Prindible v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 25 April 1929 |
| Docket Number | Docket No. 15344,15345. |
| Parties | JOHN F. PRINDIBLE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. LORETTA H. PRINDIBLE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
John Getz, Esq., for the petitioners.
L. A. Luce, Esq., for the respondent.
In these proceedings, which have been consolidated, the petitioners seek a redetermination of their income-tax liability for the calendar year 1920, for which year the respondent has determined a deficiency of $1,291.90 as to each.
The petitioners allege that the respondent erred in including in the gross income of each a profit of $8,070.42, resulting from the liquidation on June 30, 1920, of the Keyser Coal Co. The respondent determined that the petitioners each inherited from their father 41 2/3 shares of the capital stock of the Keyser Coal Co.; that the fair market value of the stock on the date of the father's death (January 11, 1918) was $521.18 per share; that the fair market value on the date of liquidation (June 30, 1920) was $714.87 per share; and that the increase in value of $193.69 per share, or $8,070.42 for the 41 2/3 shares, represented taxable income to each of the petitioners. The petitioners contend that each of them received 41 2/3 shares of stock on June 30, 1920, immediately preceding the liquidation of the corporation, as a gift from their mother, and that the basis for determining gain or loss on the liquidation would be the value at the date of gift, which value was equal to the value of the property received in liquidation, and that, therefore, they realized neither gain nor loss on the liquidation. The facts have been stipulated.
FINDINGS OF FACT.
The petitioners are individuals residing in Patton, Pa., and are children of John F. Prindible, who died testate on January 11, 1918, a resident of Johnson County, Kentucky.
The will of John F. Prindible was duly made and executed on February 9, 1914, and filed in the Probate Court of Johnson County, on February 4, 1918. It read as follows:
I, the undersigned, having complete confidence and that she was largely instrumental in accumulating the entire amount of my estate do hereby bequeath to my wife, Ada Hager Prindible, all my personal and real property feeling confident that she will make a fair allowance to my daughter, Hazel A. Prindible, of Washington, D. C., and properly provide for Loretta Hager Prindible, my daughter and John Prindible my son, both the latter children by her. I make no restriction on her re-marrying, except in case she does she shall at once make proper provision for my children. In other words, I want my brother, George E. Prindible, of Patton, Pa., to be made Administrator and in case he would not serve, for him to have a proper one in his judgment to be appointed. Said administrator to allow Ada Hager Prindible a sum not to exceed $600.00 per year, if she wishes same, and said administrator to pay Hazel A. Prindible the sum of three thousand dollars in cash or good security.
(Signed) J. F. Prindible.
The surviving widow, Ada Hager Prindible, was appointed administratrix, with the will annexed, of the estate of the decedent.
On March 8, 1918, the appraiser of the estate appointed by the Probate Court of Johnson County, Kentucky, placed a value of $25,000 on the 125 shares of stock in the Keyser Coal Co. which were owned by the decedent at the time of his death. This stock, together with other personal property, constituted all of the personal property of the decedent, the total appraisement on which was $51,600.
An action was instituted in the Circuit Court of Johnson County, Kentucky, by Ada Hager Prindible in her capacity as administratrix, and as an individual against Loretta Hager Prindible and John F. Prindible, Jr., the petitioners herein, children and sole issue of her marriage with the testator, and Hazel A. Justice, adult daughter of a former marriage of the testator, for construction and interpretation of the will. The court held that the widow, Ada Hager Prindible, took an absolute estate in the property devised and bequeathed. The guardian ad litem for John F. Prindible, Jr., appealed to the Court of Appeals (highest court in Kentucky), which court, in the case of Prindible v. Prindible, 186 Ky. 280; 216 S. W. 583, reversed the lower court and held that the testator clearly intended that his wife should have an absolute estate if she remained unmarried, but if she remarried, she should make proper provision for the testator's children and that "if at any time the widow desires to marry she should ask the chancellor to construe the will and determine what is a suitable provision for the children."
On June 30, 1920, immediately preceding the liquidation of the Keyser Coal Co., Ada Hager Prindible transferred 41 2/3 shares of the stock of that company to each of the petitioners herein. On July 17, 1920, she filed with the Johnson County Court her final report entitled "Settlement And Final Discharge of Administratrix," wherein she referred to the above transfers as follows:
Individually and as administratrix aforesaid, she has caused transfer of the 125 shares of Keyser Coal Co. stock to be made as follows:
To herself ___________________________________________________________ 41 2/3 shares
To Loretta H. Prindible, Daughter ____________________________________ 41 2/3 shares
To George E. Prindible, Trustee, interest for the sole use and benefit
of John F. Prindible, Jr., son _____________________________________ 41 2/3 shares
The appraised value of said shares was $25,000.00 which added to appraised value of the other shares herein set forth, shows complete and entire payment and distribution of the estate chargeable in first instance to her as administratrix aforesaid, and the voluntary settlement upon and for the use of Loretta H. Prindible and John F. Prindible, Jr., of one-third, each in kind, of the Keyser Coal Company stock and the principal asset of the said estate.
She herewith files receipts showing receipt of said shares by and on behalf of her said children, as also the statement in writing of Loretta Prindible, adult daughter, of her own approval of the terms of this paper as settlement. (Italics supplied.)
The receipt for the shares of the stock in question, given on behalf of John F. Prindible, Jr., is dated June 30, 1920, signed by George E. Prindible, Trustee, and reads as follows:
Received of Ada H. Prindible, Certificate No. — for Forty-one and two-thirds (41 2/3 ) shares of the Capital stock of the Keyser Coal Co., as given and transferred by her to the undersigned Trustee of John F. Prindible, Jr., to be held under the trusts of an instrument dated June 30, 1920, as Trustee upon the trust therein mentioned.
The part of the "receipt" and "statement in writing" of Loretta H. Prindible which is material here is as follows:
KNOW ALL MEN BY THESE PRESENTS:
That I, Loretta Prindible, adult daughter of John F. Prindible and Ada Hager Prindible, hereby acknowledged to have received Certificate No. — for forty-one and two-thirds (41 2/3 ) shares of the Capital Stock of the Keyser Coal Co., a corporation, as gift by and from said Ada Hager Prindible, and accepting same, do hereby release and forever acquit and discharge said Ada Hager Prindible, as administratrix, her and his personal...
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