Mercer v. Commissioner , 7 T.C. 834 ( 1946 )

Myrtle Mercer, Petitioner, v. Commissioner of Internal Revenue, Respondent

Mercer v. Commissioner

Docket No. 9400

United States Tax Court

7 T.C. 834; 1946 U.S. Tax Ct. LEXIS 72;

September 23, 1946, Promulgated

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">*72 Decision will be entered for the respondent.

Petitioner's husband died testate in 1941 and left all his estate, consisting of his one-half interest in their community property, to petitioner "for her uses and benefits in whatsoever way or manner the same may be necessary for her care and comfort and support, during the remaining period of her life." The will then directed that after petitioner's death, such portion of the estate as might remain should be distributed in equal shares to the five children of petitioner and decedent. Held, that no trust was created; that all the income from the property left by decedent belonged to petitioner, and in addition she had the right to consume as much of the property itself as might be needed for her comfort and support; and that petitioner is taxable on the income from the property in 1942 and 1943.

Winfield G. Boyd, C. P. A., for the petitioner.

Douglas L. Barnes, Esq., for the respondent.

Arundell, Judge.

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ARUNDELL

">*834 Respondent determined a deficiency of $ 5,137.13 in petitioner's income tax liability for the calendar year 1943. The question involved is whether certain income reported in a fiduciary return in">*73 the name of "Estate of Willis Mercer" is the income of petitioner and taxable to her.

The facts have been stipulated and are accordingly adopted.

FINDINGS OF FACT.

Petitioner is an individual, residing in the State of Washington. Her individual income tax returns, as well as fiduciary returns in the name of the "Estate of Willis Mercer," were filed with the collector for the district of Washington.

">*835 Petitioner's husband, Willis Mercer, died testate in 1941. At the time of his death all property owned by petitioner and her husband was community property. She was appointed executrix of his estate and administered the property in the Superior Court of Washington in and for Benton County.

During his lifetime Willis Mercer and petitioner executed substantially identical wills, in which each left to the other a certain interest in the decedent's share of the community property. The will of Willis Mercer, dated July 31, 1935, pursuant to which his interest in the community property was administered, reads in material part as follows:

Second: To my beloved wife, Myrtle Mercer, I give and bequeath all of my estate, both real and personal, for her uses and benefits in whatsoever">*74 way or manner the same may be necessary for her care and comfort and support, during the remaining period of her life. When she shall have passed away, I direct that such portion of my estate as shall remain shall be distributed among our children as follows:

To W. H. Mercer; Velma Mercer Travis; Wata Mercer Rolph; Milton Mercer and Frances Helen Mercer, I give and bequeath to each of them, share and share alike, a one-fifth interest in said residue of my estate.

On November 6, 1941, the Superior Court entered its order approving the final account and distributing the estate and discharging the executrix. That order provided in part as follows:

It Is Ordered that each and all of the assets of this estate, as shown by the inventory and supplemental inventory, and hereafter more particularly mentioned and described, be and the same are hereby distributed as follows, to-wit: An undivided one-half interest therein, constituting the community interest of decedent, be and the same is hereby distributed unto Myrtle Mercer, surviving wife of decedent, for her use and benefit in whatsoever way or manner the same may be necessary for her care and comfort and support during the remaining period">*75 of her life, and thereafter, in equal undivided shares unto W. H. Mercer, Velma Mercer Travis, Wata Mercer Rolph, Milton Mercer and Frances Helen Mercer Juzeler.

Petitioner did not include in her individual returns for 1942 and 1943 any portion of the income attributable to one-half of the property, as described in the order of distribution, which she considered to be acquired from Willis Mercer. However, she caused to be filed for each of those years a fiduciary return, reporting therein one-half the total income and disbursements attributable to the property formerly owned by the community as the income of a trust in the name of the estate of Willis Mercer.

Petitioner kept no records in 1942 and 1943 segregating income or assets or reinvested assets left by Willis Mercer from her own income derived from any source. She maintained only one bank account, which was in her own name and in which all her receipts were deposited.

">*836 Petitioner's personal expenditures did not exceed $ 3,000 a year in either 1942 or 1943.

Respondent determined that income in the amount of $ 10,720.59 for 1942 and in the amount of $ 1,753.09 for 1943 reported in the fiduciary returns was taxable ">*76 to the petitioner and accordingly asserted the deficiency which gave rise to the instant petition.

OPINION.

On behalf of the petitioner it is contended that either the will of the decedent or the decree of distribution of his estate created a trust, the income of which is taxable according to the provisions of section 161 (a) (1) of the Internal Revenue Code as "income accumulated or held for future distribution under the terms of the will or trust." We think the contention is untenable. No evidence aliunde has been submitted bearing on the intent of the testator, and all we have upon which to base our decision is the language of the testator's will. That instrument certainly was not artfully drawn to accomplish the purpose for which petitioner is contending, and we are wholly unable to spell out from its language any implied trust intent on the part of the testator.

In In re King's Estate, 144 Wash. 281; 257 P. 848">257 P. 848, the Supreme Court of Washington stated that no testamentary trust will be declared except when it clearly appears that such was the testator's plain intention. Furthermore, if the will itself does not provide">*77 for a trust, then surely the decree of distribution, which is phrased in almost the identical wording of the will, can not have the effect of creating a trust.

Not only is there an absence of trust intent on the part of the decedent, but petitioner's actions do not demonstrate any understanding on her part that the property acquired by her should be held in trust. She kept no records segregating the alleged trust income from her own income, and she maintained but one bank account, in her individual name, and commingled therein both the income from her own half interest in the property of the former community and the income from the half interest acquired from her husband.

To us it appears that the more probable intent of the decedent was to give his wife a life estate in his interest in the community property, with full enjoyment of the income the property might produce during that period. Perhaps the somewhat peculiar phraseology employed is but recitative of the testator's motive in making the gift, but we think that in addition the testator wished to exempt her from the necessity of preserving the property intact for the remaindermen, ">*837 as in the case of more conventional">*78 life estates, and to allow her to consume such portion of the property itself as might be necessary for her comfort and support, should the rents, issues, and profits therefrom at any time prove insufficient for that purpose.

This construction seems to be in harmony with the decision of the Supreme Court of Washington in Porter v. Wheeler, 131 Wash. 482; 230 P. 640">230 P. 640. In that case the testator's will bore a strong resemblance to the will of Willis Mercer. It provided:

I give and devise and bequeath to my wife Mary Wheeler Porter all the balance of my property real, personal and mixed of which I may die seized, * * * to be used and enjoyed by her during her lifetime, and at her death, I will that all of said property not used for her support and comfort, go to my said son Alvah Porter.

And the court said:

We shall not attempt to give to this estate so vested in Mary Wheeler Porter any technical legal name. It seems to be something more than an ordinary conventional life estate, since the language of the will does not limit her right to the bare use of the property, in the sense of limiting her right to the income therefrom, ">*79 with a view of preserving the property during her lifetime, but manifestly gives her the right to support and comfort from the property, even though it be consumed in furnishing her support and comfort during her lifetime. * * *

For the reasons stated, we conclude that the respondent's determination was correct and should be approved.

Decision will be entered for the respondent.