Sharp v. Commissioner of Internal Revenue, 6175.
| Decision Date | 04 August 1937 |
| Docket Number | No. 6175.,6175. |
| Citation | 91 F.2d 802 |
| Parties | SHARP et al. v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Third Circuit |
Wm. Barclay Lex, of Philadelphia, Pa. (Hepburn & Norris, of Philadelphia, Pa., of counsel), for petitioners.
James W. Morris, Asst. Atty. Gen., Sewall Key, Sp. Asst. to Atty. Gen., Carlton Fox, and Edward H. Horton, for respondent.
Before BUFFINGTON and BIGGS, Circuit Judges, and DICKINSON, District Judge.
There are two petitions for review of the decision of the Board of Appeals in the nature of cross-appeals. For clarity of treatment, we make them the subject of separate opinions. The questions raised concern the estate of Walter P. Sharp, deceased, as taxpayer. The executors returned certain items of property as constituting the gross taxable estate of the decedent. Upon this a tax of $9,855.58 was assessable. The Commissioner thought other items of property should be included calling for the assessment of a deficiency tax of $48,483.88. The taxpayer asked for a redetermination of the tax. The Board redetermined it by finding a deficiency of $13,632.12. The taxpayer and the Commissioner each appealed to this court. This appeal is that of the taxpayer. Several of the objections made to the deficiency claim of the Commissioner have been abandoned. Those which remain raise two questions. The decedent died March 13, 1926, with 5,012 shares of the capital stock of the Stephen F. Whitman & Son, Inc., standing in his name on the books of the corporation as owner. The stock had a par value of $100 per share. What is known to this record as a pooling agreement existed under which, in the event of the death of a stockholder, the other stockholders had the right to acquire the stock of the deceased shareholder, at, what may be called, its book value. On March 1, 1926, preceding the death of the petitioners decedent, the corporation declared a dividend of $8 per share payable to the stockholders of record on March 15, 1926. This it will be noted was after the death. On March 15, 1926, the stock stood in the name of the decedent and the dividend was paid to his executors. Subsequently the other stockholders exercised their option to take the stock and the book value was found to be $123.11 per share. This was an ex-dividend valuation. The first controversy is over this stock. The Commissioner asserts, and the Board found, that for tax purposes this stock should be included in the gross estate of the decedent at a valuation of $131.11 per share. This ruling the taxpayer assigns for error.
The second controversy is over the inclusion in the taxable gross estate of certain investments. The decedent just before his death had created certain trusts, the subject of which admittedly formed no part of his estate. He had recently before purchased and directed through his brokers the purchase of a number of investments. These the taxpayer asserts were purchased for the trust and belong to it and hence form no part of the decedent's estate.
These investments were made the subject of a bill in equity filed in the state court of common pleas. The investments were decreed to belong to the trust estate. The Board of Tax Appeals found the investments in question had not been transferred to the trust and that the ultimate intent and purpose of the decedent to transfer them did not operate as such transfer. This finding the taxpayer has assigned for error.
This presents the two questions raised by this appeal.
1. Whether a dividend declared March 1, 1926, before but payable March 15th, after the death of the decedent, to the then stockholders of record is properly included in the gross estate of decedent for tax purposes.
The view of the Tax Commissioner is that the declared dividend is to be considered as part of the stock on March 13th, the date of death, and the stock to be valued with the dividend. The question has thus been discussed as one of the value of the stock.
Another view is, however, that the dividend moneys, by the declaration, were taken out of the assets of the...
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