Wiles v. Comm'r of Internal Revenue
| Decision Date | 09 April 1973 |
| Docket Number | Docket No. 6186-71. |
| Parties | RICHARD E. WILES, JR., AND KAREN B. WILES, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
John H. Foard, for the petitioners.
George T. Morse III, for the respondent.
Petitioner and his wife, as Kansas domiciliaries negotiated a property settlement in anticipation of their divorce providing, among other things, that petitioner would deliver to her sufficient shares of publicly traded stocks held by him which when added to other property transferred would equal in value $550,000. For this purpose they stipulated values per share for each stock. Kansas law requires upon divorce an equitable division of property of the marriage, regardless of legal title, either by decree or by private agreement subject to judicial supervision. Sec. 60-1610(b) and (d), Kan. Stat. Ann. (Supp. 1971). Held, petitioner realized capital gain income upon the transfer of stocks. United States v. Davis, 370 U.S. 65 (1962). George F. Collins, Jr., 46 T.C. 461 (1966), affd. 388 F.2d 353 (C.A. 10, 1968), followed. Held, further, the amount realized is the aggregate fair market value of the transferred stocks as of the date of the settlement agreement, since most of the burdens and benefits of ownership passed to the wife at that time.
OPINION
The Commissioner determined deficiencies in the income tax of Richard E. Wiles and his wife Karen B. Wiles as follows:
+--------------------+
¦Year ¦Deficiency ¦
+------+-------------¦
¦1966 ¦$120,536.95 ¦
+------+-------------¦
¦1967 ¦936.00 ¦
+------+-------------¦
¦1968 ¦3,302.68 ¦
+--------------------+
Concessions were made by both parties and a Rule 50 computation will be necessary. We are asked to determine whether the transfer of appreciated stocks by petitioner Richard E. Wiles to his former wife was a taxable event, and if it was we are asked to determine what were the values of those stocks.
All of the facts are stipulated and are so found.
Petitioners Richard E. Wiles, Jr., and Karen B. Wiles, husband and wife, resided at Shawnee Mission and at Santa Fe, N. Mex., respectively, at the time they filed their petition with this Court. Petitioners filed a joint Federal income tax return for 1966 with the district director of internal revenue at Wichita, Kans. The taxable year 1966 is the only year remaining in dispute. Petitioner Karen B. Wiles is joined herein only by virtue of the filing of a joint return with her husband and further reference to petitioner shall refer only to Richard E. Wiles, Jr.
Petitioner married Constance Wiles, now known as Constance Noah, on July 30, 1948, which marriage continued until it was dissolved by a decree of divorce issued by the District Court of Johnson County, Kans., on May 27, 1966. The decree incorporated a property settlement agreement which had been negotiated by petitioner and Constance. There was no award of alimony denominated as such. In February 1967, Constance married Brooks C. Noah, petitioner's brother-in-law and business partner.
Constance filed for divorce from petitioner in April 1965; the aforesaid District Court thereupon temporarily restrained petitioner from transferring, encumbering, or otherwise disposing of any of his or Constance's securities, other investments, and property holdings pending trial. At the time suit was filed and during the time it was pending, both petitioner and Constance held title to substantial assets which were either brought into their marriage or acquired by their joint efforts during the marriage. Petitioner owned the following in his own right:
+--------------------------------------------------+
¦100 ¦shares Atchison, Topeka & Santa Fe. ¦
+-------+------------------------------------------¦
¦78 ¦shares Colgate-Palmolive Co. ¦
+-------+------------------------------------------¦
¦299 ¦shares Goodyear Tire & Rubber Co. ¦
+-------+------------------------------------------¦
¦20 ¦shares Kennecott Copper Corp. ¦
+-------+------------------------------------------¦
¦50 ¦shares Phillips Petroleum Corp. ¦
+-------+------------------------------------------¦
¦42 ¦shares Republic Steel Corp. ¦
+-------+------------------------------------------¦
¦105 ¦shares Standard Oil of New Jersey. ¦
+-------+------------------------------------------¦
¦74 ¦shares First National Bank of Kansas City.¦
+-------+------------------------------------------¦
¦67 ¦shares Montgomery Ward & Co. ¦
+-------+------------------------------------------¦
¦66 ¦shares Great Northern Railway. ¦
+-------+------------------------------------------¦
¦400 ¦shares Canada Dry Corp. ¦
+-------+------------------------------------------¦
¦100 ¦shares Otis Elevator. ¦
+-------+------------------------------------------¦
¦180 ¦shares Sinclair Oil Corp. ¦
+-------+------------------------------------------¦
¦100 ¦shares Pullman, Inc. ¦
+-------+------------------------------------------¦
¦19,408 ¦shares Sunshine Biscuits, Inc. ¦
+-------+------------------------------------------¦
¦300 ¦shares General Motors Corp. ¦
+-------+------------------------------------------¦
¦82 ¦shares Martin-Marietta Corp. ¦
+-------+------------------------------------------¦
¦$20,000¦Municipal Bonds. ¦
+--------------------------------------------------¦
¦One-half interest in a house in Minnesota. ¦
+--------------------------------------------------+
Petitioner also held title to the following jointly acquired property:
+-----------------------------------------------------------------------------+
¦250 shares Heart Bowl, Inc. ¦
+-----------------------------------------------------------------------------¦
¦600 shares Interstate 70 Corp. ¦
+-----------------------------------------------------------------------------¦
¦7,000 shares Heart Drive-In Theatre, Inc. ¦
+-----------------------------------------------------------------------------¦
¦3,000 shares First American Corp. ¦
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¦$80,000 note of a Mexican corporation, and a lease on that corporation's ¦
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¦Mexican real estate. ¦
+-----------------------------------------------------------------------------¦
¦An airplane valued at about $35,000. ¦
+-----------------------------------------------------------------------------¦
¦Life insurance policies on said petitioner's life having a cash value of ¦
¦approximately $102,243. ¦
+-----------------------------------------------------------------------------¦
¦$6,500 (approximately) cash in banks. ¦
+-----------------------------------------------------------------------------+
Heart Bowl, Inc., Interstate 70 Corp., Heart Drive-In Theatre, Inc., and First American Corp. were businesses started by petitioner and Brooks C. Noah as early as 1950. Constance assisted in their development. These four corporations owned and operated Heart Drive-In Theatre in Kansas City, Mo., the Yucca Drive-In theatre in Santa Fe, N. Mex., and the Heart Bowl in Kansas City, Mo.
During the pendency of the divorce suit, Constance owned the following in her own right:
+-------------------------------------------------------------+
¦110 shares American Telephone & Telegraph Co. ¦
+-------------------------------------------------------------¦
¦100 shares Baltimore Gas & Electric Co. ¦
+-------------------------------------------------------------¦
¦300 shares W.S. Dickey Clay Manufacturing Co. ¦
+-------------------------------------------------------------¦
¦250 shares Gas Service Co. ¦
+-------------------------------------------------------------¦
¦100 shares International Harvester. ¦
+-------------------------------------------------------------¦
¦100 shares Simmons Co. ¦
+-------------------------------------------------------------¦
¦50 shares Standard Brands. ¦
+-------------------------------------------------------------¦
¦100 shares Standard Oil of Indiana. ¦
+-------------------------------------------------------------¦
¦55 shares Standard Oil of New Jersey. ¦
+-------------------------------------------------------------¦
¦68 shares Sunshine Biscuits, Inc. ¦
+-------------------------------------------------------------¦
¦100 shares General Motors Corp. ¦
+-------------------------------------------------------------¦
¦214 shares C. A. Kiger Jewelry Co. ¦
+-------------------------------------------------------------¦
¦Aetna Life Insurance Co. annuity paying $302.12 per year. ¦
+-------------------------------------------------------------¦
¦Pacific Mutual Insurance Co. annuity paying $110.53 per year.¦
+-------------------------------------------------------------¦
¦Mutual of New York annuity paying $220.10 per year. ¦
+-------------------------------------------------------------¦
¦Cameron crude oil lease paying $101.85 per year. ¦
+-------------------------------------------------------------+
At the same time she...
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