Moyer v. Comm'r of Internal Revenue (In re Estate of Moyer)
| Decision Date | 29 May 1959 |
| Docket Number | 71324,71378,71398.,71386,71379,71325,69041,Docket Nos. 59017 |
| Citation | 32 T.C. 515 |
| Parties | ESTATE OF CLARENCE L. MOYER, DECEASED, C. LEIGH MOYER, JR., EXECUTOR, AND LENA W. MOYER, WIDOW OF CLARENCE L. MOYER, DECEASED, ET AL.,1 PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
1. For many years the Philadelphia-Baltimore Stock Exchange, an unincorporated association, has engaged in the operation of a security exchange. In 1876 the Exchange established a Gratuity Fund. Since its establishment the Gratuity Fund has been maintained exclusively to provide benefits upon the death of members of the Exchange. Held, that for purposes of Federal income taxation (1) the Exchange and the Gratuity Fund are separate entities, (2) the Gratuity Fund was during the taxable year 1953 a mutual insurance company other than life or marine and taxable under section 207, I.R.C. 1939, and during the taxable years 1954 and 1955 was a mutual insurance company (other than life or marine or fire) and taxable under section 821, I.R.C. 1954, and (3) since the Gratuity Fund's gross receipts from all sources for each of the taxable years 1953, 1954, and 1955 did not exceed $75,000, it was for 1953, exempt from tax under section 101(11), I.R.C. 1939, and, for 1954 and 1955, it was exempt from tax under section 501(c)(15), I.R.C. 1954.
2. During 1950 and 1954 the Gratuity Fund paid benefits to beneficiaries of deceased members of the Exchange. Held, that to the recipients the payments constituted amounts received under life insurance contracts, paid by reason of the death of the insured, that the payment made in 1950 was excludible from the gross income of the recipient under section 22(b)(1), I.R.C. 1939, and that the payments made in 1954 were excludible from the gross income of the recipients under section 101(a)(1), I.R.C. 1954.
3. In addition to the payment to the Gratuity Fund of a stated amount at the time of admission to the Exchange, the constitution of the Exchange requires that each member upon the death of another pay to the Gratuity Fund a stated amount. Held, that the foregoing payments constituted premiums or other consideration within the provisions of section 811(g)(2), I.R.C. 1939, and that by reason of such payments by William K. Barclay, a member of the Exchange, the entire amount paid by the Gratuity Fund to his beneficiaries upon his death is, under the provisions of section 811(g)(2), includible in his gross estate as insurance under policies upon his life purchased with premiums, or other consideration, paid by him.
4. The respondent's disallowance of a portion of a deduction taken for administration expenses by the Estate of William K. Barclay, Deceased, in computing the net estate sustained in part. WITHEY, Judge:
The respondent determined deficiencies in tax of the petitioners as follows:
+-----------------------------------------------------------------------------+
¦Docket¦Petitioner ¦Kind ¦Year¦Deficiency¦
+------+-----------------------------------------------+------+----+----------¦
¦No. ¦ ¦of ¦ ¦ ¦
+------+-----------------------------------------------+------+----+----------¦
¦ ¦ ¦tax ¦ ¦ ¦
+------+-----------------------------------------------+------+----+----------¦
¦59017 ¦Estate of Clarence L. Moyer, Deceased, C. Leigh¦Income¦1950¦$1,968.32 ¦
+------+-----------------------------------------------+------+----+----------¦
¦ ¦Moyer, Jr., Executor, and Lena W. Moyer, Widow ¦ ¦ ¦ ¦
¦ ¦of Clarence L. Moyer, Deceased. ¦ ¦ ¦ ¦
+------+-----------------------------------------------+------+----+----------¦
¦69041 ¦Gratuity Fund of Philadelphia-Baltimore Stock ¦Income¦1953¦886.66 ¦
+------+-----------------------------------------------+------+----+----------¦
¦ ¦Exchange and Trustees of Gratuity Fund. ¦ ¦1954¦4,678.94 ¦
+------+-----------------------------------------------+------+----+----------¦
¦ ¦ ¦ ¦1955¦5,745.59 ¦
+------+-----------------------------------------------+------+----+----------¦
¦71324 ¦Charles B. Barclay and Katharine B. Barclay ¦Income¦1954¦376.86 ¦
+------+-----------------------------------------------+------+----+----------¦
¦71325 ¦Estate of William K. Barclay, Deceased, Charles¦Estate¦ ¦6,615.35 ¦
¦ ¦B. ¦ ¦ ¦ ¦
+------+-----------------------------------------------+------+----+----------¦
¦ ¦Barclay, Executor. ¦ ¦ ¦ ¦
+------+-----------------------------------------------+------+----+----------¦
¦71378 ¦William K. Barclay III, a minor, H. Gilroy ¦Income¦1954¦253.41 ¦
¦ ¦Damon, ¦ ¦ ¦ ¦
+------+-----------------------------------------------+------+----+----------¦
¦ ¦Guardian. ¦ ¦ ¦ ¦
+------+-----------------------------------------------+------+----+----------¦
¦71379 ¦Oscar Doyle Johnson and Marian B. Johnson ¦Income¦1954¦207.49 ¦
+------+-----------------------------------------------+------+----+----------¦
¦71386 ¦Estate of William K. Barclay, Jr., Deceased, ¦Income¦1954¦708.08 ¦
+------+-----------------------------------------------+------+----+----------¦
¦ ¦Charles B. Barclay, Co-Executor, ¦ ¦ ¦ ¦
¦ ¦Fidelity-Philadelphia Trust Company, ¦ ¦ ¦ ¦
¦ ¦Co-Executor, and Maxine W. Darby, Co-Executor ¦ ¦ ¦ ¦
¦ ¦and Surviving Spouse (Formerly: Maxine W. ¦ ¦ ¦ ¦
¦ ¦Barclay). ¦ ¦ ¦ ¦
+------+-----------------------------------------------+------+----+----------¦
¦71393 ¦Virginia B. Bentley ¦Income¦1954¦654.24 ¦
+-----------------------------------------------------------------------------+
Issues presented for decision are the correctness of the respondent's action (1) in determining that the Gratuity Fund of the Philadelphia-Baltimore Stock Exchange is a taxable entity separate and apart from the Exchange, (2) in determining that the Gratuity Fund is a trust and taxable in accordance with the provisions of the Internal Revenue Codes of 1939 and 1954 relating to trusts (3) in disallowing deductions taken by the Gratuity Fund for payments or distributions made by the Fund to distributee-beneficiaries of deceased members of the Exchange, (4) in determining that such distributions or payments constituted, in whole or in part, taxable income to the distributee-beneficiaries, (5) in including in the gross income of the Gratuity Fund sums paid to the Fund by members of the Exchange at the time of their admission to membership in the Exchange, (6) in determining that payments or distributions made by the Gratuity Fund to distributee- beneficiaries on account of the death of William K. Barclay were includible in the gross estate of the decedent, and (7) in disallowing in a determination of the net estate of William K. Barclay, deceased, a portion of the deduction taken for administration expenses.
FINDINGS OF FACT.
Some of the facts have been stipulated and are found accordingly.
Clarence L. Moyer died June 14, 1950, leaving surviving him his wife, Lena W. Moyer. The joint Federal income tax return for Clarence L. Moyer and Lena W. Moyer for 1950 was filed with the collector of internal revenue in Philadelphia, Pennsylvania.
The trustees of the Gratuity Fund of the Philadelphia-Baltimore Stock Exchange filed their Federal fiduciary income tax returns for 1953, 1954, and 1955 with the district director in Philadelphia, Pennsylvania.
Charles B. Barclay and Katharine B. Barclay are husband and wife and filed their joint Federal income tax return for 1954 with the district director in Philadelphia, Pennsylvania.
William K. Barclay died July 29, 1954, and the Federal estate tax return for his estate was filed with the district director in Philadelphia, Pennsylvania.
William K. Barclay III is a minor and his Federal income tax return for 1954 was filed by his guardian H. Gilroy Damon, with the district director in Philadelphia, Pennsylvania.
Oscar Doyle Johnson and Marian B. Johnson are husband and wife and filed their joint Federal income tax return for 1954 with the district director in Philadelphia, Pennsylvania.
William K. Barclay, Jr., died March 19, 1954, leaving surviving him his wife, Maxine W. Barclay (now Maxine W. Darby). The joint Federal income tax return for William K. Barclay, Jr., and Maxine W. Barclay for 1954 was filed with the district director in Philadelphia, Pennsylvania.
Virginia B. Bentley filed her Federal income tax return for 1954 with the district director in Philadelphia, Pennsylvania.
The Philadelphia-Baltimore Stock Exchange (formerly the Philadelphia Stock Exchange), sometimes hereafter referred to as the Exchange, is an unincorporated association organized about 1790 in the city of Philadelphia, Pennsylvania, for the purpose of providing an auction market for trading in securities by its members. Since its formation the Exchange has conducted a security exchange. At all times material hereto it was duly registered with the Federal Securities and Exchange Commission and conducted its operations in Philadelphia.
The Exchange operates under and is governed by a constitution and the rules of its board of governors. The constitution provides for three ‘lasses of members, designated full, special, and associate. Since the cases involved here are concerned only with matters relating to full members, the terms ‘member’ and ‘members' as used...
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