Silvester v. Commissioner, Docket No. 3314-75.
| Decision Date | 29 December 1977 |
| Docket Number | Docket No. 3314-75. |
| Citation | 1977 TC Memo 439,36 TCM (CCH) 1815 |
| Parties | Estate of Austin R. Silvester v. Commissioner. |
| Court | U.S. Tax Court |
Ann B. Silvester (executrix), P.O. Box 4173, Tucson, Arizona, for the petitioner. Richard A. Jones, for the respondent.
Memorandum Findings of Fact and Opinion
The Commissioner determined a deficiency of $18,493.00 in the estate tax of the Estate of Austin R. Silvester, and the estate has claimed an overpayment of tax. The issues remaining for decision are: (1) Whether any portion of the date-of-death values of certain real and personal property held by the decedent and his surviving spouse as joint tenants with rights of survivorship was attributable to consideration furnished by the surviving spouse and therefore excludable from the gross estate; (2) whether the gross estate includes a ny portion of the rent receivable with respect to certain jointly owned real property and any portion of a joint bank account balance consisting of rents from such property; (3) whether the Commissioner erred in determining the date-of-death fair market value of such real property; (4) whether certain insurance proceeds paid with respect to a life insurance policy on the life of the decedent are includable in the gross estate; (5) whether the date-of-death values of certain shares of stock as reported on the original estate tax return and accepted by the Commissioner should be reduced; (6) whether the estate is entitled to a deduction for an alleged claim against it in the amount of $2,500.00; and (7) whether the petitioner has proved that any amount in excess of $9,395.00 is allowable as a deduction from the gross estate for attorney's fees and expenses incurred by the executrix.
Some of the facts have been stipulated, and those facts are so found.
The petition in this case was filed on behalf of the Estate of Austin R. Silvester by Ann B. Silvester, co-executrix, who residedn Tucson, Ariz., at the time the petition was filed. The original estate tax return for the Estate of Austin R. Silvester was filed with the Internal Revenue Service Center, Ogden, Utah, on April 18, 1972, by Ann B. Silvester and John P. Silvester, co-executrix and co-executor.
Austin R. Silvester (the decedent) was born on August 29, 1889. He and R. Marion Silvester were married on April 6, 1917, and lived together as husband and wife until his death on July 18, 1971. At the time of his death, the decedent resided in Boulder City, Nev.
The decedent and his wife had five children:
Child Date of Birth
Austin G. Silvester .......... May 1918
John P. Silvester ............ July 1919
Marion S. (Silvester) Smith .. Mar. 1924
Ann B. Silvester ............. July 1927
June D. (Silvester) Wiley .... June 1934
During the period of Ann B. Silvester's childhood, her mother had no housekeeper to assist her with housework or child care.
The record contains scant information as to the financial resources which the decedent and his wife brought to their marriage. During the 1915-1916 academic year, R. Marion Silvester was employed as a teacher in Rutland Jefferson County, N.Y., and earned a salary of $525. During the 1916-1917 academic year, she taught in Wellsville, N.Y., and earned $600. On November 25, 1922, Ella Reed Entwistle, the mother of R. Marion Silvester, died intestate leaving an estate, estimated at $12,000, to be distributed among four children. For some years, R. Marion Silvester served as the unpaid bookkeeper for one of her husband's businesses. Additionally, she performed certain other services in connection with the decedent's business, but apparently received no remuneration for her services.
At the time of his death, the decedent and his wife owned, as joint tenants with right of survivorship under New Jersey law, a note and mortgage with respect to certain real property (lots 9 and 17) located in Princeton, N.J. At the time of the decedent's death, 302 monthly payments of $933.72 remained to be paid with respect to such note and mortgage. The date-of-death value of the note and mortgage was $115,940.00.
On or about April 8, 1938, lots 9 and 17 were conveyed by the Silvester Motor Co., a New Jersey corporation, acting through its president Austin R. Silvester, to Austin R. Silvester and R. Marion Silvester. Such conveyance was in consideration of cancellation of a debt owed by the corporation to Austin R. Silvester for unpaid salaries. Lots 9 and 17 later were sold; part of the consideration received from the sale was the note and mortgage at issue. Austin R. Silvester paid all of the expenses with respect to the sale.
At the time of his death, the decedent and his surviving spouse also held as joint tenants with right of survivorship certain real property located in the Township of Princeton, N.J. (lots 3 and 4). Lots 3 and 4 were acquired in 1937 or 1938 by Austin R. Silvester or Austin R. Silvester and R. Marion Silvester as joint tenants with right of survivorship. At the time of their acquisition, lots 3 and 4 were improved with two old buildings containing apartments which were rented to tenants from 1937 or 1938 until June 15, 1956. During such period, R. Marion Silvester performed many of the functions of an apartment manager; she collected the rents, handled tenants' requests and complaints, and cleaned the apartments after they were vacated. From June 15, 1956, until the property was sold in 1976, R. Marion Silvester performed no services with respect to lots 3 and 4.
At the time of the decedent's death, lots 3 and 4 were subject to a lease executed on June 15, 1956. The rights of the tenant under such lease were held by the trustees of Princeton University (Princeton). The lease provided for monthly rental payments of $600, payable on the 15th day of each month, and payment by the tenant of all taxes levied or assessed against the property within 30 days after such taxes became due and payable.
Rental payments with respect to the lease of lots 3 and 4 generally were deposited into bank account No. XXX-XXXX-X at Union Trust Company, Ellsworth, Maine, in the name of Austin R. Silvester or R. Marion Silvester (the bank account). The date-of-death balance in such account was $1,211.66, all of which was attributable to the deposit of rental income from lots 3 and 4.1
On July 12, 1971, Princeton drew a check on its bank account in the amount of $1,260.48. Such check was in payment of rent due on or before July 15, 1971, and was deposited into the bank account on July 20, 1971.2
The lease with respect to lots 3 and 4 also contained an option to purchase, giving the tenant the right to purchase the property "for a sum not less than Ninety Thousand Dollars ($90,000.00) and not exceeding One Hundred Twenty Thousand Dollars ($120,000.00) * * *." With respect to such option to purchase, the lease further stated:
The expiration date of the option to purchase was June 15, 1976. On or about May 21, 1976, Princeton exercised the option, paying a total consideration of $120,000.
By 1971, the 1956 purchasing power of $90,000 had decreased by 20.40 percent based upon the Wholesale Price Index, and by 32.95 percent based upon the Consumer Price Index. Accordingly, the date-of-death option purchase price with respect to lots 3 and 4 was $113,065, based on the Wholesale Price Index, or $134,228, based on the Consumer Price Index. However, the option price was limited by the terms of the lease to $120,000. In his notice of deficiency, the Commissioner determined that the date-of-death fair market value of lots 3 and 4 was $109,770; such amount was identical to the value shown in the 1971 records of the Princeton Township Tax Assessor, County of Mercer, State of New Jersey.
At the time of his death, the decedent's life was insured by the Mutual Life Insurance Co. of New York (MONY) under insurance policy No. 269-30-76 in the face amount of $2,000.00. Pursuant to such policy, MONY paid $2,055.78 to the designated beneficiary upon the death of the decedent. All rights in this policy were held by the decedent at the time of his death.
At the time of his death, the decedent owned as his sole and separate property shares of stock in seven corporations. The date-of-death values of such stocks, as reported on the original estate tax return filed for the Estate of Austin R. Silvester and accepted by the Commissioner, were as follows:
No. of Value at Date
Stock Shares of Death
Chase Manhattan Bank ................ 237 $ 12,028
General Motors ...................... 954 74,650
Standard Oil of New Jersey .......... 181 14,164
Hercules Powder ..................... 300 14,288
Chesapeake and Ohio Railroad ........ 50 2,982
Kennecott Copper .................... 150 4,744
U.S. Steel .......................... 50 1,544
________
Total ................................ $124,400
On the original estate tax return, each of the stocks was listed with the notation "New York Stock Exchange * * * Entire value reported." The estate did not elect the alternate valuation date on the original estate tax return; it first notified the Commissioner of an intent to make such an election in the petition filed with this Court and in an amended return filed with the Ogden Service Center of the Internal Revenue Service. Both such documents were filed on or about April 15, 1975.
On October 22, 1966, Ann B. Silvester wrote a check in the amount of $2,500 payable to her father, Austin R. Silves...
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