Turman v. Comm'r of Internal Revenue, Docket No. 81268.

Citation35 T.C. 1123
Decision Date20 March 1961
Docket NumberDocket No. 81268.
PartiesZILLAH MAE TURMAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

By his will the petitioner's husband bequeathed in trust all of his residuary estate. By the terms of the will the petitioner could elect to have her one-half interest in the community property of herself and her husband, with immaterial exceptions, included in trust. The will provided that the trustee should set up out of the property two trusts of equal value and if petitioner elected to have her one-half interest in the community property included in trust, the trustee should distribute to her in equal shares from the trusts at monthly intervals so much of the net income or principal of the two trusts as the trustee in its sole discretion deemed necessary for her proper support and comfort, including travel. The will suggested for the trustee's consideration and guidance the distribution to petitioner of approximately $1,000 monthly with the payment of additional funds to permit her to purchase a new automobile every 3 years and to provide for the repairs and upkeep of, and taxes and insurance on, the home she might be occupying. The petitioner elected to have her one-half interest in the community property included in trust and has received from the trustee, in accordance with the terms of the will, distributions ranging from approximately $21,000 to approximately $26,600 annually. Held, that since the present value of the petitioner's right to life income from the entire community property going into the trusts exceeded the value of her share of such property going into the trusts, she made no taxable gift. Frank B. Appleman, Esq., for the petitioner.

John D. Laflin, Esq., for the respondent.

OPINION.

WITHEY, Judge:

The Commissioner has determined a deficiency in the petitioner's gift tax for the year 1955 in the amount of $11,239.14.

The only issue presented for determination is the correctness of the respondent's action in determining that the petitioner made a taxable gift of $71,231.09 during 1955.

All of the facts have been stipulated and are so found.

The petitioner resides in Fort Worth, Texas, and filed her gift tax return for the calendar year 1955 with the district director of internal revenue in Dallas, texas. She is the widow of Luther C. Turman, who died testate on November 3, 1955. The will of Luther C. Turman, sometimes hereinafter referred to as the decedent, was duly admitted to probate in Tarrant County, Texas.

By paragraph III of his will the decedent bequeathed to petitioner all of his interest in the household furniture, fixtures, equipment, and supplies in and around the home; his personal effects, memberships in social clubs, and any family automobiles in use at the time of his death; and all his interest in the stock of a named oil company.

The decedent's will also contained the following provisions:

IV

It is my intention by this will to dispose of not only my separate property, if any, but the entire community estate owned by my beloved wife Zillah Mae and myself, specifically including my beloved wife Zillah Mae's community one-half interest. My principal desire is for Zillah Mae and our two children to be amply cared for, and I am convinced it will be to the best interests of these loved ones that the entire estate, with the exception of the items mentioned in paragraph III above, be administered as a whole.

Therefore, all the rest and residue of my estate and, if she elects to abide by the terms of this will, all of my beloved wife Zillah Mae's one-half interest in our community property (except for the items in paragraph III) I hereby give, devise and bequeath to The Fort Worth National Bank, as trustee, subject to the following terms and conditions:

a) The trustee shall create two trusts of equal value, one to be named the ZILLAH MAE TURMAN, Jr. TRUST and the other to be named the WILLIAM FOR TURMAN TRUST. The trustee may hold undivided interests in each trust in order to insure that at the beginning each trust shall be equal in value to the other.

b) If my beloved wife Zillah Mae shall survive me and shall accept the dispositions of this will, the Trustee shall distribute to her, in equal shares from the trusts at convenient intervals, preferably monthly, so much of the net income or principal of the two trusts as the trustee in its sole discretion deems necessary for her proper support and comfort, including travel. Based on present living costs and our own standard of living, I suggest for the Trustee's consideration and guidance that payments of approximately $1,000 per month be made to her, and that additional funds be paid to her to permit the purchase of a new automobile every three years and to take care of necessary repairs and upkeep of, and taxes and insurance on, the home she may be occupying.

Any amounts of income not distributed to her may, in the sole discretion of the Trustee, be either accumulated as part of the respective trust estates or distributed to the child for whom each trust is named, or par may be accumulated and part distributed; and the Trustee in determining the amounts to be distributed to Zillah Mae Turman, Jr. from the trust named for her and the amounts to be distributed to William Ford Turman from the trust named for him shall consider their respective needs for support and education as well as other sources of income available to them and known to the trustee. Where income is insufficient for such needs, principal may be used. I desire that each shall be amply provided for, either from the respective trusts or outside sources or both, but I caution the Trustee, my surviving wife and our two children to guard against improvidence and waste on the part of Zillah Mae, Jr. and William. They have shown no improvident or wasteful habits thus far, and I do not wish to encourage the development of such habits in the future.

c) If my beloved wife Zillah Mae does not survive me, or if she survives but does not accept the dispositions of this will or dies before William Ford Turman reaches the age of 35 years, the Trustee shall manage the trusts for the respective benefits of Zillah Mae Turman, Jr. and William Ford Turman, and shall distribute to them at convenient intervals, preferably monthly, such amounts of net income, or of principal where necessary, as the trustee in its sole discretion may find necessary for their proper comfort, support and education, bearing in mind their accustomed standards of living and other sources of income available to them. The will further provides that the trusts therein created shall terminate upon the death of the petitioner provided she dies after December 17, 1972, otherwise they are to continue until December 17, 1972.

In 1955 the petitioner elected to take under the will of the decedent pursuant to and in consideration of the provisions of paragraph IV(A) and (b). This election was evidenced by the following instrument:1

THE STATE OF TEXAS

COUNTY OF TARRANT

I. ZILLAH MAE TURMAN, surviving wife, of LUTHER C. TURMAN, deceased, late of the County of Tarrant, State of Texas, do hereby elect to take under the will of said LUTHER C. TURMAN heretofore admitted to probate in the County Court of Tarrant County, Texas, in Cause No. 25463, reference to which will is here made for all purposes, and not to lay claim to my legal share of the community estate of myself and my said deceased husband. In that connection, it is my desire and I do hereby declare it to be my election that my undivided one-half (1/2) interest in the said community estate, except the items mentioned in paragraph III of Luther C. Turman's will above referred to, be included in the property and estate devised and bequeathed by him unto the Fort Worth National Bank of Fort Worth, Texas, as Trustee, subject to the other provisions of said will.

(s) Zillah Mae Turman. ZILLAH MAE TURMAN.

(s) MARY DAVIS,

(s) RUFUS S. GARRETT,

Witnesses

THE STATE OF TEXAS

COUNTY OF TARRANT

BEFORE ME, the undersigned authority, on this day personally appeared ZILLAH MAE TURMAN, known to me to be the person whose name is subscribed to the foregoing and acknowledged to me that she executed the same for the purposes and consideration therein expressed.

GIVEN UNDER MY HAND AND SEAL OF OFFICES this the 6th day of February A.D. 1957.

(s) MARY DAVIS, Notary Public in and for Tarrant County, Texas.

The net value of the interest of the petitioner in the community property going into the trusts pursuant to her election was $182,032.36 and the net value of the decedent's interest in the community property going into the trusts was $137,877.09 or a total value of $319,909.45 of all community property going into the trusts. The foregoing amounts are computed as follows:

+------------------------------------------------------------------------+
                ¦                                   ¦Total      ¦Petitioner's¦Decedent's ¦
                +-----------------------------------+-----------+------------+-----------¦
                ¦                                   ¦           ¦share       ¦share      ¦
                +-----------------------------------+-----------+------------+-----------¦
                ¦Gross value at decedent's death    ¦$568,704.00¦$284,352.00 ¦$284,352.00¦
                +-----------------------------------+-----------+------------+-----------¦
                ¦Less:                              ¦           ¦            ¦           ¦
                +-----------------------------------+-----------+------------+-----------¦
                ¦Funeral and administration expenses¦17,829.64  ¦8,914.82    ¦8,914.82   ¦
                +-----------------------------------+-----------+------------+-----------¦
                ¦Community debts                    ¦71,321.40  ¦35,660.70   ¦35,660.70  ¦
                +-----------------------------------+-----------+------------+-----------¦
                ¦Federal estate tax                 ¦42,038.85  ¦            ¦42,038.85  ¦
                +-----------------------------------+-----------+------------+-----------¦
                ¦Texas inheritance tax
...

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9 cases
  • United States v. Stapf
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • September 26, 1962
    ...necessary type. Commissioner v. Seigel, 9 Cir., 1957, 250 F.2d 339; Commissioner v. Chase Manhattan Bank, supra; and Turman v. Commissioner of Internal Revenue, 35 T.C. 1123. 8 On the subject of a windfall under another tax statute, it has been aptly said: "Granting the government's proposi......
  • Hambleton v. Comm'r of Internal Revenue
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    • U.S. Tax Court
    • July 16, 1973
    ...5, 1942), (Texas); Mildred Irene Siegel, 26 T.C. 743, 747 (1956), affd. 250 F.2d 339 (C.A. 9, 1957), (California); Zillah Mae Turman, 35 T.C. 1123, 1129 (1961), (Texas); Estate of Emma Bressani, 45 T.C. 373, 379 (1966), (California). Cf. Chase National Bank, 25 T.C. 617, 627 (1955), (Texas)......
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    • July 11, 1962
    ...applicable sub. nom. Commissioner of Internal Revenue v. Chase Manhattan Bank, 5 Cir., 1958, 259 F.2d 231; and Turman v. Commissioner of Internal Revenue, 1961, 35 T.C. 1123. Section 1002 uses consideration in the same sense as it is used in § 2043(a). Commissioner v. Bristol, 1 Cir., 1941,......
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    • U.S. Court of Appeals — Fifth Circuit
    • February 5, 1969
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