McCarthy v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 17334.

• Decision Date: 09 December 1927
• Docket Number: Docket No. 17334.
• Citation: 9 BTA 525
• Parties: WALTER R. McCARTHY, EXECUTOR, ESTATE OF JOHN FRANCIS McCARTHY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

9 B.T.A. 525 (1927)

WALTER R. McCARTHY, EXECUTOR, ESTATE OF JOHN FRANCIS McCARTHY, PETITIONER, v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 17334.

Board of Tax Appeals.

Promulgated December 9, 1927.

Hugh Satterlee, Esq., and A. E. Graupner, Esq., for the petitioner.

L. C. Mitchell, Esq., for the respondent.

The taxes in controversy are income taxes for the calendar year 1924, and are in the approximate amount of $3,647.60.The only error which the petitioner now alleges was committed by the Commissioner is that he included in income an amount of $25,000.The facts have been stipulated.

FINDINGS OF FACT.

The petitioner, Walter R. McCarthy, whose principal office is at 706Board of Trade, Duluth, Minn., is the duly qualified and acting executor of the estate of John Francis McCarthy, deceased.

John Francis McCarthy, the decedent herein, died on April 28, 1923, and at that date, and for a long time prior thereto, was domiciled at and a resident of Duluth, Minn.His last will and testament was filed for probate with the Probate Court of St. Louis County, Minn., June 11, 1923, and thereafter the will was duly probated and Walter R. McCarthy was duly appointed by the court as the executor of the decedent's estate.

For many years prior to his demise, the decedent was the president of the Capitol Elevator Co., a Minnesota corporation, with its principal office in Duluth.

At a regularly called meeting of the stockholders of the Capitol Elevator Co. held in the City of Duluth, on June 15, 1922, a resolution was passed instructing the board of directors of the company to pay to the decedent $100,000 as additional salary for past services as soon as it could be done conveniently.

The decedent received $75,000 of the aforesaid additional salary prior to his death, and, at the time of his demise, $25,000 thereof was owing him and remained unpaid.

The petitioner filed with the collector of internal revenue at St. Paul, Minn., his return for Federal estate tax, and included therein the $25,000 additional salary remaining unpaid as a debt due to and an asset of the estate and set forth the debt in schedule D-2 of the return as having a value of $25,000.

The respondent duly audited the return for estate tax made by petitioner and included in the estate of the decedent subject to tax the item of $25,000 and assessed estate tax thereon, which estate tax was paid by the petitioner on October 10, 1924.

The aforesaid $25,000 was paid to the petitioner, as executor of the decedent's estate, during the year 1924.In his income-tax return as executor of the estate of the decedent for the taxable year ending December 31, 1924, the petitioner did not include the $25,000 or any part thereof, as income of the estate.

After the return of the $25,000 as a portion of the assets of the aforesaid estate and the payment of estate tax thereon, the respondent included the amount of $25,000 as part of the taxable income of the estate for the year 1924, the year in which it was paid, and...