Opal v. Comm'r of Internal Revenue (In re Estate of Opal)

• Decision Date: 05 February 1970
• Docket Number: Docket No. 4144-66.
• Citation: 54 T.C. 154
• Parties: ESTATE OF EDWARD N. OPAL, DECEASED, MAE OPAL, EXECUTRIX, NOW BY REMARRIAGE KNOWN AS MAE KONEFSKY, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

54 T.C. 154

ESTATE OF EDWARD N. OPAL, DECEASED, MAE OPAL, EXECUTRIX, NOW BY REMARRIAGE KNOWN AS MAE KONEFSKY, PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 4144-66.

United States Tax Court

Filed February 5, 1970.

Louis J. Opal, for the petitioner.

John B. Murray, Jr., for the respondent.

A New York joint and mutual will contained specific and explicit wording that its dispositive provisions were made in consideration of each other and were to be irrevocable. By subsequent clauses the makers devised and bequeathed residuum, each to the other, ‘absolutely and forever,‘ and thereafter provided that upon the death of the survivor of the makers, residuum was devised and bequeathed to their son. Held: The use of the phrase ‘absolutely and forever’ in the dispositive provisions in favor of the respective makers is considered along with the other language of the will to determine whether the will created a contract between the makers and the question is answered affirmatively under New York law. It follows that the survivor of the makers received a terminal interest which did not qualify for the marital deduction under sec. 2056(b)(1), I.R.C. 1954, and does not qualify as a life estate with a power of appointment under sec. 2056(b)(5), I.R.C. 1954. Held, further, testimony regarding intent of maker has been considered in determining whether joint will constituted a contract between makers, but is inadmissible to reveal or prove testator's dispositive intentions. Held, further, petitioner's burden regarding claimed deduction of $2,000 additional expenses has not been carried.

FORRESTER, Judge:

Respondent has determined deficiencies in petitioner's Federal estate tax in the amount of $63,574.82.

Concessions have been made by both parties so that the only remaining issues for decision are: (1) Whether petitioner is entitled to a marital deduction under the provisions of section 2056¹ of the Internal Revenue Code for the value of the interest in property passing to Mae Opal under the terms of the joint last will and testament of Edward and Mae Opal; and (2) whether certain expenditures of $2,000, claimed at trial as administrative expenses of the Estate of Edward N. Opal, are ordinary and necessary expenses under section 2053.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulations and exhibits attached thereto are incorporated herein by this reference.

Edward N. Opal (hereinafter sometimes referred to as Edward died testate at the age of 62 on November 16, 1961, a resident of New York, N.Y. He was survived by his wife, Mae Opal (hereinafter sometimes referred to as Mae or petitioner), and a son, Warren Ian Opal (hereinafter sometimes referred to as Warren).

Mae Opal resided at New York, N.Y., at the time of the filing of the petition herein and is the executrix of the Estate of Edward N. Opal.

On August 29, 1961, Edward and Mae executed their joint last will and testament, pertinent portions of which follow:

IN THE NAME OF GOD AMEN

We, EDWARD N. OPAL and MAE OPAL, his wife, both residing at 85-19 Avon Street, Jamaica, Queens County, New York, both of us being of sound and disposing mind and memory and mindful of the uncertainty of this life, do make, publish and declare this to be our joint LAST WILL AND TESTAMENT, hereby agreeing, each of us with the other in consideration of the dispositive provisions hereinafter set forth, that this Will shall be irrevocable by either of us without the written consent of the other, and hereby revoking any and all former Wills and Codicils by us or either of us at any time heretofore made.

SECOND: In the event EDWARD N. OPAL predecease MAE OPAL,

A. We direct that his just debts and funeral expenses be paid as soon after his decease as may be practicable;

B. All the rest, residue and remainder of the estate of EDWARD N. OPAL, real, personal and mixed, and wheresoever the same may be situate, is hereby given, devised and bequeathed unto the said MAE OPAL, absolutely and forever;

C. Thereafter and upon the death of said MAE OPAL, and after the payment of her just debts and funeral expenses, all the rest, residue and remainder of the estate of said MAE OPAL, real, personal and mixed, and wheresoever the same may be situate, is hereby given, devised and bequeathed unto our beloved son WARREN IAN OPAL, absolutely and forever;

THIRD: In the event MAE OPAL predecease EDWARD N. OPAL,

A. We direct that her just debts and funeral expenses be paid as soon after her decease as may be practicable;

B. All the rest, residue and remainder of the estate of MAE OPAL, real, personal and mixed, and wheresoever the same may be situate, is hereby given, devised and bequeathed unto the said EDWARD N. OPAL, absolutely and forever;

C. Thereafter and upon the death of said EDWARD N. OPAL, and after the payment of his just debts and funeral expenses, all the rest, residue and remainder of the estate of said EDWARD N. OPAL, real, personal and mixed, and wheresoever the same may be situate, is hereby given, devised and bequeathed unto our beloved son WARREN IAN OPAL, absolutely and forever;

FOURTH: In the event both EDWARD N. OPAL and MAE OPAL die in a common accident or disaster, or under circumstances leaving any doubt as to which of them predeceased the other,

A. We direct that our just debts and funeral expenses be paid as soon after our decease as may be practicable;

B. All the rest, residue and remainder of the estates of both EDWARD N. OPAL and MAE OPAL, real, personal and mixed, and wheresoever the same may be situate, is hereby given, devised and bequeathed unto our beloved son WARREN IAN OPAL, absolutely and forever.

The will was admitted to probate on December 6, 1961, in the Surrogate's Court, Queens County, in the State of New York.

On August 16, 1963, petitioner filed an estate tax return for the decedent's estate, and respondent has issued his statutory notice of deficiency disallowing the marital deduction, claimed by petitioner under section 2056, on the grounds that the property passing to Mae under the will was a ‘terminable interest.’

OPINION

Petitioner and her husband executed a joint last will and testament, leaving Edward's property to Mae. Respondent contends that the property interest passing to Mae from Edward does not qualify for the marital deduction under section 2056.²

He argues that: (1) Under New York law Mae is contractually bound to devise and bequeath to Warren the unconsumed portions of the property which came to her from Edward; and that (2) because of the limitations imposed on the use of the property by reason of this contractual obligation, her interest in the property is in effect a life estate with broad powers of invasion that do not include an ability to give it away by an inter vivos gift which would defeat the purposes of the contract; and that such an interest fails to qualify for the marital deduction, since it is a terminable interest under section 2056(b) (1) which does not qualify as a life estate with a power of appointment under section 2056(b)(5).

Petitioner, on the other hand, contends that she received ‘a fee simple and absolute’ under the will and is not contractually bound to devise the property to her son.

At the outset, an interpretation of the joint will is necessary in order to ascertain the nature of the property interest passing to Mae and the existence or nonexistence of a contractual obligation to devise to her son any property received from Edward. The law of New York is determinative of that interest. Estate of Julius Selling, 24 T.C.191, 197 (1955).

The introductory language of the first paragraph of the will explicitly states that the dispositions are irrevocable and that each is in consideration of the other. In the second provision, clause C, Mae is to devise her estate to Warren. Necessarily that estate will include any remaining portions of the property received from Edward, as well as her own property. No indication is evidenced in clause C that property received from Edward is to be treated any differently from Mae's. If any part of his estate remains at her death it will be in her estate, and it is the devising of Mae's estate to the son which the introductory paragraph makes irrevocable. Hence, it appears that Mae is contractually bound to devise Edward's estate to the son at her death.

Petitioner contends, however, that the use of the phrase ‘absolutely and forever’ in clause B of the second provision of the will precludes a finding of a contractual obligation to devise the property received from Edward and requires a finding that Mae received ‘a fee simple and absolute’ in her husband's estate. She refers us to two New York cases which hold that no contract existed to devise property received from a decedent when the dispositive provisions of the will under consideration used language of absolute gift in devising property to the survivor. Matter of Zeh, 24 App. Div. 2d 983, 265 N.Y.S. 2d 257, affirmed on opinion of lower court 18 N.Y. 2d 900 (1965), 223 N.E.2D 43 (1966); Matter of Silverman, 43 Misc.2d 909, 252 N.Y.S.2D 587 (Sur. Ct. 1964).

We have carefully examined Silverman and Zeh and find them distinguishable. The issue before the court in Zeh was whether a contract to devise could be implied from the format of the will and the wording of the dispositive provisions. There was no independent contractual language in the will nor a contemporaneous agreement to make the will irrevocable. The provisions therein under consideration are as follows (24 App.Div.2d at 984, 265 N.Y.S.2D at 259):

‘1. We, or said survivor, give and devise all of the real property together with all buildings thereon and equipment used in connection therewith, of which we, or said survivor, may die seized and/or possessed or in which we, or said survivor, may have any interest or to which we, or said survivor, may be entitled at the time of our deaths, or at the death of said...