Whitlock v. Commissioner

HAROLD A. WHITLOCK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

HERBERT V. WHITLOCK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

LOUIS I. WHITLOCK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

WILLARD P. WHITLOCK, JR., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

ANNIE V. WHITLOCK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Whitlock v. Commissioner

Docket Nos. 46416-46420.

United States Board of Tax Appeals

22 B.T.A. 1355; 1931 BTA LEXIS 1952;

April 29, 1931, Promulgated

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Where distributions are made to heirs during the period of administration of an estate and in the year of distribution the estate had receipts from the sale of capital assets and receipts of income and the Commissioner determines that a portion of the distributions is from income, and the evidence does not show to the contrary, the Commissioner's determination will not be disturbed.

Albert S. Wright, Esq., and William M. Sperry, 2nd, Esq., for the petitioners.

E. L. Corbin, Esq., for the respondent.

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SMITH

These proceedings, which have been duly consolidated for hearing and report, are for the redetermination of deficiencies in income tax as follows:

		Deficiencies
Petitioner	Docket No.	1925	1926
Harold A. Whitlock	46,416	$672.86	$677.55
Herbert V. Whitlock	46,417	432.67	472.86
Louis I. Whitlock	46,418	668.22	239.98
Willard P. Whitlock, Jr	46,419	742.23	771.07
Annie V. Whitlock	46,420	360.02	809.66

The question in issue relates to the taxability of distributions made to the petitioners by the administrator of the estate of Willard P. Whitlock, deceased, during the period of administration and settlement.

FINDINGS OF FACT.

Willard P. Whitlock, then a resident of the City of Elizabeth, County of Union, State of New Jersey, died intestate, March 3, 1924, leaving him surviving a widow, Annie V. Whitlock, one of the petitioners herein, and four sons, Harold A. Whitlock, Herbert V. Whitlock, Louis I. Whitlock, and Willard P. Whitlock, Jr., the other petitioners herein, as his only heirs at law and next of kin.

On March 21, 1924, letters of administration upon the goods and chattels of the decedent were duly issued by the Surrogate of Union County, New Jersey, to Willard P. Whitlock, Jr., who thereupon entered upon his duties as such administrator. From March 21, 1924, to April 30, 1926, the estate of Willard P. Whitlock, deceased, was in process of settlement.

From January 1, 1925, to December 31, 1925, the administrator had in hand cash belonging to said estate as follows:

Cash on hand Dec. 31, 1924	$5,085.34
Cash received from sale of capital assets	100,008.35
Dividends and interest received during calendar year 1925	53,878.10
Total	158,971.79

During the year 1925, the administrator made payments from the cash on hand or so received as follows:

Federal estate tax upon the estate of Willard P. Whitlock, deceased		$18,696.15
Debts, administration expenses, etc		30,058.50
Payments on account of distributive shares:
To Harold A. Whitlock	$18,500
To Herbert V. Whitlock	18,500
To Louis I. Whitlock	18,500
To Willard P. Whitlock, Jr	18,500
To Annie V. Whitlock	28,000
		102,000.00
Total payments in 1925		150,754.65

The administrator had on hand in cash on December 31, 1925, the sum of $8,217.14.

The administrator made a return for Federal income tax for the year 1925, wherein he showed a gross income received by way of interest and dividends amounting to $53,878.10; and claimed as a deduction therefrom the sum of $18,696.15, the Federal estate tax upon the estate of the decedent, leaving a net income of $35,181.95 subject to tax, upon which the income tax in the amount of $1,326.38 was duly assessed and paid. Thereafter the administrator filed a claim for refund of the tax so paid, stating therein that said claim was made without prejudice to the claims of the beneficiaries of said estate that there should be no additions to their income by reason of income received by the estate during the year in question, which claim for refund is still pending before the Bureau.

In addition to said sum of $8,217.14, the administrator had on hand December 31, 1925, corporate securities carried on his books at a value of $500,000. From January 1, 1926, to April 30, 1926, the administrator received, in cash, dividends amounting to $40,000 and interest amounting to $80, making a total of cash and securities of $548,297.14. On or about April 30, 1926, the administrator made final distribution of said cash and securities as follows:

Harold A. Whitlock	$91,382.86
Herbert V. Whitlock	91,382.86
Louis I. Whitlock	91,382.86
Willard P. Whitlock, Jr	91,382.86
Annie V. Whitlock	182,765.70
Total distributed	548,297.14

The administrator made a return, for Federal income tax, of the income received by him during the period from January 1, 1926, to April 30, 1926, reporting therein as income said interest in the amount of $80 and dividends in the amount of $40,000, and claiming no deductions, thereby showing a total taxable net income in the amount of $40,080. The tax disclosed thereon in the amount of $1,108.80 was thereupon assessed and paid. Thereafter the administrator filed a claim for refund of said amount of $1,108.80, stating in said claim that it was made without prejudice to the claims of the beneficiaries that there should be no additions to their income by reason of income received by the estate during the period in question, which claim for refund is pending in the Bureau.

None of the petitioners included in his or her individual Federal income tax returns for the years 1925 and 1926 any part of the sums received by him or her from said administrator as hereinabove set forth. In the audit of the returns of the decedent's estate and of the petitioners for the years 1925 and 1926, the Commissioner held that the administrator should have taken additional deductions on account of the payments to the beneficiaries of the estate as hereinabove set forth and that he should have reported no net income subject to tax for the years 1925 and 1926. The Commissioner added to the income reported by the petitioners upon their respective returns for said years, certain amounts which he determined constituted income of the decedent's estate, properly paid and credited during such years to the petitioners as beneficiaries of the estate, as follows:

Beneficiaries	1925	1926
Harold A. Whitlock	$5,863.66	$6,680.00
Herbert V. Whitlock	5,863.66	6,680.00
Louis I. Whitlock	5,863.65	6,680.00
Willard P. Whitlock, Jr	5,863.66	6,680.00
Annie V. Whitlock	11,727.32	13,360.00
Total	35,181.95	40,080.00

The deficiencies herein result entirely from the additions of the above amounts to the income of the petitioners. In determining the deficiencies in each instance the Commissioner treated the entire amount so added to income as dividends subject to surtax only.

OPINION.

SMITH: The question presented by these proceedings is whether the amounts received by the petitioners from the administrator of the estate of Willard P. Whitlock in the years 1925 and 1926 were from the capital of the estate as contended by the petitioners or in part from income as determined by the respondent. The respondent has held that all of the income of the estate in 1925, amounting to $53,878.10, was distributed to the petitioners herein with the exception of $18,696.15, which was paid for Federal estate tax. He in effect contends that the debts, administration expenses, etc., of the estate paid in 1925, amounting to $30,058.50, were paid from capital. Whether this is so is not shown by the stipulation upon which our findings are based. We do not know the date of the receipt of the cash from the sale of capital assets or the dates of receipt of the dividends and interest received in 1925, nor do we know the dates of the payments to the petitioners, the distributees. The determination of the respondent upon this point is presumed to be correct. . For lack of evidence disproving the correctness of the respondent's determination as to the year 1925, the same is sustained.

The evidence conclusively shows that in 1926 the administrator distributed $40,080, the entire income of the estate in that year, to the petitioners. These payments were legal deductions from the gross income of the estate, since they were distributions to the beneficiaries. (Section 219(b)(3) of the Revenue Act of 1926.) The action of the respondent in holding the petitioners liable to income tax in respect of these receipts is sustained, upon the authority of ; affirmed in .

Judgments will be entered for the respondent.