Linderme v. Comm'r of Internal Revenue (In re Estate of Linderme), Docket No. 3882-67.
| Decision Date | 21 May 1969 |
| Docket Number | Docket No. 3882-67. |
| Citation | 52 T.C. 305 |
| Parties | ESTATE OF EMIL LINDERME, SR., DECEASED, EMIL M. LINDERME, EXECUTOR, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
William W. Falsgraf, for the petitioner.
John P. Graham, for the respondent.
In 1956, decedent executed a quitclaim deed of his residence in favor of his three sons. He continued his exclusive occupancy of the premises until he entered a nursing home in March 1963. The residence thereafter remained vacant until October 1964. Held, under all the facts and circumstances, decedent retained the ‘possession or enjoyment’ of the residence until his death and the property is includable in his gross estate under sec. 2036(a)(1), I.R.C. 1954. Estate of Allen D. Gutchess, 46 T.C. 554 (1966), distinguished.
Respondent determined a deficiency in petitioner's estate tax in the amount of $11,075.89. The sole issue remaining for our determination is whether the decedent retained the possession or enjoyment of his residence within the meaning of section 20361 following the execution of a quitclaim deed in favor of his three sons.
Some of the facts are stipulated and are found accordingly.
Petitioner is the son of Emil Linderme, Sr., who died October 12, 1964, and the sole executor under his will. His legal residence at the time of filing the petition herein was Euclid, Ohio. The estate tax return was filed with the district director of internal revenue, Cleveland, Ohio.
Emil Linderme, Sr., resided at 16205 Shaker Boulevard, Shaker Heights, Ohio, from 1936 until March 1963, when he entered a nursing home, where he remained continuously until his death. The decedent's wife, Fredericka Linderme, died on March 22, 1955.
Emil Linderme, Sr., executed a quitclaim deed for his residence on September 7, 1956, in favor of his sons, Emil M. Linderme, Fred W. Linderme, and Edwin G. Linderme, which was recorded in the deed records of Cuyahoga County, Ohio, on September 10, 1956. The deed was then delivered by the decedent to Emil M. Linderme. Since he acted as custodian of his father's papers, he placed the deed in a file maintained in the decedent's name, where it remained until after the decedent's death. The decedent received no consideration for this transfer and no Federal gift tax return was filed. The other two brothers were not made aware of the deed until after the death of Emil Linderme, Sr.
The decedent continued to live alone in the house without paying rent until his removal. Each of the decedent's sons has a family and at all times pertinent maintained residences independently of the decedent.
Emil Linderme, Sr., continued to receive the bills for, and paid with his own funds, the real estate taxes, insurance premiums, maintenance expenses, and all other expenses relating to the property until he entered a nursing home in March 1963. Thereafter, the property remained vacant; all expenses incident to the property were paid by Emil M. Linderme from funds belonging to the decedent. The Linderme brothers never discussed the sale or rental of the property until after their father's death. About a year and one-half after the death of Emil Linderme, Sr., the property was sold and the proceeds were utilized to pay certain expenses of the estate, the remaining balance being then divided among the three sons.
In 1936, the decedent had transferred practically all his shares in the Linderme Tube Co., which he had founded, to his three sons.
The legatees under the decedent's will were Emil M. Linderme, Albina Rovniak, and the Emil M. Linderme Foundation.
Edwin G. Linderme died on July 20, 1965, and Fred W. Linderme died on October 16, 1965.
From the time of the transfer in 1956 until his death in 1964, decedent had an understanding pursuant to which he retained the exclusive use of the property in question.
OPINIONThe sole issue confronting us is whether the decedent retained the ‘possession or enjoyment’ of his residence so as to bring its value within his gross estate for purposes of the Federal estate tax pursuant to section 2036(a)(1). 2
Petitioner insists that respondent's assertion of the applicability of section 2036(a)(1) constitutes an unwarranted attempt to create a statutory presumption of retention of ‘possession or enjoyment’ from the mere fact of occupancy of the residence by the decedent from the time of the quitclaim deed in favor of his three sons in 1956 until his removal to a nursing home. We do not thus interpret respondent's position. Rather, we understand respondent to argue that, based upon an evaluation of all the facts and circumstances herein, there are adequate grounds for inferring an agreement or understanding on the part of decedent and his three sons sufficient to bring the transfer within the sweep of section 2036(a)(1). We agree with respondent.
The facts involved herein are clear. Decedent executed a quitclaim deed to the residence to his three sons in 1956. At that time, he delivered the deed to his son Emil. While the other two sons were not made aware of the delivery until after the father's death, we think it a reasonable assumption that Emil's actions in accepting the deed and in dealing with the decedent in respect of subsequent treatment of the property coincided with their views. Although the deed had been recorded prior to delivery, it was put into a file with decedent's other papers— a factor perhaps of more significance if there were an issue as to whether any gift was made, but also having some bearing on the existence, of an understanding with respect to decedent's interest in the property. Decedent continued in exclusive possession of the residence until he entered the nursing home. The residence was unoccupied from that time until his death about a year and a half later. There was neither consideration of any sale or rental of, nor any effort to sell or rent, the residence during that interval, thus indicating that the property was being held available for decedent's possible return. From the date of the quitclaim deed until his death, decedent's funds were used to pay all the expenses relating to the property, including real estate taxes, insurance premiums, and costs of maintenance. Even after the property was sold, part of the proceeds of sale were used to pay the obligations of decedent's estate. While this factor also would have greater bearing on the ‘any gift’ issue (see fn. 2, supra), it is a further indication, when taken into account with the other elements involved herein, of a retained interest in decedent.
Petitioner claims that the application of section 2036(a)(1) under the foregoing circumstances would unjustifiably extend the frontiers of that section contrary to the mandate of the decided cases and particularly our decision in Estate of Allen D. Gutchess, 46 T.C. 554 (1966), acq. 1967-1 C.B. We disagree. Petitioner correctly concludes that it is neither necessary that the proscribed retained interest be expressed in the instrument of transfer nor necessary that the decedent have a legally enforceable right to possession or enjoyment. Petitioner, however, points out that, in all of the decided cases in which section 2036(a) was held applicable to situations similar to that involved herein, the property was income-producing (Estate of Daniel McNichol, 29 T.C. 1179 (1958), affd. 265 F.2d 667 (C.A. 3, 1959); Estate of G. W. Peck v. United States, an unreported case (M.D. Ga. 1965, 16 A.F.T.R.2d 6125, 65-2 U.S.T.C.par 12,333); Carpenter v. United States, 243 F.Supp. 993 (W.D. Okla. 1965); Estate of Harter v. United States, an unreported case (N.D. Okla. 1954, 48 A.F.T.R. 1964, 1965-1U.S.T.C.par. 11,503)3 and that, in all of the decided cases which refused to apply that section, the property involved was non-income-producing. Union Planters National Bank v. United States, 361 F.2d 662 (C.A. 6, 1966); Estate of Binkley v. United States, 358 F.2d 639 (C.A. 3, 1966); Diehl v. United States, an unreported case (W.D. Tenn. 1967, 21 A.F.T.R.2d 1607, 68-1 U.S.T.C.par. 12,506); Stephenson v. United States, 238 F. Supp. 660 (W.D. Va. 1965); Estate of Allen D. Gutchess, supra; Estate of Robert W. Wier, 17 T.C. 409 (1951). Petitioner then seeks to parlay the foregoing decisions into the negative proposition that, unless income-producing property is involved, no agreement or understanding with respect to a decedent's retention of ‘possession or enjoyment’ can be inferred.
To be sure, the factual distinction emphasized by petitioner does exist in these cases. But a more significant element seems to have been the fact that there was no withholding of occupancy from the donee. In the absence of such withholding, the continued co-occupancy of the property by the donor with the donee was considered, in and of itself, an insufficient basis for inferring an...
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