Pittsburgh Nat'l Bank v. Comm'r of Internal Revenue (In re Estate of Iversen)
| Decision Date | 25 November 1975 |
| Docket Number | Docket No. 8082-73. |
| Citation | 65 T.C. 391 |
| Parties | ESTATE OF ROBERT F. IVERSEN, DECEASED, PITTSBURGH NATIONAL BANK, AGENT FOR JOHN D. IVERSEN, EXECUTOR, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Robert J. Dodds III, for the petitioner.
David W. Otto, for the respondent.
Decedent and his former wife while domiciled in Pennsylvania in 1950 entered into a separation agreement which was binding whether or not a divorce was later obtained by either. The agreement provided for monthly payments to the wife for her life or until her marriage, these payments to be secured by a trust created by decedent the income of which was payable to decedent so long as he was not in default with the monthly payments and the corpus of which was to be distributed to decedent upon the death or marriage of his former wife. After the execution of the agreement and the creation of the trust the wife filed an action for an absolute divorce from decedent as it was contemplated she would do when the agreement was entered into. The divorce decree made no reference to the separation agreement. After decedent's death the trustee continued the monthly payments to the wife even though the Pennsylvania Common Pleas Court held the payments to be a liability of the estate and not secured solely by the trust. Held: (1) There was no consideration in money or money's worth received for the creation of the trust to secure the monthly payments to decedent's former wife independent of the consideration received for decedent's agreement to make the monthly payments and therefore no reduction of the value of the trust includable in decedent's gross estate is proper under sec. 2043(a); (2) the former wife had a valid claim against decedent's estate for the monthly payments for her life based on the separation agreement and the release of decedent's former wife of her right to support while she was married to decedent was consideration in money or money's worth for the agreement even though a former wife is not entitled to alimony under Pennsylvania law after an absolute divorce; (3) on the facts of this case there is no showing of the value if any in money or money's worth for the provision of the agreement for payments to the former wife after decedent's death and therefore the estate is entitled to no deduction under sec. 2053 for the former wife's claim against the estate for these payments.
Respondent determined a deficiency of $225,446.01 in the Federal estate tax of the Estate of Robert F. Iversen. The issues for decision are (1) whether any consideration in money or money's worth was received by decedent for the creation of a trust to secure payments to his former wife so that the value of the trust assets includable in the gross estate should be reduced by the value of such consideration under section 2043(a), I.R.C. 1954,1 or (2) whether the value of the obligation of the decedent's estate under a separation agreement incident to a divorce is a claim against the estate supported by consideration in money or money's worth so as to be deductible from the gross estate under section 2053(a)(3).
All facts have been stipulated and are found accordingly.
Robert F. Iversen (Robert or decedent), a resident of Florida, died testate on May 24, 1969. By his will dated December 20, 1966, he appointed his brother, John D. Iversen (John) his executor. The will was admitted to probate on June 4, 1969, and letters testamentary were issued to John by the County Judge's Court, Charlotte County, Fla. John appointed Pittsburgh National Bank (Bank) as his agent in carrying out his responsibilities as executor of Robert's estate. At the time of the filing of the petition in this case the legal residence of John was Pittsburgh, Pa. On August 11, 1970, a United States Estate Tax Return (Form 706) for decedent's estate was filed with the District Director of Internal Revenue, Jacksonville, Fla.
Robert married Mary Elizabeth McKeever (Mary) on April 2, 1938, in Massachusetts. No children were born of this marriage.
In early 1950 Robert and Mary, then residents of Pennsylvania, separated. Each retained local counsel for representation with respect to their marital difficulties. Both parties were desirous of obtaining a divorce and settling their property interests. During the separation period Mary continued to live in the family home and Robert paid for the upkeep and maintenance of the home as well as living expenses for Mary.
On September 8, 1950, Robert and Mary entered into an agreement (the separation agreement). This agreement which was executed in Pennsylvania provided in part as follows:
WHEREAS, they are no longer living together, and realizing that it will no longer be possible for them to live together as husband and wife, they have hereunto entered into this Agreement in order to settle their marital and property rights without resorting to legal proceedings, except as hereinafter provided; and
WHEREAS, the parties hereto have agreed upon the sums to be paid by the husband to the wife and the manner of payment in full satisfaction of any claim or demand which the wife now has or had or in the future may have against the husband for the wife's support and maintenance; and
WHEREAS, the husband and wife have agreed upon the discharge of the wife's marital rights and the sums and manner of payment, and have agreed upon the discharge of the husband's marital rights; and
WHEREAS, it is intended that the wife will proceed in a diligent manner to obtain a divorce a vinculo matrimonii promptly after the execution of this Agreement; and
WHEREAS, it is intended that this Agreement be incident to a decree in any divorce proceedings, whether instituted by the wife or by the husband;
NOW, WHEREFORE, in consideration of the premises and the covenants hereinafter contained, the parties hereunto each intending to be legally bound hereby agree as follows:
First: The husband shall pay to the wife immediately or as soon as practicable after the execution of this Agreement, but in all events before the entry of the decree of divorce, Fifty Thousand Dollars ($50,000.00), which sum is in partial discharge of the wife's marital rights, other than maintenance and support, arising from the marriage between the parties in the event the wife remarries after the said divorce, and is in total discharge of said marital rights in the event the wife dies after said divorce without ever remarrying.
Second: The husband shall pay One Thousand Dollars ($1,000.00) per month to the wife for maintenance and support as long as she remains his wife, such payments to begin on the first day of the month immediately following the execution of this Agreement. In the event a decree of divorce is obtained by either the husband or the wife, the husband shall continue to make said monthly payments to the wife in lieu of alimony and in settlement of such legal obligation imposed upon him because of the marital relationship now existing between the parties. Such payment shall be made on the first day of each month by the husband or by his estate to the wife for her life or until her remarriage.
Third: In the event the wife remarries, the husband or his estate shall pay to the wife Seventy-five Thousand Dollars ($75,000.00) within thirty (30) days of said marriage upon proper proof that such event has taken place. Such payment will release in full the marital rights of said wife in the event this contingency occurs.
Sixth: To provide for the true and faithful performance of the above covenants, the husband, at or before the execution of this Agreement, has transferred to the Commonwealth Trust Company of Pittsburgh as Trustee, stocks or securities having a presently realizable market value of at least Two Hundred Thousand Dollars ($220,000.00) for the uses and purposes and upon the terms and conditions set forth in a written agreement between the husband and said Commonwealth Trust Company of Pittsburgh, the original of which is attached hereto and made part hereof. The rights of the wife to the said monthly and lump sum payments are not limited to the security provided herein.
Seventh: The wife, in consideration of the premises and payments, covenants and promises of the husband, agrees to and does hereby release the husband from any and all right, claim, title and interest which she now has, has had, or hereafter may have, to other and additional support and maintenance for herself other than that contained in this Agreement.
Eighth: The wife, having a full knowledge of her husband's estate, hereby releases the husband and his estate from any and every claim which she now has, may hereafter have, or can have at any time, of, in, to or against the same or any part thereof, whether for support and maintenance or by way of curtesy or dower or under the intestate laws of the Commonwealth of Pennsylvania or any other jurisdiction, excepting only the provision in this Agreement contained and provided.
Ninth: The husband, having a full knowledge of his wife's estate, hereby releases the wife and her estate from any and every claim which he now has, may hereafter have, or can have at any time, of, in, to or against the same or any part thereof, whether by way of curtesy or dower or under the intestate laws of the Commonwealth of Pennsylvania or any other jurisdiction, excepting only the provisions in this Agreement contained and provided.
Twelfth: This Agreement shall not be abrogated nor its terms affected, except as herein expressly provided, by any decree of divorce, a vinculo matrimonii or a mensa et thoro, which may hereafter be entered in favor of either party hereto.
This Agreement shall be binding upon the parties hereto, their respective heirs, executors, administrators and assigns.
Pursuant to the sixth paragraph of the separation agreement, Robert entered into an agreement of trust (the trust agreement) dated September...
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