Lámar v. Bookwalter
| Decision Date | 03 December 1962 |
| Docket Number | No. 13113-3.,13113-3. |
| Parties | Maude H. LAMAR, Personally and as Executrix of the Estate of Frederick C. Lamar, Deceased, Plaintiff, v. Edwin O. BOOKWALTER, District Director of Internal Revenue, Defendant, and United States of America, Intervenor. |
| Court | U.S. District Court — Western District of Missouri |
Harry A. Morris and Thomas E. King, Kansas City, Mo., for plaintiff.
F. Russell Millin, U. S. Atty., by Calvin K. Hamilton, Asst. U. S. Atty., Kansas City, Mo., for defendant.
Harvey G. Schneider of the Tax Division, Department of Justice, Washington, D. C., for the United States.
This action was instituted by the executrix to recover the sum of $70,456.89 plus interest, alleged to have been overpaid as Federal Estate Taxes by the estate of Frederick C. Lamar. The facts are not in dispute, and the question for determination by the court is one of law; whether or not the plaintiff, as deceased's widow, under the terms of his will was entitled to a marital deduction of 50%, or whether her interest was a terminable one under § 2056 Internal Revenue Code 1954, 26 U.S.C.A.1954 Ed. § 2056.
This controversy arises under § 361 Revenue Act of 1948; c. 168, 62 Stat. 110, which amended the Internal Revenue Code of 1939 to provide for a marital deduction. This section became § 812(e) of the Internal Revenue Code 1939, and is presently found in § 2056 Internal Revenue Code of 1954.
Prior to the enactment of this section, there was no provision in the tax laws allowing such marital deduction. The intent of Congress, as revealed in S.Rep. No.1013, 80th Cong. 2d Sess. U.S.Code, Cong.Serv.1948, Vol. II, page 1223 which accompanied the Bill, clearly points out that the basic purpose of the marital deduction was to equalize the tax situation between community and non-community property states. See Poe v. Seaborn, 282 U.S. 101, 51 S.Ct. 58, 75 L.Ed. 239; Commissioner of Internal Revenue v. Ellis' Estate, 252 F.2d 109 (C.A. 3d).
The enactment of this statute was the culmination of more than ten years of discussion and consideration by the tax writing committee of the Congress. The question first arose in the middle '30s when the Treasury Department recommended that the tax benefits derived by husband and wife in the community property states be abolished, primarily for the purpose of obtaining additional revenue. This, of course, resulted in a great storm of protest from the twelve community property states, particularly Texas and California, where the wealthy taxpayers were enjoying preferential advantages as compared to the taxpayers of the rest of the country. A hearing was held before the Committee and the recommendation was not accepted or approved and written into the succeeding tax bill.
As Federal taxes continued to increase rapidly, the taxpayers in the non-community property states complained bitterly of inequality and demanded some relief for themselves. As a matter of fact, several states including Oklahoma and Michigan and others, enacted statutes to give their citizens relief. This was necessary because some of their wealthy citizens were moving into the community property states so that they might enjoy the tax benefits.
This controversy continued until finally it resulted in the enactment of the present bill which authorized joint tax returns between husband and wife, and provided for the marital deduction. However, in § 2056 Internal Revenue Code of 1954, the Congress has placed certain restrictions upon the transfer of property for the purpose of allowance of the marital deduction, including subsection (b) (1), which provides:
In view of the clear and unequivocal Congressional expression that the purpose of the statute was to equalize the burden of Federal taxation between community and non-community property states, certainly the statute should be construed so as to effectuate that purpose, if it can be consistently done.
Frederick C. Lamar died testate on January 1, 1958, a resident of Jackson County, Missouri. He was survived by his widow, the plaintiff, a son, a daughter-in-law and a number of grandchildren. His will was admitted to probate on January 8, 1958, and his widow was duly appointed executrix by the Probate Court of Jackson County, Missouri.
After making certain specific bequests to his heirs, he provided in Article X of his will:
The testator then made provision for the disposition of the residue of his estate to his son, his daughter-in-law and his grandchildren going into considerable detail as to how the estate should be disposed of, and to whom, all of which is not important to a determination of the issues here.
The estate consisted entirely of personal property, the bulk of which was stocks, bonds, securities and some mortgages. According to the records of the Probate Court, there were no debts except some minor current accounts and expenses incident to his death and the cost of administration.
The decedent's widow did not predecease him, and survived the administration of his estate.
Subsequently there were some adjustments in the gross estate resulting from an audit, which reflected an increase in the value of certain stocks and securities. The marital deduction was also disallowed to the extent that it included the value of the assets within the residuary estate amounting to $223,907.31.
These adjustments led to an assessment of a tax deficiency against the estate of $70,456.89, which included principal and interest. The amount is not in controversy, and was paid by the executrix to the District Director on September 19, 1960, and on the same day a claim for refund was filed with the Commissioner, which was thereafter disallowed. In due time this action was instituted.
In disallowing the deduction the District Director contends that the provision of the will relative to the survival by the widow of the administration of the estate created a non-deductible terminable interest. Plaintiff contends that the interest created is absolute and indefeasible and vested immediately upon the death of the testator. Consequently it was not terminable as defined by the Revenue Code.
It is recognized by the parties that the question of whether or not the interest of the plaintiff was a terminable one is to be determined by the law of Missouri. No Missouri cases have been cited and we have not been able to find any determining whether or not such interest as we are dealing with here vested at the time of testator's death or at the time of distribution. Nor has a like question of Missouri law been before the Federal courts.
However, the question has been considered by United States District Courts in other states where the language in the will was almost exactly like that in Lamar's will. Because the decisions in those cases were based upon state law, there is no unanimity of opinion.
In Robertson v. United States, 199 F.Supp. 78 (N.D.Ala.1961), the District Court held that language in a will similar to that in the present case, under Alabama law, created a terminable interest and was not deductible.
In California in several cases it has been held that such language creates a terminable interest. See Farrell v. United States, 198 F.Supp. 461 (S.D. Cal.1961).
In Montana in Steele v. United States, 146 F.Supp. 316 (D.Mont.1956) the United States District Court held that a determination by a state court of language in a will comparable to that in Lamar's will, created an interest which vested at the time of decedent's death, was binding upon it and held that the wife was entitled to her marital deduction.
A similar situation appeared in Oklahoma in Mappes et al. v. United States, 208 F.Supp. 42 (D.C.) it was held that a determination by the state probate court where testator provided in his will that:
"I give, devise and bequeath to my wife, Lottie Mappes, if living at the time of my death, all of the remainder of my property, real, personal and mixed, wherever it may be situated."
In paragraph 3 he further provided that:
"In the event my wife should predecease me, or should die before my estate has been administered, then in that event I give, devise and bequeath to my sons, * * *."
created a fee simple title in the wife at the time of her husband's death, was binding...
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Bookwalter v. Lámar
...widow immediately upon Lamar's death, free of any contingency — as urged by appellee and as found by the trial court? Lamar v. Bookwalter, W.D.Mo., 213 F.Supp. 860 (1962). Section 2056 of the Internal Revenue Code of 1954, the statutory authority for the "marital deduction," also provides f......
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United States v. Mappes
...discussion, with a divergence of opinion concerning their sufficiency to condition an otherwise indefeasible devise. See: Lamar v. Bookwalter, D.C., 213 F.Supp. 860. The case which seems most influential is Kasper v. Kellar, 8 Cir., 217 F.2d 744, a South Dakota case, involving the South Dak......
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