Sbicca v. Comm'r of Internal Revenue (In re Estate of Sbicca), Docket No. 70987.

• Decision Date: 24 October 1960
• Docket Number: Docket No. 70987.
• Citation: 35 T.C. 96
• Parties: ESTATE OF FRANK SBICCA, DECEASED, ERNESTA SBICCA AND ARTHUR SBICCA, EXECUTORS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

35 T.C. 96

ESTATE OF FRANK SBICCA, DECEASED, ERNESTA SBICCA AND ARTHUR SBICCA, EXECUTORS, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 70987.

Tax Court of the United States.

Filed October 24, 1960.

1. The decedent and his wife were residents of the State of California. In his will he gave, devised, and bequeathed the residue of his estate to his wife ‘if she is living at the time of the entry of the Order of Final Distribution of my estate,‘ and further provided that if she should not be living at such time, the residue of the estate should vest in his five children. Held, that the interest so given to the surviving wife was a terminable interest and that the estate is not entitled to a marital deduction with respect to the property in question under section 812(e) of the Internal Revenue Code of 1939.

2. Held, further, that if it be assumed that certain property held by the decedent at the time of his death represented property acquired while a resident of a noncommunity property State and that it meets the description of property covered by section 201.5 of the California Probate Code, nevertheless, the full value of such property is to be included in the gross estate under section 811(a) of the Internal Revenue Code of 1938, since the decedent owned such property at the date of death, section 201.5 of the Probate Code being merely a statute of succession and not purporting to alter the character of such property as being separate property up to the time of death.

3. Held, further, that the surviving wife's interest in such property is a marital right in the decedent's property, that the relinquishment thereof resulting from the wife's election to take under the will is not a consideration ‘in money or money's worth’ (section 812(b) of the Internal Revenue Code of 1939), and that no part of the value of such property is to be excluded from the gross estate under section 811(c) of the Code. Rudolph A. Phillips, C.P.A., for the petitioner.

Alfred L. Margolis, Esq., for the respondent.

ATKINS, Judge:

The respondent determined a deficiency of $13,371.60 in estate tax against the petitioner, the estate of Frank Sbicca. The principal issue relates to the amount of the marital deduction to which the estate is entitled under section 812(e) of the Internal Revenue Code of 1939. By amendment to the petition, the petitioner raises the issue whether certain property should be excluded from the gross estate.

FINDINGS OF FACT.

Some of the facts were stipulated and the stipulations are incorporated herein by this reference.

The decedent, Frank Sbicca, was born in Italy and immigrated to the United States prior to May 8, 1916, the date of his marriage. He and his wife, Ernesta, lived in Philadelphia, Pennsylvania, from the date of their marriage until July 1943, when they moved to California.

At the time the decedent came to the United States he had a fractional interest, of small value, jointly with his brothers in a family home in Italy, but he did not receive any income therefrom after coming to the United States. He did not receive any gifts, bequests, or inheritances after the date of his marriage.

At the time of his marriage the decedent had only about $300, which he and his wife used to buy household furniture. After the marriage the decedent repaid to his brother in Italy some money which he had borrowed to come to the United States, and he sometimes sent additional sums to his brother in Italy to help him out.

The decedent was a shoemaker by trade, and in September of 1920 he started his own business, which included the manufacture of shoes, in the house in which he lived. At the time of his marriage the decedent could not speak English, and his wife translated for him in his contacts with the public, and answered the telephone. She also did the office work such as keeping books, making payrolls, reconciling bank accounts, and managing the business when he was away. The decedent always consulted with his wife about purchases of property and investments. The business was incorporated in about 1930, and thereafter the decedent received a salary from the corporation.

The decedent died November 13, 1953, at which time he was a resident of California. He was survived by his wife, Ernesta, three sons, and two daughters. The decedent's wife and his son Arthur are executrix and executor of the decedent's estate and verified the petition herein on December 2, 1957.

The decedent executed a will in California on March 22, 1950. The first paragraph thereof provided for the payment of debts and cost of last illness and burial. The second paragraph bequeathed property as follows: To his three sons in equal parts all of his shares of stock in Sbicca of California, a California corporation; to his wife a life estate in the business property at 214 West 17th Street, Los Angeles, California, with remainder to his five children; and to his five children certain land and buildings in Los Angeles. The third paragraph provides as follows:

I give, devise and bequeath the residue of my estate, real and personal, wherever situate, to my wife, ERNESTA, if she is living at the time of the entry of the Order of Final Distribution of my estate. If my wife, ERNESTA, is not living at the time of the entry of the Order of Final Distribution of my estate, the residue of my estate shall vest in my said five (5) children, share and share alike.

On the same date, and before the same witnesses, the decedent's wife executed the following document:

WAIVER

I, Ernesta Sbicca, wife of Frank Sbicca, hereby certify that I have read the foregoing Will of my husband and fully understand that my husband by this Will disposes not only of his separate property but also of our community property now owned or hereafter to be acquired, if any, including my half of that property. Being fully satisfied with its provisions, I hereby elect to accept and acquiesce in the provisions of the Will, but not including property exempt from execution, my right to a probate homestead, nor my right to a family allowance out of my husband's estate during probate. This instrument is not a transfer or release of my right, title or estate in any property now owned or hereafter to be acquired by me, is revocable by written instrument executed by me and delivered to my husband during his lifetime, and it shall be effective and valid for any purpose only after the decease of my husband and provided I survive him, and upon the condition that the foregoing Will shall be duly admitted to probate by a court of competent jurisdiction and that it shall not be successfully contested or probate revoked. My husband shall have the right to revoke this Will at any time without liability to me.

DATED at Los Angeles, California, the 22 day of March, 1950.

ERNESTA SBICCA.

The will and the waiver were filed in the Superior Court of California for the county of Los Angeles on November 23, 1953, and were admitted to probate on December 10, 1953. On July 14, 1955, the presiding judge of the Superior Court for the county of Los Angeles issued ‘ORDER SETTLING FINAL ACCOUNT AND FOR DISTRIBUTION UNDER WILL,‘ which provides in part as follows:

The first and final account and report, and petition for distribution herein of Ernesta Sbicca and Arthur Sbicca, as executors of the estate of said deceased, by Aaron Levinson, their attorney, coming on this 14th day of July, 1955, for hearing and settlement by the Court, all notices of said hearing having been given as required by law, the Court, after hearing the evidence, and finding that said estate is partly separate and partly community property, and that all inheritance taxes and all personal property taxes due and payable by said estate have been paid, settles said account, approves said report, and orders distribution of said estate as follows:

It is Ordered, Adjudged and Decreed by the Court * * * that in pursuance of and according to the provisions of the last will of said deceased, and Ernesta Sbicca, widow, having elected to take under said last will, the residue of cash, and the property hereinafter described, and all other property belonging to said estate, whether described herein or not, be and is hereby distributed as follows:

To Arthur Sbicca, Peter Sbicca, and Frank Sbicca, Jr., Wanda Pontrelli and Flora Osa, Children of decedent, each, an undivided one-fifth interest in and to the following described real property: (Describing the Los Angeles real property.)

To Ernesta Sbicca, widow of decedent, a life estate in real property described as: (Description of property);

* * * and subject to the life estate held by said Ernesta Sbicca, said property shall vest in Arthur Sbicca, Peter Sbicca, Frank Sbicca, Jr., Wanda Pontrelli and Flora Osa, children of decedent, in equal parts;

To Ernesta Sbicca, widow of decedent, all the rest, residue and remainder of said estate, consisting, so far as the same is known, of the following property;

Cash in checking account, Bank of America;

Cash in savings account in Citizens National Bank, after payment of attorney fees;

Account receivable from Sbicca of California, $3,362.45;

Notes receivable from Sbicca of California, $13,750.00;

41 2/3 shares of United States Shoe Corporation of Cincinnati;

27 shares of Los Feliz Drive-in Theatre;

Share in partnership known as Sbicca Enterprises.

An estate tax return was timely filed for the estate by the executor and executrix; and it was represented therein that decedent's total gross estate was $220,668.42, after reduction of insurance by 50 per cent on account of the wife's community interest and reduction by 50 per cent of value of certain jointly held property (being the wife's interest either as community interest or separate interest); that the adjusted gross estate was $173,165.74; and that the total allowable deductions were $99,374.45, including a marital deduction of $75,445.39. It has been stipulated that the decedent...