McCann v. United States, K-64.

• Decision Date: 06 April 1931
• Docket Number: No. K-64.,K-64.
• Citation: 48 F.2d 446
• Parties: McCANN et al. v. UNITED STATES.
• Court: U.S. Claims Court

48 F.2d 446 (1931)

McCANN et al. v. UNITED STATES.

No. K-64.

Court of Claims.

April 6, 1931.

A. Donald MacKinnon, of New York City (Murray, Aldrich & Webb, of New York City, on the brief), for plaintiffs.

George H. Foster, of Washington, D. C., and Charles B. Rugg, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

WHALEY, Judge.

This suit is brought by the administrators of the estate of John William Cooke, who inherited an undivided one-eighth interest in certain real estate in the city of New York under the will of William Washington Cole, who died March 10, 1915, to recover an assessment of additional income taxes based on the increased value of the property at the time of sale over the appraised value placed on it at the time of the death of Cole. The plaintiffs contend the value of the property in March, 1913, should be compared with the sale price received in 1920 which would show a loss sustained instead of a gain derived. But Cooke had no interest in the property in 1913. The only interest he acquired was under the will of Cole, and that interest vested immediately upon the death of Cole. The value of his interest was an undivided one-eighth of the total value of the property at that time. The appraisal of the property by the State authorities for inheritance-tax purposes placed a value of $800,000 on the property at the death of Cole. Cooke's interest was one-eighth of that amount, or $100,000. Cooke died 18 days after the devise had vested. The plaintiffs are the ancillary administrators de bonis non of his estate and as his representatives are entitled to receive his interest in the estate of Cole. No immediate distribution of this property was made by the executor of Cole. It was held by the executor until 1920, when it was sold for $978,001.58, or a net gain of $178,001.58 over the appraisal made at the death of Cole. The mortgages taken in part payment were not disposed of until 1923, and then distribution was made by the executor of Cole of the proceeds of sale. The estate of Cooke received one-eighth of the $978,001.58, or $122,250, an increase of $22,250 over the value of the property when acquired by Cooke upon the death of Cole. The Commissioner of Internal Revenue assessed a tax on this increase as income to the estate of Cooke. The taxable year is 1920 and the revenue act of 1918 is applicable. The corpus of the devise is exempt from taxation, but the income from such property is subject to tax. Section 213 (b) (3), 40 Stat. 1057, 1065. The regulations specifically provide that where there is no appraised value for federal estate tax purposes "its value as appraised in the State court for the purpose of State inheritance taxes should be deemed to be its fair market value when acquired." Article 1562, Reg. 45.

Immediately upon the death...