Schmidt v. United States

• Decision Date: 25 January 1968
• Docket Number: Civ. No. W-3701.
• Citation: Schmidt v. United States, 279 F.Supp. 811 (D. Kan. 1968)
• Parties: Irene SCHMIDT, Executrix of the Estate of Carl H. Schmidt, Deceased, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of Kansas

279 F. Supp. 811

Irene SCHMIDT, Executrix of the Estate of Carl H. Schmidt, Deceased, Plaintiff, v. UNITED STATES of America, Defendant.

Civ. No. W-3701.

United States District Court D. Kansas.

January 25, 1968.

Jochems, Sargent & Blaes, Wichita, Kan., for plaintiff.

Gioria Ben Horin, Tax Division, Dept. of Justice, Washington, D. C., Bernard Borst, Asst. U. S. Atty., Wichita, Kan., for defendant.

MEMORANDUM OF DECISION

THEIS, District Judge.

This action arises under the Internal Revenue laws of the United States, and is here now on cross-motions for summary judgment. The plaintiff's complaint prays for recovery of estate taxes and interest thereon assessed against the Estate of Carl H. Schmidt pursuant to 26 U.S.C.A. § 2001, as amended. The Court finds, as a preliminary matter, that it has jurisdiction of the subject matter and the parties to the action. The facts in this matter have been stipulated to and are as follows:

1. This is a civil action for the recovery of $10,699.99 in federal estate tax and interest allegedly erroneously and illegally assessed and collected from the plaintiff, and statutory interest.

2. The Court has jurisdiction over the parties and subject matter under Title 28, United States Code, Sec. 1346(a).

3. Carl H. Schmidt (hereinafter "decedent") died testate on April 20, 1961, a resident of Caldwell, Kansas.

4. The decedent and his wife, Irene M. Schmidt, had executed their Joint and Mutual Last Will and Testament on June 19, 1957.

5. On May 15, 1961, decedent's widow, as co-executrix, filed a Petition for Probate of Will in the Probate Court of Sumner County, Kansas.

6. The will was admitted to probate on June 14, 1961, the date on which was filed the probate court's Order Admitting Will to Probate. Letters Testamentary were issued on June 27, 1961, to Irene M. Schmidt and Donald Schmidt, decedent's elder son, as co-executors.

7. On July 20, 1962, the federal estate tax return on behalf of decedent's estate was filed with the District Director of Internal Revenue, Wichita, Kansas. On the return, there was reported a total gross estate of $232,433.73, total allowable deductions of $164,293.04, including a marital deduction of $68,140.68, a taxable estate of $8,140.69, and a net estate tax payable of $369.84. A remittance in the latter amount accompanied the return.

8. Also on July 20, 1962, the inventory and appraisement for the estate was filed in the probate court as required by Kansas law. K.S.A. 59-1201 et seq.

9. On July 30, 1962, the decedent's widow filed in the probate court a document entitled Revocation of Joint and Mutual Will, Revocation of Consent Thereto, Election of Surviving Spouse to Take by Intestate Succession, and Application for Relief Under G.S.1961 Supp., 59-2233 and for Approval of Such Revocations and Election.

10. On July 30, 1962, the Probate Court filed its Order for Hearing setting the aforementioned Revocation of Joint and Mutual Will, Revocation of Consent Thereto, Election of Surviving Spouse to Take by Intestate Succession, and Application for Relief Under G.S.1961 Supp., 59-2233, and For Approval of Such Revocation and Election for hearing on August 22, 1962, at 10:00 o'clock a. m. Notice of Hearing was duly filed. Proof of Publication was duly filed on August 21, 1962.

11. On August 22, 1962, the probate court entered its Order Approving Revocation of Joint and Mutual Will, Revocation of Consent Thereto, Election of Surviving Spouse to Take by Intestate Succession and Granting Relief Under G.S.1961 Supp., 59-2233, which order was filed on August 25, 1962.

12. On January 7, 1964, after audit of the estate tax return, the Commissioner mailed to the executors of decedent's estate a notice of deficiency in the amount of $9,604.93. In addition to several adjustments not now in controversy, the Commissioner decreased the claimed marital deduction by $60,554.91, from $68,140.68 to $7,585.77.

13. The estate thereupon paid the deficiency, with interest, and on April 7, 1965, filed a timely claim for refund in the amount of $9,235.09. On June 20, 1966, the estate filed a waiver of statutory notification of claim disallowance, and this suit was thereafter timely instituted.

Within the scope of the stipulation, but not set forth specifically therein except as a part of the will as an exhibit, was that provision of the will numbered XXII, wherein it was stated by the testator:

"This will has been arrived at by agreement between us and shall be subject to revocation by request of either party. Each of us hereby consents to the same and accepts all provisions hereof in lieu of all other constitutional or statutory rights, interests or allowances whatsoever."

This provision was a part of the principal will and not a separate part at the end of the will in the usual form of most consents. The will itself contained twenty-two separate paragraphs and made a devise or legacy of a proportionate part of the testators' estates to each of their children in an overall manner which reflects apparent consideration of the extent and evaluation of their estates and the close family relationships.

An additional fact to consider under one of plaintiff's contentions is the phraseology of Paragraph 4 of the "Petition for Probate of Will," filed by plaintiff in the Probate Court of Sumner County, Kansas, on May 15, 1961, which read as follows:

"4. The petitioner, Irene M. Schmidt, consented to the will in writing and the same is the joint and mutual last will and testament of the decedent and this petitioner and petitioner accepts the provisions outlined in said will in lieu of any other constitutional or statutory rights."

Reduced to its simplest terms, this lawsuit turns upon the correct interpretation of the passing and disposition of the property of Carl H. Schmidt, deceased. If, under a correct interpretation of Kansas law, the decedent's widow, and the plaintiff here, Irene M. Schmidt, were required to take under the will, then the Government's contention of the computation of the marital deduction for federal estate tax purposes is correct and must be sustained by the judgment of this Court. On the other hand, if the contention of the surviving widow, as plaintiff here, is correct, that she made a proper election to take under the law of descent and distribution and against the will of her husband, then her contention as the fiduciary representative of the estate is correct as to the proper computation of the marital deduction under the federal estate tax law. To decide the issue before the Court it will be necessary to consider the language and interpretation of Sections 59-602, 59-603, and 59-2233 of Kansas Statutes Annotated.

Originally, the principal thrust of the plaintiff's case and argument was to the effect that the adjudication by the Probate Court of Sumner County, Kansas, on August 22, 1962, when it entered its "Order Approving Revocation of Joint and Mutual Will, Revocation of Consent Thereto, Election of Surviving Spouse to Take by Intestate Succession, and Granting Relief Under G.S.1961 Supp. § 59-2233," made the Government's contention unsound and barred its action solely for the reason that the probate court had entered such an order and its adjudication could not be questioned by a federal court under existing precedents for judicial decision.

It is now, however, conceded by both sides that this contention is out of the window, in view of the two recent decisions by the United States Supreme Court in the companion cases of Commissioner of Internal Revenue v. Estate of Bosch, and Second National Bank of New Haven v. United States, both decided June 5, 1967, and now...