Stoumen v. Comm'r of Internal Revenue, Docket Nos. 16353
| Decision Date | 28 March 1957 |
| Docket Number | 55740-55742.,Docket Nos. 16353 |
| Citation | 27 T.C. 1014 |
| Parties | MARY STOUMEN, ET AL.,1 PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Llewellyn A. Luce, Esq., for the petitioners.
Stephen P. Cadden, Esq., for the respondent.
Abraham Stoumen died a suicide in 1946. In 1953 this Court held that Abraham owed income taxes and additions to tax for the years 1943, 1944, and 1945, in an amount exceeding $270,000. At his death Abraham had assets of more than $338,000, which included life insurance proceeds of more than $113,000. His liabilities, including the taxes determined in 1953, were over $297,000. Abraham retained until his death all incidents of ownership of the insurance policies, including the right to change the beneficiaries of the policies. Petitioner Mary Stoumen, as executrix of Abraham's estate, received $77,950 in partial payment of an obligation owing to the estate. She distributed this to herself as sole devisee and legatee of the decedent, Abraham. Held: (1) Transfer of the insurance proceeds to the petitioners rendered Abraham's estate insolvent. (2) Petitioners are liable as transferees for Abraham's unpaid tax liability to the extent of the insurance proceeds received by them. (3) Petitioner Mary is liable as transferee to the extent of the cash received by her in her capacity as sole devisee and legatee of Abraham's estate. TIETJENS, Judge:
The Commissioner determined that the petitioners are liable as transferees of the assets of Abraham L. Stoumen, deceased, for deficiencies in income taxes and additions to the taxes, due from the Estate of Abraham L. Stoumen, deceased, as follows:
+--------------------------------------------------------------+
¦ ¦ ¦ ¦Additions ¦
+----------------------------+------+----------+---------------¦
¦Docket No. ¦Year ¦Deficiency¦to tax ¦
+----------------------------+------+----------+---------------¦
¦ ¦ ¦ ¦section 293 (b)¦
+----------------------------+------+----------+---------------¦
¦ ¦ ¦ ¦ ¦
+----------------------------+------+----------+---------------¦
¦ ¦( 1943¦$60,123.46¦$30,061.73 ¦
+----------------------------+------+----------+---------------¦
¦26353 (Mary Stoumen) ¦( 1944¦68,540.04 ¦34,270.02 ¦
+----------------------------+------+----------+---------------¦
¦ ¦( 1945¦51,612.79 ¦25,806.40 ¦
+----------------------------+------+----------+---------------¦
¦ ¦( 1943¦$2,221.58 ¦$1,110.79 ¦
+----------------------------+------+----------+---------------¦
¦55740 (Kenneth Stoumen) ¦( 1944¦2,532.58 ¦1,266.29 ¦
+----------------------------+------+----------+---------------¦
¦ ¦( 1945¦1,907.11 ¦953.55 ¦
+----------------------------+------+----------+---------------¦
¦ ¦( 1943¦$2,227.40 ¦$1,113.70 ¦
+----------------------------+------+----------+---------------¦
¦55741 (Lois Stoumen Deutsch)¦( 1944¦2,539.22 ¦1,269.61 ¦
+----------------------------+------+----------+---------------¦
¦ ¦( 1945¦1,912.11 ¦956.06 ¦
+----------------------------+------+----------+---------------¦
¦ ¦( 1943¦$2,221.58 ¦$1,110.79 ¦
+----------------------------+------+----------+---------------¦
¦55742 (Eileen Stoumen) ¦( 1944¦2,532.58 ¦1,266.29 ¦
+----------------------------+------+----------+---------------¦
¦ ¦( 1945¦1,907.11 ¦953.55 ¦
+----------------------------+------+----------+---------------¦
¦ ¦ ¦ ¦ ¦
+--------------------------------------------------------------+
There are two issues for decision: (1) Whether the petitioners, as the beneficiaries of certain insurance policies on the life of Abraham L. Stoumen, deceased, are liable as transferees for his unpaid income taxes, additions to the tax, and interest thereon, for the years 1943, 1944, and 1945, to the extent of the insurance proceeds received by them; and (2) whether petitioner Mary Stoumen, as Abraham's sole devisee and legatee, is liable as transferee for the above-mentioned taxes to the extent of the money received by her as executrix of Abraham's estate and subsequently deposited in her personal bank account.
Some of the facts are stipulated. Those facts and the exhibits thereto are found as stipulated and are incorporated herein by this reference.
Abraham L. Stoumen died a suicide on May 7, 1946. In 1949 the Commissioner determined a deficiency in income taxes and additions to tax for fraud, against the Estate of Abraham L. Stoumen, deceased, Mary Stoumen, Executrix, as follows:
+----------------------------------+
¦ ¦ ¦Additions to ¦
+------+------------+--------------¦
¦ ¦ ¦tax section ¦
+------+------------+--------------¦
¦Year ¦Deficiency ¦293 (b) ¦
+------+------------+--------------¦
¦1943 ¦$60,123.46 ¦$30,061.73 ¦
+------+------------+--------------¦
¦1944 ¦68,540.04 ¦34,270.02 ¦
+------+------------+--------------¦
¦1945 ¦51,612.79 ¦25,806.40 ¦
+----------------------------------+
In a petition to this Court (Docket No. 26354) the deficiencies were not contested but the additions to the taxes for fraud were contested. Such income taxes and additions to tax grew for the most part out of profits of Fairplay Knitting Mills, a partnership formed January 2, 1943, between Abraham and his brother Bernard Stoumen. Such partnership was engaged in the manufacture of men's sportswear. In a Memorandum Opinion filed December 10, 1953, we approved the additions to the taxes and entered a decision in favor of the Commissioner of Internal Revenue. This decision was not appealed. The tax liabilities determined have never been paid.
Petitioner Mary Stoumen is Abraham's widow. During the taxable years she resided in Philadelphia, Pennsylvania. Mary is the executrix of Abraham's estate, which is being administered in the Orphan's Court for Philadelphia County, Philadelphia, Pennsylvania. Mary is the sole devisee and legatee of Abraham, under the terms of his will.
Petitioners Kenneth Stoumen, Louis Stoumen Deutsch, and Eileen Stoumen are Abraham's children. During the taxable years they resided in Philadelphia, Pennsylvania.
Petitioners, Mary, Kenneth, Lois, and Eileen, were the beneficiaries of certain life insurance policies on the life of Abraham. During 1946 and subsequent thereto, the proceeds of such policies were paid to them or deposited to their credit, as the designated beneficiaries of such policies, as follows:
+-------------------------+
¦Beneficiary ¦Amount ¦
+--------------+----------¦
¦ ¦ ¦
+--------------+----------¦
¦Mary ¦$83,775.00¦
+--------------+----------¦
¦Kenneth ¦9,991.90 ¦
+--------------+----------¦
¦Lois ¦10,018.10 ¦
+--------------+----------¦
¦Eileen ¦9,991.90 ¦
+-------------------------+
Abraham, the insured, had the right to change the beneficiary on each of the above-mentioned life insurance policies until his death and he had the right to receive the cash surrender value of the policies or to make loans upon them. He also retained all other rights inherent in the policies. The partnership agreement executed on January 2, 1943, between Abraham and Bernard provided for payment of the premiums on the above-mentioned insurance policies, by the partnership (Fairplay Knitting Mills).
In 1947, Mary, as executrix, filed an estate tax return for the decedent, Abraham, in which she reported that no estate tax was due. Her computation was as follows:
+-----------------------------------------------------------------------------+
¦Donchester Manufacturing Co. stock ¦$625.00 ¦
+-----------------------------------------------------------------+-----------¦
¦Insurance ¦117,549.10 ¦
+-----------------------------------------------------------------+-----------¦
¦Total gross estate ¦$118,174.10¦
+-----------------------------------------------------------------+-----------¦
¦ ¦ ¦
+-----------------------------------------------------------------+-----------¦
¦Funeral expenses ¦$1,399.21 ¦
+-----------------------------------------------------------------+-----------¦
¦Executor's commissions ¦2,500.00 ¦
+-----------------------------------------------------------------+-----------¦
¦Attorneys' fees ¦5,000.00 ¦
+-----------------------------------------------------------------+-----------¦
¦Miscellaneous administrative expenses ¦493.00 ¦
+-----------------------------------------------------------------+-----------¦
¦Debts of decedent (including a reserve for possible debts of ¦130,318.20 ¦
¦$100,000) ¦ ¦
+-----------------------------------------------------------------+-----------¦
¦Total deductions ¦$139,710.41¦
+-----------------------------------------------------------------+-----------¦
¦Net estate ¦None ¦
+-----------------------------------------------------------------------------+
In 1950 the Commissioner determined a deficiency in Abraham's estate taxes in the amount of $110,614.24. He made the following...
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