DocketNumber: Docket No. 22646-92
Citation Numbers: 69 T.C.M. 1951, 1995 Tax Ct. Memo LEXIS 81, 1995 T.C. Memo. 81
Judges: COLVIN
Filed Date: 2/23/1995
Status: Non-Precedential
Modified Date: 11/21/2020
1995 Tax Ct. Memo LEXIS 81">*81 Decision will be entered under Rule 155.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN,
References to decedent are to Jack H. Levin. References to petitioner are to his estate. Unless otherwise provided, section references are to the Internal Revenue Code in effect during the time relevant to this case. Rule references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
All of the facts have been stipulated and are so found.
Decedent was a resident of Florida when he died on November 22, 1988. At the time the petition was filed, Jefferson National Bank of Miami Beach had its principal place of business in Miami Beach, Florida.
Decedent held a party to celebrate his 90th birthday. Friends, family, 1995 Tax Ct. Memo LEXIS 81">*82 and representatives of 20 charitable organizations attended the party. At the party, decedent announced that he would establish a $ 10,000 charitable remainder annuity trust for each charity represented at the party, with family members and nonfamily members as the income beneficiaries.
Decedent died testate before he established the trusts. On January 9, 1989, decedent's will was admitted to probate in Dade County, Florida. Donald Stern (Stern) and Jefferson National Bank of Miami Beach were appointed as copersonal representatives of the estate. Stern's wife and children are beneficiaries of a revocable trust executed by decedent before his death. The revocable trust, which was created for the benefit of individuals and charitable organizations, was the residual beneficiary of decedent's will.
Of the 20 charitable organizations for which decedent promised to establish a trust, 19 filed claims beginning in March 1989, for payment in the probate proceedings. Some of the charities attached letters to their claims that decedent had written to them after the party in which decedent reaffirmed his intent to make gifts to the charities. The personal representative paid $ 10,0001995 Tax Ct. Memo LEXIS 81">*83 to each of 17 of the charities in March 1991. The remaining three charities and six individuals which had filed claims entered into a settlement agreement with petitioner. The settlement agreement provided for a total payment of $ 30,000 plus accrued interest in satisfaction of the trusts contemplated but not established by decedent, $ 13,575 of which was paid to the three charities and $ 22,039 of which was paid to the six individuals. The settlement agreement was entered by order of the Probate Court of Dade County, Florida, on March 26, 1991.
Petitioner deducted the $ 200,000 of claims that arose from the promises decedent made at his birthday party as debts of decedent.
OPINION
1.
The parties have both cited two related statutory provisions to be applied in this case. Under one of the provisions, payment by an estate of a claim made by a charitable organization, based on a promise by the decedent during his or her lifetime to contribute to the charitable organization, is deductible by the estate if the claim is "allowable" under applicable1995 Tax Ct. Memo LEXIS 81">*84 law.
We next discuss the background and development of these two provisions.
1995 Tax Ct. Memo LEXIS 81">*85 The predecessors to
In
In response to At the present time a claim founded upon a promise or agreement of the decedent to make a contribution or gift to or for the use of any donee described in
1995 Tax Ct. Memo LEXIS 81">*88
1995 Tax Ct. Memo LEXIS 81">*89 2.
We first decide whether decedent's promises to contribute to 20 charitable organizations were allowable, i.e., enforceable, under Florida law.
Respondent contends that the claims were not allowable under Florida law. Under Florida law, a promise to contribute to a charitable organization is enforceable under the doctrine of promissory estoppel if the promisor makes a promise which the promisor reasonably expects to induce action or forbearance of a substantial character by the promisee.
In
The case of
We conclude that petitioner may not deduct as a claim against the estate payment made to the charitable organizations because those claims were not enforceable under Florida law.
3.
Petitioner paid $ 22,039 to six individuals to whom the decedent had1995 Tax Ct. Memo LEXIS 81">*92 promised an income interest in the charitable remainder trusts which he had intended to establish.
Petitioner may deduct the $ 22,039 if decedent's promise was enforceable under Florida law and contracted bona fide for adequate and full consideration in money or money's worth.
Adequate and full consideration in money or money's worth is consideration that: (a) Augmented the decedent's estate, (b) bestowed a right or privilege not previously held by the decedent, or (c) discharged an existing claim of the decedent.
Therefore, we conclude that petitioner may not deduct any of the $ 200,000 it paid to the charities and individuals.
To reflect the foregoing,
1. (a) General Rule. -- For purposes of the tax imposed by section 2001, the value of the taxable estate shall be determined by deducting from the value of the gross estate such amounts -- * * * (3) for claims against the estate, * * * * * * as are allowable by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered.↩
2.
(c) Limitations. -- (1) Limitations applicable to subsections (a) and (b). -- (A) Consideration for claims. -- The deduction allowed by this section in the case of claims against the estate, unpaid mortgages, or any indebtedness shall, when founded on a promise or agreement, be limited to the extent that they were contracted bona fide and for an adequate and full consideration in money or money's worth; except that in any case in which any such claim is founded on a promise or agreement of the decedent to make a contribution or gift to or for the use of any donee described in
3.
.↩
Glaser v. Commissioner of Internal Revenue , 69 F.2d 254 ( 1934 )
john-a-propstra-personal-representative-of-the-estate-of-arthur-e-price , 680 F.2d 1248 ( 1982 )
Taft v. Commissioner , 58 S. Ct. 891 ( 1938 )
Mount Sinai Hosp. of Greater Miami, Inc. v. Jordan , 290 So. 2d 484 ( 1974 )
Dorman, Et Vir. v. Publix-Saenger-Sparks Theatres, Inc. , 135 Fla. 284 ( 1938 )