Farmers' Loan & Trust Co. v. Commissioner , 16 B.T.A. 438 ( 1929 )

FARMERS' LOAN & TRUST CO., EXECUTOR OF THE WILL OF JAMES A. BENEDICT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Farmers' Loan & Trust Co. v. Commissioner

Docket No. 21621.

United States Board of Tax Appeals

16 B.T.A. 438; 1929 BTA LEXIS 2588;

May 9, 1929, Promulgated

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Gift held not intended to take effect in possession or enjoyment at or after death.

Lawrence A. Baker, Esq., for the petitioner.

P. M. Clark, Esq., and C. C. Holmes, Esq., for the respondent.

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SIEFKIN

This is a proceeding for the redetermination of a deficiency in estate taxes in the amount of $705.03, resulting from the inclusion in the gross estate of the decedent of $20,000, and the respondent's failure to allow $303.53 paid as state inheritance taxes as a credit against the estate tax. The questions involved were raised by the pleadings.

FINDINGS OF FACT.

The petitioner is a corporate fiduciary organized under the laws of the State of New York, with its principal office in the City of New York, and is the executor under the will of James A. Benedict, deceased. James A. Benedict died on October 2, 1924, testate, and by his last will and testament, dated June 2, 1922, appointed the petitioner as sole executor and trustee of his estate. For some time prior to June 2, 1922, he had resided in the Borough of Manhattan and had residing with him his daughter, Juliette B. Livingston, her husband, Philip Livingston, and two children of the said Juliette B. Livingston and Philip Livingston. A short time prior to June 2, 1922, Philip and Juliette B. Livingston contemplated the purchase of a dwelling, which they expected would be occupied by themselves, their children, and the decedent, James A. Benedict, and which would afford better accommodations and facilities for the decedent, who was to make his home with them. The purchase of said dwelling by the said Philip and Juliette B. Livingston was conditioned upon an agreement by the decedent, James A. Benedict, that the latter would give $20,000 to Juliette B. Livingston. This condition was met by the decedent, who paid the $20,000 was a gift to Juliette B. Livingston on the 2nd day of June, 1922.

For the purpose of equalizing the decedent's gift of $20,000 to Juliette B. Livingston with the amount of property which his other daughter, Carolyn B. Prentice, might receive under his will, the said Juliette B. Livingston agreed to pay to the decedent, during his lifetime, interest on $20,000 at the rate of 6 per cent, per annum, payable quarterly. Thereupon an agreement was entered into between the said Juliette B. Livingston and James A. Benedict, dated the 2nd day of June, 1922, the material portions of which are as follows:

WHEREAS, the party of the first part has this day given or advanced to the party of the second part the sum of Twenty Thousand dollars; and

WHEREAS, the party of the first part has by his will, bearing even date herewith, bequeathed to his other daughter, Carolyn B. Prentice, the sum of Twenty thousand dollars, for the purpose of making an equal division of his property;

NOW, THEREFORE, THIS AGREEMENT WITNESSETH, that the parties hereto, in consideration of the premises and of the sum of One Dollar, the receipt whereof is hereby acknowledged, to hereby mutually covenant and agree, as follows:

1. The party of the second part hereby agrees to pay to the party of the first part interest at the rate of six per cent per annum, payable quarterly, on the said sum of Twenty thousand dollars for and during the life of the said party of the first part.

II. It is mutually understood and agreed that the said sum of Twenty thousand dollars shall be construed as a gift, and the party of the second part shall be under no obligation whatsoever to repay the same either to the party of the first part or his legal representatives, but shall merely pay interest on the said amount as above set forth.

On the 9th day of December, 1925, the petitioner, as executor, paid to the Treasurer of the State of New Jersey, the sum of $672.73 in satisfaction of the transfer inheritance tax due to the State of New Jersey from the estate of the decedent, James A. Benedict.

That portion of the will of James A. Benedict which is material to this controversy is as follows:

* * * Having advanced to my said daughter Juliette the sum of Twenty thousand dollars, on which sum she is to pay interest to the date of my death, I give and bequeath the sum of Twenty thousand dollars unto my daughter Carolyn B. Prentice, and in case she shall die before me then I give and bequeath the same unto her children living at my death and I authorize my executors to pay such last mentioned legacy in cash or by transferring to my said daughter or to her children, as the case may be, securities of my estate selected by it having a market value of Twenty thousand dollars at the time of my death. * * *

OPINION.

SIEFKIN: Two errors were originally alleged in the petition, but the assignment of error with respect to inheritance tax paid by the estate is now admitted to be error by the respondent and is not in issue.

The other question relates to whether the sum of $20,000 advanced to the decedent's daughter in 1922, with an agreement that she should pay interest on that amount during the decedent's lifetime, is a gift intended to take effect in possession or enjoyment at or after death within the meaning of the Revenue Act of 1921. It is admitted by the respondent that the transfer is not in contemplation of death.

The petitioner cites and relies upon the decision of the Court of Claims in , decided April 2, 1928, and on the approval of that case in , and the cases of ; ; ; and . The respondent, on his part, calls attention to the case of , and .

From the agreed facts we consider the gift of $20,000 to the decedent's daughter to have been full and complete on June 2, 1922. All interest in the money passed out of the decedent at that time and he took only a personal obligation from his daughter to pay a specified sum quarterly. There is nothing in the facts from which we can fairly conclude that the money or the property purchased with the money was chargeable with the payment of the specified sum. On the contrary, it seems clear that the gift was complete at that time and was not intended to take effect in possession or enjoyment at or after death. Neither possession or enjoyment vested at or after death. Both possession and enjoyment were given on June 2, 1922, to his daughter.

Judgment will be entered under Rule 50.