DocketNumber： Docket Nos. 56169, 56183, 56230
Citation Numbers： 25 T.C. 398, 1955 U.S. Tax Ct. LEXIS 34
Judges： Kern
Filed Date： 12/6/1955
Status： Precedential
Modified Date： 11/14/2024
*34
Petitioner Samuel J. Chase was an executor of the estate of a California decedent, whose widow denied the claim of Chase as executor to the possession of certain property. Chase therefore brought suit against the widow also naming his co-executor as defendant because she would not join with him as plaintiff. Shortly before the trial of this case, Chase employed petitioner Leslie W. Irving as his attorney in this litigation on a contingent basis, but subject to the approval by the Probate Court of a petition for compensation. Some time after the trial of the case Irving became attorney for the estate. The litigation was successful and during the taxable year substantial fees were paid to Chase and Irving by the estate as compensation for extraordinary services rendered in this litigation which, however, were less than 80 per centum of the total compensation received by Chase as executor and less than 80 per centum of all the compensation paid to Irving by the estate for legal services.
*399 OPINION.
In Docket No. 56169, respondent determined a deficiency in the income tax of petitioners Leslie W. Irving and Ruth L. Irving for the year 1952 in the amount of $ 19,468.06.
In Docket Nos. 56183 and 56230 respondent determined deficiencies in the income tax of petitioner Jeannette S. Chase and petitioner Samuel J. Chase for the year 1952 in the respective amounts of $ 2,014.40 and $ 2,155.78.
These cases were consolidated on joint motion and were submitted to the Court under Rule 30 upon a complete stipulation of facts.
*36 The issue presented by the parties is whether petitioners are entitled to apply the provisions of
We find the facts to be as stipulated and incorporate herein by this reference the stipulation of facts and exhibits attached thereto.
In order to give a factual background to our discussion of the issue presented in*37 these proceedings, we shall set out a short resume of the facts stipulated. Necessarily, some of the facts contained in the long stipulation and the numerous exhibits are omitted from this resume but such omission is not to be taken as an indication that we have not given due consideration to every fact established on the record.
Petitioners in Docket No. 56169 are husband and wife residing in California and filed their joint return for the period here involved with the collector of internal revenue, San Francisco, California.
*400 Petitioners in Docket Nos. 56183 and 56230 are husband and wife, residing in California, and filed separate returns for the period here involved with the same collector of internal revenue.
Petitioner Leslie W. Irving (hereinafter referred to as Irving) and petitioner Samuel J. Chase (hereinafter referred to as Chase), are lawyers.
One George L. Leiter died on January 23, 1947. A short time before his death he and his wife Ida signed a contract in the form of a joint will which provided that all of their property, regardless of how it was held or its nature when acquired, "shall be deemed to be community property." At that time the property had the*38 approximate value of $ 350,000 which included property held in joint tenancy or otherwise apparently payable to the survivor of the total approximate value of $ 293,500, including joint bank accounts, annuities, United States savings bonds (Series G), and real estate.
By decedent's will Chase and decedent's daughter, Burdeitta L. Forrest, were named executors and testamentary trustees and were appointed as such executors by the proper California court on February 11, 1947. One Charles W. Snook was the sole attorney for the executors from the date of their appointment until May 14, 1948, the day before he took office as judge of the California Superior Court to which he was appointed on April 12, 1948.
After decedent's death his wife, Ida, as survivor, claimed the properties held in joint tenancy or otherwise apparently payable to the survivor while Chase contended that since the contract above referred to converted all of the property of decedent and his wife into community property, the executors were entitled to possession of all the property and Ida was entitled by the terms of the contract to only the income therefrom.
This dispute could not be settled amicably and Chase could*39 not get a ruling on the matter from the Probate Court. Therefore, on September 3, 1947, Chase filed an action in the Superior Court of California titled "Complaint for Declaratory Judgment and Equitable Relief for Possession of Real and Personal Property, and to Quiet Title thereto and for Injunction and Accounting," in which Ida Leiter was named defendant and Burdeitta L. Forrest was also named defendant because she had refused to join with Chase as a plaintiff. This action was filed on behalf of Chase by "Chas. Wade Snook, Attorney for plaintiff." Ida was represented by counsel and Burdeitta was represented by other counsel.
On April 12, 1948, the day on which Snook was appointed judge, the case of Chase v. Leiter was set for trial on May 4, 1948.
"On April 15, 1948, petitioner Samuel J. Chase entered into an agreement with petitioner Leslie W. Irving which provided in substance *401 that Leslie W. Irving would handle the case of
"The services rendered by petitioner Leslie W. Irving in connection with the case of
A petition for allowances for extraordinary services in connection with these tax matters and partial distributions was filed by Chase and Irving on June 29, 1953, and after due hearing the court ordered payment to Chase of $ 20,000 and to Irving of $ 40,000 on account of such extraordinary services.
On October 10, 1950, the Probate Court "ordered payment on account of executors' statutory fees and commissions and statutory attorneys' fees as follows: to Samuel J. Chase, executor the sum of $ 2,200.00, to Burdeitta L. Forrest, executrix, the sum of $ 2,200.00, to L. W. Irving, attorney, the sum of $ 4,400 as a portion of the statutory attorneys' fees and compensation." From the latter amount Irving paid $ 1,500 to Snook.
The statutes of California provide that "the executor or administrator must take into his possession all the estate of the decedent, *403 real and personal, and collect all debts due to the decedent or to the estate." Although the situation faced by Chase in his efforts to take into his possession as executor all of the estate of the decedent presented unusual difficulties, his services in this regard were undertaken*45 pursuant to his duties as such executor, and were properly paid for by the estate by an allowance to "be made as the court may deem just and reasonable for * * * extraordinary services, such as * * * litigation in regard to the property of the estate * * *," in addition to regular percentage commissions provided by statute. All of his services compensated by the estate were services rendered by him as executor. In our opinion no part of these services can be treated separately with regard to the application of
*46 However, we reach a different conclusion with regard to the compensation received by Irving during the taxable year because of the peculiar circumstances incident to his employment by Chase to act as counsel for him in the case of Chase v. Leiter. At the time of his employment he was not the attorney for the estate, but was engaged by one of the executors to act as
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