Fiske v. Commissioner

ESTATE OF GEORGE S. FISKE, GEORGE P. DAVIS AND EDWARD F. MCCLENNEN, EXECUTORS, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Fiske v. Commissioner

Docket No. 103684.

United States Board of Tax Appeals

45 B.T.A. 52; 1941 BTA LEXIS 1188;

September 5, 1941, Promulgated

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ESTATE TAX - DEDUCTIONS. - A termination charge due and paid to trustees of a trust which terminated at the death of a decedent who had retained and exercised a power of appointment by will over the trust was deductible from the gross estate under section 303(a)(1) of the Revenue Act of 1926 as amended.

Allison L. H. Newton, Esq., for the petitioners.

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

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MURDOCK

The Commissioner determined a deficiency of $8,716.55 in estate tax. The only issue is whether or not $19,921.47 should be excluded or deducted from the gross estate. FINDINGS OF FACT.

George S. Fiske died on January 18, 1936. The petitioners are the duly appointed executors of his estate. An estate tax return was filed in Massachusetts, where the decedent resided.

The decedent created a trust in 1903 over which he retained a power of appointment by will. He exercised the power in his will, thus terminating that trust, and directed what should be done with the trust property, which had a value of at least $1,992,146.92 at the date of his death. The value of the trust property was included in his gross estate and a deduction was taken for a termination charge to which the trustees were entitled. The charge, amounting to 1 percent of the value of the property, or $19,921.47, was paid to the trustees in January and April 1937. That was a reasonable and customary termination charge, which by long established custom in Massachusetts is payable to trustees when they finally surrender and distribute the property in their hands.

The Commissioner disallowed the deduction taken for the termination charge and added the amount to the value of the estate.

The stipulation of the parties is included herein by this reference.

OPINION.

MURDOCK: The Commissioner recognizes the reasonableness of the termination charge and its validity as an obligation which had to be paid from the property included in the gross estate. He says it "is just another debt of the decedent, and would be deductible, were it not for the express provision in the Estate Tax Regulations, Article 33, which specifically provides that trustees' commissions are not deductible." The regulation states that trustees' commissions do not constitute expenses of administration and are not deductible. That regulation applies to commissions of trustees under the will of a decedent who perform some service separate from that of executors or administrators in the usual administration and settlement of an estate. It also applies to commissions of other trustees who perform services long after the death of the decedent. ; ; affd. ; . But it does not apply to a charge, such as this, which had to be paid to free the trust property and let it pass as a part of the decedent's estate under the power exercised in his will. Such a charge is a proper charge against the estate, allowed by the laws of Massachusetts, and deductible under section 303(a)(1) of the Revenue Act of 1926 as amended.

Decision will be entered under Rule 50.