Zillmer v. Comm'r of Internal Revenue (In re Estate of Alexander)

• Decision Date: 22 December 1955
• Docket Number: 41122,41123.,Docket Nos. 38977
• Citation: 25 T.C. 600
• Parties: ESTATE OF JEAN S. ALEXANDER, RAYMOND T. ZILLMER, ADMINISTRATOR C.T.A., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.FIRST WISCONSIN TRUST COMPANY, TRANSFEREE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.ELSIE D. KIPP, TRANSFEREE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

25 T.C. 600

ESTATE OF JEAN S. ALEXANDER, RAYMOND T. ZILLMER, ADMINISTRATOR C.T.A., PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.FIRST WISCONSIN TRUST COMPANY, TRANSFEREE, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.ELSIE D. KIPP, TRANSFEREE, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 38977

41122

41123.

Tax Court of the United States.

Filed December 22, 1955.

1. Held, the estate is entitled to a deduction of $23,000 as support allowance under former section 812(b)(5), I.R.C. 1939.

2. Held, under the peculiar facts of this case the charitable deduction under section 812(d), I.R.C. 1939, must be computed by the use of an ‘indirect method’ which considers not only the possibility of invasion of the trust corpus but also all of the events by which the trust may terminate. Charles E. Prieve, Esq., for the petitioners.

Robert R. Veach, Esq., for the respondent.

The Commissioner has determined that Jean S. Alexander is liable under section 3467 of the Revised Statutes (31 U.S.C.sec. 192) for a deficiency of $11,419.34 in estate tax due from the Estate of Clarence F. Kipp, and he determined that Elsie D. Kipp and the First Wisconsin Trust Company were each liable for the same deficiency as transferees of property of the Estate of Clarence F. Kipp. The Commissioner has made claim for an increased deficiency by an amended answer in which he claims that the deduction for a charitable bequest was overstated in determining the deficiency.

Of the several adjustments made by respondent in determining the deficiency only three are in controversy.

The issues for decision are:

(1) Whether the sum of $23,000 paid in 23 monthly payments of $1,000 each by the executrix to Elsie D. Kipp allegedly as a widow's allowance is an allowable deduction under section 812(b)(5) of the Internal Revenue Code of 1939, in effect as of the pertinent date.

(2) What amount is allowable as a charitable deduction under section 812(d), Internal Revenue Code of 1939, one-half of the remainder of the testamentary trust being payable to the Milwaukee Foundation, a charitable organization.

(3) Is Jean S. Alexander, deceased, represented by her personal representative in these proceedings at Docket No. 38977, personally liable for the deficiency, if any, in the estate tax due from the Estate of Clarence F. Kipp.

Elsie D. Kipp and the First Wisconsin Trust Company have admitted liability as transferees for any deficiency herein determined.

The parties have agreed that certain adjustments respecting Wisconsin inheritance taxes and additional attorneys' fees and expenses may be made upon recomputation under Rule 50.

FINDINGS OF FACT.

Some of the facts were stipulated and are so found.

Petitioner Raymond T. Zillmer is the administrator c.t.a. of the Estate of Jean S. Alexander. (For convenience hereinafter this petitioner will be referred to as Jean S. Alexander). Jean S. Alexander was the executrix of the Estate of Clarence F. Kipp (hereinafter sometimes referred to as decedent), who died testate in Milwaukee, Wisconsin, on October 11, 1947. Petitioners Elsie D. Kipp and the First Wisconsin Trust Company are co-trustees of a trust under the will of Clarence F. Kipp.

Jean S. Alexander was appointed executrix by the County Court of Milwaukee County, Wisconsin, and served in that capacity until discharged on May 31, 1950.

As executrix, Jean S. Alexander filed on January 10, 1949, an estate tax return for the Estate of Clarence F. Kipp with the collector of internal revenue for the district of Wisconsin. Inserted on the lower half of the fifth page of a 47-page return, following detailed printed questions denominated ‘General Information’ and printed instructions regarding ‘Optional Valuation,’ was the following typewritten paragraph:

APPLICATION FOR DISCHARGE.

Pursuant to section 825(a) of the Internal Revenue Code, the Executrix hereby makes application for immediate determination of the tax and discharge from personal liability therefor.

Notice of liability under section 3467 of the Revised Statutes (31 U.S.C.sec. 192) was mailed to Jean S. Alexander on December 21, 1951. Separate notices of liability as transferees were mailed to the First Wisconsin Trust Company and to Elsie D. Kipp on the same day.

At the time of his death Clarence F. Kipp left surviving him his widow, Elsie D. Kipp; his mother-in-law, Amanda Domsch; his sister Mildred K. Pollard; his nephew, Kipp O. Pritzlaff; and his close friend and secretary, Jean S. Alexander.

Under the will of Clarence F. Kipp, admitted to probate on December 2, 1947, certain household furniture and an automobile (valued at $1,000) were left to Elsie D. Kipp. In addition cash bequests, totaling $1,500, were paid by the executrix.

The will provided further:

ARTICLE IV.

All the rest and residue of my estate, and estate over which at the time of my death I have any power of appointment, I bequeath and devise to Jean S. Alexander, as trustee in trust upon the trusts herein prescribed and defined, to take, receive, hold, administer, collect, invest, and reinvest said trust estate and collect and apply the assets, rents, issues, incomes, and profits thereof as herein prescribed:

A. In the event of the death of my wife, Elsie D. Kipp, prior to the termination of this trust, my trustee or successor trustee shall pay to my mother-in-law, Amanda Domsch, the sum of Two Hundred Fifty Dollars ($250.00) per month, payable monthly and commencing with the date of my wife's death, as long as Amanda Domsch shall live or until the termination of this trust, as hereinafter provided, whichever is the shorter period, provided that if my wife elects to take the statutory allowance provided for a widow, this bequest in trust shall lapse.

B. In the event that Jean S. Alexander, hereinafter named as my trustee, does not act as trustee or resigns as trustee at any time prior to the termination of this trust, my successor trustees shall pay to Jean S. Alexander, out of income as long as she shall live or until the termination of this trust, whichever is the shorter period, the sum of Eighteen Hundred Dollars ($1,800.00) per year. Such payments shall be made quarterly and shall commence on the transfer of my estate by my executor to my successor trustees, or upon her resignation as trustee, in the event she acts as trustee; provided, however, that in the event Jean S. Alexander is living at the termination of this trust, as hereinafter provided, whether she is acting as trustee or has earlier resigned, my trustee or successor trustees shall purchase for said Jean S. Alexander a single premium life annuity contract from a responsible insurance company, which annuity contract will guarantee to Jean S. Alexander, Eighteen Hundred Dollars ($1,800.00) per year as long as she shall live.

C. My trustee or successor trustees shall pay to my wife, Elsie D. Kipp, as long as she shall live, and does not remarry, the net income remaining after the payment of the bequests provided in paragraph B of Article IV. If such remaining net income does not at any time equal Six Hundred Dollars ($600.00) per month, then and in that event, an amount shall be paid out of principal which will, together with said remaining net income, equal six Hundred Dollars ($600.00) per month. Any amounts paid out of principal by reason of the remaining net income falling below Six Hundred Dollars ($600.00) per month, shall be restored to principal before payments of income in excess of Six Hundred Dollars ($600.00) per month shall be made to my wife, Elsie D. Kipp.

Upon the remarriage of my wife, Elsie D. Kipp, the payments of income to her shall cease, and the trustee shall pay to her the sum of Twenty-five Thousand Dollars ($25,000.00).

The payments herein provided for my wife, Elsie D. Kipp, shall commence with the date of my death and shall be made monthly.

In the event of the death or remarriage of my wife, Elsie D. Kipp, prior to the fortieth (40th) birthday of my nephew, Kipp O. Pritzlaff, my trustee or successor trustee shall pay the net income remaining after the payments required in paragraphs A and B of Article IV, to my sister, Mildred K. Pollard, if she be then living, until my nephew, Kipp. O. Pritzlaff, reaches or would have reached the age of forty (40) years. If the said remaining net income does not equal Five Hundred Dollars ($500.00) per month, then an amount shall be paid out of principal which will, together with said remaining net income, equal Five Hundred Dollars ($500.00) per month. Any amounts paid out of principal by reason of the said remaining net income falling below Five Hundred Dollars ($500.00) per month, shall be restored to principal before payments of income in excess of Five Hundred Dollars ($500.00) per month shall be paid to my sister.

In the event of the death of my sister, Mildred K. Pollard, after the death or remarriage of my wife, Elsie D. Kipp, but prior to the fortieth (40th) birthday of my nephew, Kipp O. Pritzlaff, my trustee shall pay to my nephew, Kipp O. Pritzlaff, until he reaches the age of forty (40) years, the net income up to Five Hundred Dollars ($500.00) per month, remaining after the payments required in paragraphs A and B of Article IV. It is my intend that said nephew receive not more than Five Hundred Dollars ($500.00) per month, regardless of the net income, and if the net income remaining after the payments required in paragraphs A and B of Article IV is less than Five Hundred Dollars ($500.00) per month, my nephew is to receive said net income, whatever it may be.

In the event that my nephew, Kipp O. Pritzlaff, is dead, such payments shall be made to his lawful children, if any, until said nephew would have reached the age of forty (40) years.

D. In the event my wife, Elsie D. Kipp, should elect to take the statutory allowance provided for a widow, the provisions contained in paragraphs A and C of Article IV shall fail and lapse. All other...