Grinnell v. Commissioner ( 1941 )

ESTATE OF FRANCIS BROWNE GRINNELL, STATE STREET TRUST COMPANY AND RUSSELL GRINNELL, ADMINISTRATORS WITH WILL ANNEXED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Grinnell v. Commissioner

Docket No. 105092.

United States Board of Tax Appeals

44 B.T.A. 1286; 1941 BTA LEXIS 1201;

August 28, 1941, Promulgated

---

ESTATE TAX - DEDUCTIONS - CLAIMS AGAINST ESTATE. - Alimony decreed by court is deductible, not being based upon agreement.

Samuel H. Batchelder, Esq., for the petitioners.

Martin M. Lore, Esq., for the respondent.

---

MURDOCK

The Commissioner determined a deficiency of $37,869.63 in estate tax. The issue is whether the estate is entitled to a deduction of $156,473.04 as a claim against the estate representing monthly payments to be made to a divorced wife of the decedent pursuant to a divorce decree awarding alimony.

FINDINGS OF FACT.

The decedent died on November 17, 1937. The estate tax return was filed in Massachusetts. The administrators are duly authorized to represent the estate.

Elizabeth M. Grinnell obtained a divorce from the decedent which became absolute in July 1917 under the laws of Massachusetts. The decree contained the following provision for the payment of alimony:

That said libellee shall, on the said decree nisi becoming absolute, and thereafter during the life of the libellant, well and truly pay, or cause to be paid to her, the sum of twelve thousand dollars ($12,000.) annually in installments of one thousand ($1,000.) monthly, each of said installments to be payable on the first day of each month, the first of said installments to be paid as of November 1, 1916:

That the said payments shall constitute full, final and conclusive satisfaction of any and all demands and rights of any and every nature, whether at law or in equity, of said libellant, for or on account of alimony or otherwise, against said libellee.

Provided, however, that in the event of the marriage of said libellant, but not otherwise, further obligations of said libellee to said libellant, as hereinabove fixed and determined, shall be subject to any further order or modification by this Court, upon the motion of either of said parties.

Elizabeth M. Grinnell was born on July 30, 1889. She was living at the date of the hearing and had never remarried. She made claim as a creditor of the estate for payment of the amounts due her under the divorce decree and asked to have assets retained sufficient to meet payments due her. Her claim was valid and enforceable against the estate. An agreement was entered into in 1938 and approved by the Probate Court to liquidate the claim by the payment of $30,000 in cash and monthly payments of $650 so long as she lived and remained unmarried. She had received from the estate a total of $50,800 up to the date of the hearing.

The estate claimed a deduction of $156,473.04 representing the value at the date of decedent's death of monthly payments of $1,000 for life to a person the age of Elizabeth M. Grinnell, calculated in accordance with tables published in Regulations 80, article 10(i), and table A. The Commissioner disallowed the deduction.

OPINION.

MURDOCK: The Commissioner contends that no deduction is proper because the claim was founded upon a promise or agreement for which there was not an adequate and full consideration in money or money's worth. See section 303(a) and (d) of the Revenue Act of 1926 as amended. He points to a recital in Exhibit B, a part of Exhibit 3 in this proceeding, to the effect that the parties, prior to the divorce decree, had entered into an agreement that the decree should require Francis to pay Elizabeth $1,000 monthly for life in full satisfaction of all rights as alimony or otherwise. The respondent cites cases wherein it was held that claims based upon agreements were not deductible ductible under section 303(a) and (d). ; ; affd., ; ; certiorari denied, . The petitioners argue that this claim was not based upon an agreement and the cases cited are not in point, since they were based upon agreements, not court decrees.

The petitioners contend that the claim of Elizabeth was based upon the decision of a Massachusetts court of competent jurisdiction in the divorce action. Obviously, this was an enforceable claim against the estate allowed by the laws of the jurisdiction. Cf. , holding that the payments go on after the death of the husband. The record does not show clearly the agreement of the parties prior to the decree. But the claim is not based upon any such agreement. It is based upon the decree. . The judge was required to make his own decision in regard to alimony and was not bound by any agreement of the parties. ; . He ordered the payments of $1,000 monthly. Since the claim is not based upon an agreement, the question of consideration is immaterial and a deduction is proper. ;. Cf. ; reversed sub nom. .

The parties agree that they can settle the question of credit for Massachusetts taxes.

The claim at the date of death of the decedent was a claim for the payment of $1,000 monthly and the respondent states that the later change by agreement was immaterial. He does not contest the computation of the petitioners or the amount claimed except on one ground. He argues that the value or amount of the claim was necessarily indeterminable because it was to continue only so long as Elizabeth lived and remained unmarried, and there was no way of determining how long she would remain unmarried. The payments might continue as long as she lived even though she remarried. There was a valid claim and it entitled the estate to a deduction in some amount. The Commissioner raised doubts. He has allowed, and proposes to allow, nothing. The petitioners, using the Commissioner's own tables, have done what they could to estimate the amount of the claim. Their estimate is the best in the record. The estate is entitled to the deduction in the amount of $156,473.04.

Decision will be entered under Rule 50.