissioner determined that Ianthe and Gabrielle had each made a gift to George of one-third of the net estate, and the Tax Court sustained his action, 17 T.C. 166. These petitions for review challenge the Tax Court's decision on the ground that the Minnesota Probate Court by its order of final distribution of decedent's estate made the only effective transfer thereof to George Hardenbergh. The taxpayers (Ianthe and Gabrielle) contend that the State Probate Court, as an incident to its jurisdiction of decedent's estate, was invested with jurisdiction to determine decedent's heirs and to adjudicate the taxpayers' right to renounce any claim or interest in the estate; that the Tax Court has erroneously determined a question of State law contrary to the determination thereof by the State Probate Court; and that the decree of the Probate Court, and not the act of the taxpayers in relinquishing their claims to decedent's estate, is the source of the right and title in the property of the estate acquired by George Hardenbergh.

Section 1000 of the Internal Revenue Code, 26 U.S.C.A. § 1000, imposes a tax upon the transfer of property by gift whether the property is real or personal, tangible or intangible, and whether the gift is direct or indirect. Section 86.2 of Treasury Regulations 108 provides that all transactions whereby property or rights or interests in property "are gratuitously passed or conferred upon another, regardless of the means or device employed, constitute gifts subject to tax." The words "property," "transfer," "gift," and "indirect," as used in the section of the Revenue Code, are to be read in the broadest and most comprehensive sense. Smith v....