Landers v. Comm'r of Internal Revenue (In re Estate of Landers)
| Decision Date | 13 September 1962 |
| Docket Number | Docket No. 82578. |
| Citation | 38 T.C. 828 |
| Parties | ESTATE OF WILLIAM A. LANDERS, SR., DECEASED, WILLIAM A. LANDERS, JR., AND DANIEL LANDERS, EXECUTORS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Henry M. Henderson, Esq., for the petitioner.
Donald C. Knickerbocker, Esq., for the respondent.
Decedent died March 10, 1956, a resident of Georgia. He left a somewhat ambiguous will which the Superior Court construed as giving his widow (in essence) a life estate with power to consume with respect to certain property. The Superior Court also decreed that another bequest was void for indefiniteness, thereby creating a partial intestacy. The widow was entitled to one-fifth of the property passing under the intestacy laws of Georgia. One year after the decree, which had then become final, all interested parties ‘dismissed’ the action and entered into a compromise settlement. The Court of Ordinary, pursuant to the widow's petition, granted.$23,500 to the widow for a ‘Year's Support’ allowance as provided by Georgia statutes. Held:
1. The question of the proper construction of decedent's will being fairly presented to the Superior Court, its decree is binding upon us, and the subsequent ‘dismissal’ does not change this result.
2. The interest thus created in the widow was not equal to a power ‘to do with as she pleases' and was therefore not a power of appointment exercisable ‘in all events' within the meaning of section 2056(b)(5), I.R.C. 1954. Accordingly, the widow's interest was ‘terminable’ and did not qualify for the marital deduction.
3. Since the widow's right to the support award was indefeasibly vested when the award became final, such award is
not a terminable interest and hence qualifies for the marital deduction even though under the Georgia statute the widow could not receive the award if she died or remarried prior to the time it was granted.
4. Expenses incurred in procuring said award were incurred for the primary benefit of the widow and not incident to the administration of the estate. Thus said expenses are disallowed.
5. The portion of the decree creating the partial intestacy and thus vesting in the widow a one-fifth interest in certain property was a binding determination of rights in property and conclusively fixed the widow's interest therein. Said interest qualified for the marital deduction.
Respondent has determined a deficiency in the tax liability of petitioner in the amount of $13,751.38.
The issues presented for our determination are: (1) Whether the decree of the local probate court relative to the interest which decedent's wife acquired under his will is binding upon us; and, in any event, whether said interest constituted a ‘terminable interest’ within the meaning of section 2056(b) 1 (and the exception thereto, section 2056(b)(5)) so as to deny the petitioner the marital deduction under section 2056(a); (2) whether the amount set aside, pursuant to court order, as a year's window's allowance under Georgia statutes, constituted a terminable interest; (3) whether the court costs and legal fees incurred in obtaining such allowance are deductible by the estate under section 2053(b); (4) whether a partial intestacy was created as to decedent's interest in certain bank accounts so that decedent's wife would be entitled to one-fifth thereof under Georgia statutes.
FINDINGS OF FACT.
Some of the facts have been stipulated and are so found.
William A. Landers, Sr. (hereinafter referred to as decedent), died testate on March 10, 1956, a resident of De Kalb County, Georgia. Decedent was survived by his wife, Edna Pearl Landers, four daughters, and two sons. The sons, Daniel Landers and W. A. Landers, Jr., were nominated as coexecutors under the will. His will was duly probated, letters testamentary were issued to the executors named therein, and an estate tax return was filed with the district director of internal revenue Atlanta, Georgia.
The dispositive portions of said will provided:
(Fourth) To my beloved wife, Edna Pearl Landers, one-half of all my money or credits in banks or saving institutions; also, all stocks or bonds that I may own, or be entitled to, at my death; also the following real estate and personal property, houses and lot at 4173 Covington Road, DeKalb County, Georgia, together with furniture, fixtures, tools, etc., therein or thereon; also, one Chrysler automobile and one Willys jeep; also, other real estate as follows: No. 612 Park Drive, N.E., Atlanta, Georgia; No. 313 Ware Avenue, East Point, Georgia; No. 794 North Central Avenue, Hapeville, Georgia; No. 5 Landers Drive, Clayton County, Georgia. Also, watches, and other personal effects, all which she is to have and use as long as she lives and remains single.
(Fifth) At her death whatever of this property remains is to be divided equally among our children then living.
(Sixth) To my sister, Miss Georgia Landers, $3,000.00 in cash.
(Seventh) All the rest of the real estate I own at my death is to be divided equally between my children then living, except my daughter, Mrs. Grace Butcher, is to have as her part of said real estate the six-room brick house at No. Custer Street in Hapeville, Georgia. This house on Custer Street is to be held and used by her during her lifetime and at her death is to be inherited by her two children, Leu Allen Stephens and Frances Stephens.
(Eighth) At my death one-half of the money I own on hand, or in banks or saving institutions, is to be divided equally among my children then living and the part falling to my daughter, Grace, is to be kept in separate bank account and paid to her at the rate of $100.00 per month until she receives her full share, except in cases of emergency, such as doctors or hospital bills, which can be paid by the Executor.
The property described in paragraph Fourth (apart from that set aside for widow's support) had the following agreed values at decedent's death:
+-----------------------------------+
¦One-half credits in bank¦$25,779.14¦
+------------------------+----------¦
¦Real estate ¦43,250.00 ¦
+------------------------+----------¦
¦Coca Cola stock ¦1,157.62 ¦
+------------------------+----------¦
¦Watches ¦20.00 ¦
+------------------------+----------¦
¦ ¦ ¦
+------------------------+----------¦
¦ ¦ ¦
+------------------------+----------¦
¦ ¦70,206.76 ¦
+-----------------------------------+
All property described in said paragraph and not enumerated above was taken by Edna as her widow's allowance (discussed below).
The real estate passing under paragraph Seventh had an agreed value of $38,950.
On January 28, 1957, the executors petitioned the Superior Court of De Kalb County for a construction of this will. The meaning of this already ambiguous will was further confused when the judge issued his order (dated Feb. 27, 1957) which consisted of answers to certain questions posed by the executors in the petition. The relevant questions raised in the petition with the answers given by the judge were as follows:2
Question (b):
Does the language ‘all of which she is to have and use as long as she lives and remains single’ apply only to the ‘watches, and other personal effects' described in the last sentence of the same said fourth paragraph, or does the same relate to the whole of said paragraph and all of the property therein described?
Answer:
In answer to Subsection (B)(b)(it) applies to all of the property described in the fourth paragraph of said Will.
Question (c):
Does the fifth paragraph of said will apply to all of the fourth paragraph, or does it apply only to the property described in the last sentence of the fourth paragraph?
Answer:
In answer to Subsection (C)(c) the fifth paragraph of said Will is applicable to all of the property described in paragraph 4 of the Will.
Question (d):
Does the language of said fifth paragraph vest in the widow a simple life estate in whatever property to which the language is applicable, or under such language does the widow have the right to consume or alienate any of the property to which the said fifth paragraph is applicable?
Answer:
In answer to Subsection (D)(d) the 5th paragraph of said Will leaves the wife a simple life estate.
Question (f):
It is respectfully submitted that the exception in the eighth paragraph of said will with respect to the share of Mrs. Grace Butcher in the testator's monetary assets is so vague and indefinite that the provisions thereof are utterly incapable of being carried out, and the Court is prayed to so declare, or else render full and complete direction.
Answer:
In answer to Subsection (F)(f) to paragraph 8 of the said Will, said paragraph is so vague and indefinite that it would be incapable of being administered by anyone.
The parties made numerous efforts to have the judge change this order but to no avail and the order became final at the conclusion of the December 1956 term of court. No party appealed from the order.
On April 10, 1957, the parties, in an apparent effort to comply with the above order, entered into a ‘Distribution Agreement.’ Under this agreement Edna (the widow) received $9,270 in cash and 9 shares of common stock in Coca Cola Company (then valued at $930) for a release of all her interests under paragraph Fourth of the will. She was also to receive one-fifth of all further moneys available for distribution after payment of expenses and charges against the estate.
On June 16, 1958, by agreement of all the parties the action was ‘dismissed’ of record.
On March 30, 1956, Edna petitioned the Court of Ordinary of De Kalb County, Georgia, for a setting apart of a ‘Year's Support.’ The court set aside certain property, ultimately valued at.$23,500, for the widow pursuant to this petition. The property set apart to satisfy this award constitutes the...
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