Moore v. United States
| Decision Date | 14 January 1963 |
| Docket Number | Civ. A. No. 3861. |
| Citation | 214 F. Supp. 603 |
| Court | U.S. District Court — Western District of Kentucky |
| Parties | C. P. MOORE, Jr., etc., and Muriel Ward Moore, etc., Plaintiffs, v. UNITED STATES of America, Defendant. |
S. Russell Smith, Smith & Smith, John A. Fulton, Woodward, Hobson & Fulton, Louisville, Ky., E. E. Hubbard, Fulton & Hubbard, Bardstown, Ky., for plaintiffs.
Robert Sama, Melvyn I. Mark, Attys., Dept. of Justice, Washington, D. C., Wm. E. Scent, U. S. Atty., Louisville, Ky., for defendant.
This is a suit for the refund of Federal estate taxes imposed upon the estate of C. P. Moore, Sr.
The Administrator paid $78,587.42 in estate taxes on September 7, 1955 and an additional assessment of $1,082.48 in estate taxes on April 12, 1956. Interest on that additional assessment, amounting to $18.55, was paid by the Administrator on May 21, 1956. Subsequently, on February 6, 1958 the Administrator filed a refund claim for the recovery of $15,883.07 of the amounts so paid, with statutory interest thereon. This refund claim was denied on January 29, 1959, and the complaint in this action was filed on October 15, 1959.
The substantial facts are not in dispute. The only question to be determined is whether or not the $55,000.00 which Muriel Moore, the widow of C. P. Moore, Sr., received outright and in cash pursuant to an out-of-court compromise and settlement of the claim which she asserted through her counsel to the fair value of her dower interest in her husband's Kentucky real estate is a terminable interest and thus does not qualify for the marital deduction under § 2056 of the Internal Revenue Code of 1954.
1. C. P. Moore, Sr. died intestate on September 30, 1954, a resident of Bardstown, Nelson County, Kentucky. He was survived by his third wife, Muriel, nine children by his second marriage and one daughter by Muriel. He was seventy-four years of age at the time of his death. His widow was fifty-four. The nine children by his second wife ranged in age from thirty-two to forty-seven. Anne, his daughter by Muriel, was twenty-five.
2. C. P. Moore, Jr., one of the decedent's children by his second marriage, was appointed Administrator of his father's estate by order of the Nelson County Court on October 8, 1954 and duly qualified as such. He and Muriel Moore are the plaintiffs in this action.
3. At the time of C. P. Moore, Jr.'s appointment as Administrator of his father's estate, the Nelson County Court appointed S. R. Demaree and T. B. Nichols, licensed real estate brokers, and Joseph F. Downs, to appraise the property owned by the decedent at the time of his death. Their appraisal, including land, was made on October 12, 1954 and the Administrator adopted it as his inventory of C. P. Moore, Sr.'s estate. That appraisal has been accepted, with minor adjustments, for estate tax purposes. There is no dispute in this proceeding as to the value of any property owned by the decedent for estate tax purposes.
4. The taxable estate of C. P. Moore, Sr. consisted of the following:
Real Estate
Colorado real estate $ 21,750.00
Kentucky real estate 287,267.46
___________
Total real estate $309,017.46
Probate Estate (Personalty)
Cash in bank 92,318.96
Stock in Farmers Bank and
Trust Co. 65,100.00
Other stocks 99.54
Farm machinery, cattle
and crops 5,168.68
Automobiles and personal effects 5,542.66
Other personal property 1,873.71
____________
Total probate estate (personalty) 170,103.55
Other Inclusions in Taxable Estate
Insurance policies payable to widow 5,274.56
Jointly-owned property 1,068.90
____________
Total of other inclusions 6,343.46
___________
Total Gross Estate 485,464.47
Deductions
Funeral expenses 2,895.50
Administration expenses 14,220.63
Debts 17,049.52
___________
Total Debts, Funeral and
Administration Expenses 34,165.65
__________
Adjusted Gross Estate $451,298.82
5. The Government calculated and determined the marital deduction to which the estate of C. P. Moore, Sr. was entitled as follows:
Widow's exemption $ 1,500.00
Life insurance 5,274.56
One-half interest in Colorado real estate 10,875.00
One-half interest in surplus personal
property 67,300.90
__________
Total in fee to surviving spouse $ 84,950.46
Less inheritance and estate taxes
payable therefrom 5,769.36
___________
Net marital deduction $ 79,181.10
6. There is no dispute as to the propriety of the inclusion in the marital deduction of the items hereinabove set forth.
7. The plaintiffs take exception to the inclusiveness of the marital deduction as calculated and determined by the Government. They claim that the $55,000.00 paid to Muriel Moore under the circumstances hereinafter set forth in settlement and compromise of her dower interest in the $287,267.46 of Kentucky real estate owned by her husband properly qualifies for the marital deduction and should have been included therein.
8. C. P. Moore, Sr. at the time of his death owned the fee simple title to ten parcels of real estate located in Kentucky, having an aggregate estate tax value of $287,267.46. These ten parcels were:
9. No action was instituted by the ten heirs of C. P. Moore, Sr. or anyone else in the Nelson Circuit or County Court under KRS 381.135 to have dower proper (a life interest) in one-third of the decedent's Kentucky real estate laid off, allotted and deeded in kind to Muriel Moore by Court Commissioners as provided in that statute or to otherwise have that Kentucky real estate partitioned and divided between the widow and the ten children of C. P. Moore, Sr.
10. The Government in this action stipulated in open court, and the Court finds, that the Kentucky real estate owned by C. P. Moore, Sr., at the time of his death was indivisible. It could not be partitioned in any manner (by individual parcels, parts of same or combinations thereof) between C. P. Moore's widow and his heirs without materially impairing its value or the value of the interest of the respective parties therein.
11. No action was instituted in the Nelson Circuit Court by Muriel Moore under KRS 389.020 and KRS 389.050 to have C. P. Moore, Sr.'s Kentucky real estate sold by court order because of its indivisibility and to obtain out of the proceeds of such sale a "reasonable compensation" for the value of her contingent dower interest therein for the reason that the compromise and settlement agreement she and the ten heirs entered into on April 23, 1955 obviated the necessity for such a judicial proceeding.
12. On April 23, 1955 Muriel Moore and the ten heirs of C. P. Moore entered into a formal written contract in which they This agreement contained an acknowledgment by all of the parties to it that the ten children of C. P. Moore, Sr. were "the owners of the fee simple title to * * * the real estate owned by C. P. Moore, Sr., at the time of his death and located in the State of Kentucky, subject to the dower interest of third party, widow of C. P. Moore, Sr." It provided that those ten heirs would pay Muriel Moore the $55,000.00 agreed upon as the fair cash value of her dower interest in the form of a three-year promissory note bearing interest at the rate of 5% per annum, which note would be secured by a mortgage to be executed by the ten heirs on three parcels of that Kentucky real estate having an aggregate estate tax value of $106,795.56. Muriel Moore, in consideration thereof, released and relinquished to the ten heirs "all of her right, title and interest, including her dower interest," in the Kentucky real estate owned by her husband and agreed to execute a deed to this effect.
13. The April 23, 1955 agreement between Muriel Moore and the ten children of C. P. Moore, Sr. was negotiated in good faith and at arms' length between persons having adverse and conflicting interests who were sui juris and represented by counsel. The parties thereto were not consciously endeavoring to minimize, avoid or evade estate taxes in negotiating that...
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