Kirkpatrick v. Sanders, 7673.

• Decision Date: 16 October 1958
• Docket Number: No. 7673.,7673.
• Citation: 261 F.2d 480
• Parties: Marie S. KIRKPATRICK, Margaret S. Hayes, and J. H. Pearson, Co-Administrators of Estate of N. B. Smithey, deceased, Appellants, v. P. K. SANDERS, District Director of Internal Revenue Service of North Carolina, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

261 F.2d 480 (1958)

Marie S. KIRKPATRICK, Margaret S. Hayes, and J. H. Pearson, Co-Administrators of Estate of N. B. Smithey, deceased, Appellants, v. P. K. SANDERS, District Director of Internal Revenue Service of North Carolina, Appellee.

No. 7673.

United States Court of Appeals Fourth Circuit.

Argued October 13, 1958.

Decided October 16, 1958.

Rehearing Denied January 14, 1959.

Kyle Hayes, North Wilkesboro, N. C. (Clyde Hayes, North Wilkesboro, N. C., on brief), for appellants.

James P. Saunders, Atty., Dept. of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, Melva M. Graney, Attys., Dept. of Justice, Washington, D. C., James E. Holshouser, U. S. Atty., North Wilkesboro, N. C., and Lafayette Williams, Asst. U. S. Atty., Greensboro, N. C., on brief), for appellee.

Before SOBELOFF, Chief Judge, SOPER, Circuit Judge, and BRYAN, District Judge.

SOBELOFF, Chief Judge.

The administrators of the estate of N. B. Smithey sued for refund of estate taxes paid by them upon a deficiency assessment. Their controversy with the District Director of Internal Revenue relates to two parcels of land which the Director included for estate tax purposes, but which they contend had been effectually transferred by the decedent to his two daughters in his lifetime. The Director maintains that the transfers were gifts, and because the deeds were not recorded within two years after execution in 1941, they were void under the applicable North Carolina statute.¹ Failure to record within two years is conceded, but the administrators insist that the deeds were not made as gifts but for a valuable consideration and that, therefore, the statute is inapplicable.

At the conclusion of the evidence, the District Judge, being of the opinion that there was no basis in the testimony from which the jury could conclude that the deeds were other than gifts, directed a verdict for the defendant. The administrators, appealing, contend that there was an issue of fact which should have been presented to the jury.

On December 16, 1941, Mr. Smithey and his wife executed two separate warranty deeds, one conveying a parcel of real estate valued at $27,000.00 to his daughter, Mrs. Marie Smithey Kirkpatrick, and the second conveying real estate worth $23,918.00 to Mrs. Margaret Smithey Hayes, another daughter. The first of the deeds recited a consideration of $100.00 and "other valuable considerations"; the second, $1.00 and "other valuable considerations." Internal Revenue transfer stamps in the amounts of $30.00 and $26.00, bearing cancellation marks dated and initialed, "12/26/41 N. B.S.", were attached to the respective deeds. Shortly thereafter, the daughters leased back to the father the properties conveyed by the deeds, and he continued to operate his business therein and paid annual rentals of $900.00 on each property until his death in 1953.

In 1942, Smithey duly filed a federal gift tax return reporting gifts of the properties to his daughters, and they, in turn, filed corresponding "Donee Information Returns for Gifts."

The appellants argue that in North Carolina recitals of consideration in deeds are considered prima facie correct, Randle v. Grady, 1944, 224 N.C. 651, 32 S.E.2d 20, 22; Faust v. Faust, 1907, 144 N.C. 383, 57 S.E. 22, 23, and that, therefore, the mention in the deeds of monetary and other considerations must be presumed to negate gifts in this instance, thus raising a jury question as to whether the properties passed for a valuable consideration.

However, on the entire record we think the District Judge was clearly correct in his view that no real issue of fact existed for the jury to consider, for the testimony permitted only one rational finding, namely, that the transfers were gifts.

The gift tax returns filed by Smithey and his daughters in 1942 clearly show that the parties regarded the transfers as gratuitous. While the internal revenue stamps may be considered some...