Clark v. Commissioner , 12 B.T.A. 425 ( 1928 )

FRANK H. CLARK, EXECUTOR, ESTATE OF M. K. MCMULLIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Clark v. Commissioner

Docket No. 8015.

United States Board of Tax Appeals

12 B.T.A. 425; 1928 BTA LEXIS 3542;

June 6, 1928, Promulgated

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">*3542 Interest accrued to the date of the decedent's death on securities owned by him, a pension due for a period preceding his death, salary for a period preceding his death, and dividends declared prior to his death, but payable after his death on stocks owned by him, all of which were received by his estate after his death, where both the decedent and the estate were on the cash receipts and disbursements basis, are not taxable income to the estate, where the amount finally received did not exceed the fair market value of the right to receive the various items at the date of the decedent's death.

W. A. Seifert, Esq., and F. C. Miller, C.P.A., for the petitioner.

J. W. Fisher, Esq., for the respondent.

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MURDOCK

">*425 Income taxes in the amount of $2,445.37 for the period from February 23, 1919 to December 31, 1919, are in controversy.

">*426 The following errors were alleged:

(1) The Commissioner erroneously included as income subject to surtax in the period ended December 31, 1919, the amount of $35,132.25, representing dividends received by the taxpayer in the period from January 1st, 1919 to February 23, 1919.

(2) The Commissioner">*3543 erroneously included as income subject to normal tax in the period ended December 31, 1919, the amount of $5,838.90, representing interest from Liberty Bonds.

(3) The Commissioner erroneously included as income subject to surtax in the period ended December 31, 1919, the amount of $4,815.65, representing interest on Liberty Bonds.

(4) The Commissioner erroneously included as income in the period ended December 31, 1919, the amount of $46,516.98, representing interest, salaries and pension accrued up to the date of death of Mr. M. K. McMullin, to wit: February 23, 1919.

(5) The Commissioner failed to exclude as income in the period ended December 31, 1919, the amount of $24,439.24, representing accrued dividends at the date of death of Mr. M. K. McMullin, to wit: February 23, 1919.

The answer admits the first error alleged.

All of the facts were either stipulated or admitted.

FINDINGS OF FACT.

The petitioner has his principal office at Pittsburgh, Pa., and is a duly constituted executor of the estate of M. K. McMullin, who died on February 23, 1919.

The executors of the estate of M. K. McMullin, deceased, Pittsburgh, Pa., filed for the decedent an individual">*3544 income-tax return of income for the fractional part of the year preceding the date of the decedent's death, to wit, January 1, 1919, to February 23, 1919; and for the decedent's estate an individual income-tax return of income for the period from February 23, 1919, to December 31, 1919.

The Commissioner of Internal Revenue included as income for the period ended December 31, 1919, the amount of $46,516.98, representing salaries, pension, and interest, as follows:

Salaries:
Received from Empire Machine Co. for month of
February	$1,250.00
Received from American Window Glass Co. for month
of February	1,000.00
Received from American Window Glass Machine
Company for last half of February	461.54
		$2,711.54
Pension, United States Government		90.00
Interest on corporate bonds, mortgages, notes, etc		43,715.44
Total		46,516.98

The salaries making up the said amount of $2,711.54 were salaries of the decedent as an officer or employee of certain corporations, and ">*427 were the salaries allowable for the entire month of February, 1919, or for the last half of said month, on the monthly or semimonthly basis upon which the decedent's salaries">*3545 were regularly allowed, and said salaries were regularly due and payable at or immediately after the end of each month. The pension making up the said amount of $90 was pension of the decedent from the United States, and was the pension allowable for the months of October, November, and December, 1918, and the amount thereof was based on the regular monthly amount allowed to the decedent, and said pension was regularly paid at or immediately after the end of each quarter year, determining said quarters from January 1. The interest making up the said amount of $43,715.44 was interest on corporate bonds, mortgages, notes, etc., which were owned by the decedent in his lifetime; and the said amount was the total of interest accrued on the several obligations from the regular interest payment date in each case next preceding February 23, 1919, up to and including the said date of February 23, 1919; and the said amount was a part of, and was included in, the total of the several interest payments made on the said obligations at the regular interest payment date in each case next following the said date of February 23, 1919, the interest accrued on each obligation as aforesaid to and including">*3546 February 23, 1919, being a part only of the next regular payment of interest made on such obligation after February 23, 1919, by reason of the fact that said date of February 23, 1919, fell between two regular interest payment dates.

The corporate bonds, mortgages, notes, etc., on which interest was paid were included in Schedules B and C of the return for Federal estate tax for the estate of M. K. McMullin, and the fair market values thereof on February 23, 1919, were determined by the Commissioner. And in addition thereto as separate and distinct items there were included in Schedules B and C, pursuant to regulations and in accordance with instructions printed on the Return Form 706, the accrued interest on each obligation, aggregating $43,715.44, as a part of the corpus of the estate.

Said amount of $46,516.98 was included by the Commissioner as a part of the corpus of the estate upon which the Federal estate tax was determined and assessed by the Commissioner and the said tax was paid in accordance with such assessment.

The Commissioner included as income in the period ended December 31, 1919, the amount of $4,815.65 for interest accrued on Liberty Loan bonds from the">*3547 regular interest payment date next preceding February 23, 1919, up to and including the date of death of M. K. McMullin on February 23, 1919; and said amount formed a part of, and was included in, the payment of interest made on said bonds at ">*428 the regular interest payment date next following February 23, 1919, and was a part only of said payment, the said date of February 23, 1919, being between two regular interest payment dates.

The Liberty bonds on which interest was paid were included in Schedule B of the return for Federal estate tax for the estate of M. K. McMullin, and the fair market values thereof on February 23, 1919, were determined by the Commissioner. And in addition thereto as separate and distinct items there were included in Schedule B, pursuant to regulation and in accordance with instructions printed on the Return Form 706, the accrued interest on each obligation, aggregating $4,815.65, as a part of the corpus of the estate.

The amount of $4,815.65 was included as a part of the corpus of the estate upon which the Federal estate tax was determined and assessed by the Commissioner, and was paid in accordance with such assessment.

The Commissioner">*3548 included as income in the period ended December 31, 1919, the amount of $24,439.24, representing dividends declared, and payable to holders of record on dates prior to February 23, 1919, the date of M. K. McMullin's death. The corporation books for the payment of dividends were closed prior to February 23, 1919.

The stocks on which these dividends were declared were included in Schedule B of the return for Federal estate tax for the estate of M. K. McMullin, and the fair market values thereof on February 23, 1919, were determined by the Commissioner. And in addition thereto, as separate and distinct items, there were included in Schedule B, pursuant to regulations and in accordance with instructions printed on the Return Form 706, the aforesaid dividends amounting to $24,439.24, as a part of the corpus of the estate.

These dividends were all declared between December 31, 1918, and February 10, 1919, both dates inclusive. They were payable to stockholders of record on certain dates, which dates ranged from January 4, 1919, to February 19, 1919. They were paid on various dates from February 24, 1919, to March 4, 1919, and they were received by the petitioner on various dates">*3549 from March 1, 1919, to March 14, 1919. They were in the amount of $24,439.24, which amount was included as part of the corpus of the estate upon which the Federal estate tax was determined and assessed by the Commissioner and was paid in accordance with such assessment.

All of the salaries, interest, pension, and dividends hereinabove referred to as included by the Commissioner in the income of the estate for the period from February 24, to December 31, 1919, were paid to and were received by the estate during the said period.

The decedent prior to his death kept his accounts and made his income-tax returns on the cash receipts and disbursements basis, and the executors likewise have kept their accounts of the estate and all ">*429 returns of income tax which they have made have been made on a cash receipts and disbursements basis.

The parties agree that if the salaries, pension, and interest, aggregating $46,516.98, and the Liberty bond interest, aggregating $4,815.65, and the dividends, aggregating $24,439.24, are not taxable income to the petitioner for the period ended December 31, 1919, then for this period the petitioner's total net income subject to surtax is">*3550 $308,629.82, and the total net income subject to normal tax (before deducting personal exemption of $1,000) is $12,714.30.

OPINION.

MURDOCK: Prior decisions of this Board govern this case and we sustain the contentions of the petitioner. ; ; ; ; ; ; and .

Judgment will be entered under Rule 50.