Wear v. Commissioner , 26 B.T.A. 682 ( 1932 )

JOSEPH WALKER WEAR, WILLIAM E. GOODMAN AND WILLIAM POTTER WEAR, EXECUTORS OF THE ESTATE OF WILLIAM POTTER, DECEASED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Wear v. Commissioner

Docket No. 47612.

United States Board of Tax Appeals

26 B.T.A. 682; 1932 BTA LEXIS 1271;

July 20, 1932, Prlmulgated

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Where certain property was subject to a general power of appointment and the power was exercised by the donee of the power, such property should be included in the taxable estate of decedent donee.

Claude C. Smith, Esq., for the petitioner.

E. L. Corbin, Esq., and Ralph F. Staubley, Esq., for the respondent.

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VAN FOSSAN

The respondent determined a deficiency in estate tax of $14,390.53, of which amount $14,389.94 was proposed for assessment. The facts were stipulated. The question is the correctness of respondent's action in holding that certain property of a value of $194,448.34 should be included in the taxable estate under the provisions of section 302(f) of the Revenue Act of 1926.

FINDINGS OF FACT.

The petitioners are executors of the estate of William Potter, deceased.

Thomas Potter, the father of the decedent (William Potter), died September 29, 1878, leaving a will which provided, among other things, as follows:

* * * and upon the decease of the survivor of my said wife and children I direct that three judicious persons shall be appointed, by a majority of such of the male heirs and devisees of my said children as shall then be of the full age of twenty-one years, to make division and partition of my said estate into as many equal parts or shares as I may have children living at the time of my decease, and the issue of any deceased child, such issue representing the part or share his, her or their deceased parent would have been entitled to if then living, one of said equal parts or shares to be assigned or conveyed by the then Trustees of my estate as may be directed, limited, and appointed by the last Will and Testament of each of my said children, or by any writing in the nature thereof, and in default of any such last Will and Testament or writing in the nature thereof, I give, devise and bequeath one of said equal parts or shares of my estate, to the heirs and legal representatives of each of my said children so dying intestate, free and clear, and discharged of, and from, all trusts and confidences whatsoever.

William Potter died April 29, 1926, leaving a will dated December 3, 1925, by which, after disposing of his own property, he provided in the tenth paragraph thereof as follows:

TENTH: Whereas in and by the last Will and Testament of my father, the late Thomas Potter, of the City of Philadelphia, there is given to, and conferred upon me authority to direct, limit and appoint a portion of his estate. Now, by virtue of the power and authority contained in the last Will and Testament of the said Thomas Potter, deceased, and thereby vested in me, I do, in exercise thereof, by this my last Will and Testament, give and appoint all the estate, real and personal, whatsoever, over and concerning which I have the power of appointment aforesaid, unto my two daughters, ADALINE POTTER WEAR and ELIZABETH VANUXEM POTTER GOODMAN, share and share alike, absolutely, and in fee simple.

Adaline Potter Wear and Elizabeth Vanuxem Potter Goodman, parties named in the tenth paragraph of William Potter's will, were on December 3, 1925, have been continuously since that time, and are now the sole issue, sole heirs and next of kin of William Potter, deceased.

Pursuant to proceedings instituted in the Orphans' Court of Philadelphia County in the matter of the Estate of Thomas Potter, deceased, October Term, 1878, No. 273, upon petition for review of adjudication in that estate, citation was directed against and served upon Joseph S. MacLaughlin, collector of internal revenue for the First District of Pennsylvania, making him a party to the proceedings, and thereafter an answer was filed by the said Joseph S. McLaughlin, collector of internal revenue, and upon the issue raised by the pleadings a decision was rendered by the orphans' court on May 16, 1930, reversing a former determination, and holding that the attempted exercise by decedent, William Potter, of the power of appointment was a nullity and that the property in question passed to the heirs of William Potter under the provisions of the will of Thomas Potter.

OPINION.

VAN FOSSAN: Petitioners make two contentions - (1) that under the law of Pennsylvania the property in question passed under the will of the donor (decedent's father) to the beneficiaries; and (2) that the determination of the Orphans' Court of Philadelphia County to this effect is conclusive and thus determinative of the whole question.

Even though it be conceded that the law of Pennsylvania is as contended by petitioners and that under the state law the decision of the orphans' court was correct, we are nevertheless unable to agree with petitioners that the property was improperly included in the taxable estate under the provisions of section 302(f) of the Revenue Act of 1926.

Petitioners concede that the power was a "general power." It is established by the facts that it was exercised. The exercise of the power brought the case within the wording and intent of the Federal tax statute and justified the respondent's action. All of the considerations urged upon us in support of petitioners' position were exhaustively considered by the Board in , and ruled adversely to petitioners. Petitioners do not attempt to distinguish the cited case, but content themselves with an attempted but unconvincing distinguishing of , one of the cases cited in support of the Hancy decision. In our opinion the decision in , is controlling. That case was based on established rulings of the Federal courts and has been approvingly cited by the Board in subsequent cases. It stands as the considered judgment of the Board. See ; ; .

Nor are we disturbed or hindered in reaching the above conclusion because in a case arising under the same documents it was decided by the Orphans' Court of Philadelphia County that the attempted exercise of the power of appointment was a nullity and the award should have been made to the distributees under the will of Thomas Potter. Whatever may have been the effect of this decision in the local administration of the estate, and it would seem that under the facts it was of no effect, the only announced reason for amending the earlier decision being to bring the parties within the rule announced in , this decision is not conclusive of the question before us. The Board of Tax Appeals is a Federal tribunal engaged in deciding questions presented under the Federal taxing acts. Though there are certain restricted situations in which the local law may be controlling, in the present case we are not so confined. The statute which we are here interpreting was enacted by the Congress of the United States to meet certain situations and achieve certain results. As has been said by the Supreme Court, "the Act of Congress has its own criteria," and in determining whether or not there has been a transfer under the Federal statute we must look to the interpretations adopted by the Federal courts and tribunals. See ;. ;.

Decision will be entered for the respondent.