DocketNumber： Docket No. 7497-79.
Filed Date： 4/9/1981
Status： Non-Precedential
Modified Date： 11/21/2020
*573 MEMORANDUM FINDINGS OF FACT AND OPINION
TANNENWALD,
Some time prior to 1960, Mrs. Levin inherited securities worth approximately $ 85,000. Mrs. Levin opened a custodial account (M62725-25) in her maiden name with the Manufacturers Hanover Trust Company, New York (the New York account), into which she deposited these securities. Mrs. Levin never changed the name of the New York account to reflect her subsequent marriage, nor did she authorize the Manufacturers Hanovedr Trust Company to release securities to Mr. Levin without her permission.
Mr. and Mrs. Levin opened a joint account after their marriage with Shearson, Hammil & Co., Boston (the Boston account). This was a highly leveraged account used for securities speculation by the Levins. If they desired to trade a security kept in the New York account, Mrs. Levin would instruct the Manufacturers Hanover Trust Company to transfer it to the Boston account; if they desired to remove a security from that account, it would be transferred to the New*575 York account. FOURTH: I give, devise and bequeath to my Trustee hereafter named, IN TRUST NEVERTHELESS, all of the property then held by the Manufacturers Hanover Trust Company * * * in custodial account M-62725 for the uses and purposes provided in Article SIXTH hereof. * * *
A. During the lifetimes of my husband, IRVING M. LEVIN, and my mother, EDNA G. BOARDMAN, my Trustee shall pay * * * such amounts of principal and such amounts of income as my Trustee shall, in his sole discretion, deem necessary to provide for their respective care, comfort, support and maintenance, and to defray the cost of medical emergency.
B. After the death of my husband, and thereafter until her death, in addition to the distribution set forth in paragraph A of this Article SIXTH, my Trustee shall pay to or apply for the benefit of my mother-in-law CELIA LEVIN * * * such amounts * * * as my Trustee shall * * * deem necessary * * *.
C. * * *
D. Upon the death of the survivor of the said EDNA G. BOARDMAN, whether or not the said CELIA LEVIN be then living, I*577 direct my Trustee to pay over my then remaining Estate to my husband, IRVING M. LEVIN, free and discharged of this Trust if he shall be then living * * * and if he shall not be then living, upon the death of the survivor of the said EDNA G. BOARDMAN and CELIA LEVIN, I direct my Trustee to [distribute the remaining estate to seven specified persons].
Mr. Levin also executed a will on February 18, 1972. Both wills were drafted by the same lawyer, and they contained numerous similarities. Mr. Levin's will, however, did not refer to the New York account. The pertinent provisions of his will are as follows:
A. My trustee shall pay to or apply for the benefit of my mother-in-law, EDNA G. BOARDMAN * * * such amounts of principal and such amounts of income as my Trustee shall * * * deem necessary * * *.
B. My Trustee shall pay to or apply for the benefit of my mother, CELIA LEVIN * * * such amounts of principal and such amounts of income as my Trustee shall * * * deem necessary * * *.
C. * * *
D. Upon the death of the survivor of the said EDNA G. BOARDMAN and CELIA LEVIN, I direct my Trustee to [distribute the remaining estate to seven specified persons].
Both Mr. and Mrs. Levin intended that their testamentary disposition provide security for their mothers and one another. Each red his/her will before signing it. The will and codicil of Mrs. Levin were filed with the Massachusetts*579 Probate Court, and Mr. Levin has not sought to challenge, modify, or reform it.
On the Levins' joint Fededral income tax return for the year 1975, the securities held in the New York account are indicated as belonging solely to Mrs. Levin, and the estate tax return reflects the same ownership.
OPINION
The first issue is the extent to which the bequests to Mr. Levin under Mrs. Levin's will and codicil (the will) qualify for the marital deduction provided by section 2056. Petitioner argues that Article SIXTH of Mrs. Levin's will, which provides for a trust, did not become operative because it is conditioned upon Mr. Levin having predeceased Mrs. Levin (an event which did not occur), that the trust of the New York account provided for in Article FOURTH was subject to the same inoperative condition, and that consequently the New York account passed to Mr. Levin as part of the rest, residue, and remainder left to him outright by virtue of Article FIFTH and thereby qualifies for the marital deduction. Petitioner bases his argument on the contention that the survivorship provision in Article SIXTH creates an inconsistency and therefore an ambiguity with respect to the New York account*580 which is resolved by Mr. Levin's testimony (admitted over respondent's objection) to the effect that Mrs. Levin intended that the New York account pass outright to Mr. Levin. Respondent recognizes the fact that Article FIFTH provides for an outright bequest to Mr. Levin of the rest, residue, and remainder of Mrs. Levin's estate but argues that, since Article SECOND of Mrs. Levin's will provides that all estate and inheritance taxes are to be paid out of the residuary estate (see note 3
The will of Mr. Levin reinforces our view. This will was drafted by the same lawyer who drafted Mrs. Levin's will, and at the same time. The two wills were executed simultaneously, and plainly reflect a jointly conceived plan of disposition. Yet, the will of Mr. Levin has no difficulty in saying that a trust should only arise if the testator survives his spouse, and it correctly appoints a trustee other than one assumed by the creation of the trust to be deceased. In short, if Mrs. Levin had desired to give the New York account outright to her husband if he survived her, and to put it in trust only if he did not, the attorney who drafted her will knew what to write and presumably would have done so.
Mrs. Levin's will refers to the New York account, while Mr. Levin's does not. More importantly, it is the securities in this account, securities brought into the marriage*583 and retained in Mrs. Levin's maiden name, which are unconditionally placed in trust. Given the joint concern of Mr. and Mrs. Levin to provide for their mothers and the substantial similarity of the wills, we think that Mrs. Levin intended that her interest
Mr. Levin's testimony was patently self-serving and totally uncorroborated. We accept the fact that Mrs. Levin desired that her husband, mother, and mother-in-law should be provided for and that Mr. Levin should have substantial control over the assets in her estate, but this does not resolve the issue: both an outright gift and a gift in trust can adequately provide for loved ones and retain flexibility.
The conclusion that the New York account was subject to a trust rather than passing outright to Mr. Levin causes that account not to qualify for the marital deduction. The provisions governing the operations of the trust set forth in Article SIXTH of Mrs. Levin's will clearly gave Mr. Levin only a disqualifying terminable interest under section 2056(b) and, indeed, petitioner does not contend otherwise. To be sure, Mr. Levin's life interest was coupled with a power
The second issue is the extent of Mrs. Levin's interest in the New York account. Petitioner argues that Mrs. Levin conveyed a half interest in the account to him, that as a consequence they were were partners as to that account, and that therefore Mr. Levin possessed and still possesses a one-half interest in the account.
Whether Mrs. Levin conveyed a half interest in the New York account to Mr. Levin is a question of fact, and the burden of proof is upon the*587 petitioner.
That securities were transferred from the New York account to the Boston account offers petitioner little sustenance. No evidence was presented which rebuts the natural inference from the facts of record that securities were only transferred out of the New York account with the understanding that other securities would be transferred in, and no evidence was produced showing whether the transfers between the two accounts produced a net gain or loss to the New York account. As far as this record reveals, securities from the New York account were only transferred to the Boston account to facilitate sale and the sale proceeds were usually, if not always, reinvested in securities then sent to the New York account.Moreover, that the New York account might have enriched at the expense*589 of the joint Boston account (had that been established to be true) would only show that gifts might have been made by Mr. Levin to Mrs. Levin, an explanation which does not help Mr. Levin's cause. Even the testimony of Mr. Levin, an interested party the weight of whose testimony is questionable because of its patently self-serving nature, sheds little light on this area. We must conclude that petitioner has wholly failed to prove that the investment conduct of the Levins operated as a tacit conveyance to Mr. Levin of any part of Mrs. Levin's interest in the New York account.
To be sure, the Levins treated themselves as equals in a marriage partnership, but that does not imply that they became joint owners of all their property. Massachusetts law specifically provides that property brought into a marriage by one spouse remains the separate property of that spouse. Ann. Laws of Mass. ch. 209, sec. 1 (Michie Law Co-op 1969). Husband and wife can convey property interests between themselves as validly as can strangers, Ann. Laws of Mass.,
1. All section references are to the Internal Revenue Code of 1954, as amended and in effect at the time of the decedent's death.↩
2. In fact, the transfers took a more circuitous route through a third account in Boston held in Mrs. Levin's maiden name. For simplicity, we will disregard this intermediate account.↩
3. Article SECOND provides that all estate, succession, legacy, or inheritance taxes are to be paid out of the residuary estate and Article THIRD bequeaths to Mr. Levin all of Mrs. Levin's tangible personal property not otherwise specifically bequeathed.↩
4. Respondent concedes that any property transferred by virtue of Article THIRD of the will, see note 3
5. We note that the account is specifically referred to in Article FOURTH by its account number. ↩
6. deed, the appointment of Mr. Levin as trustee reinforces the conclusion that Article FOURTH intended to have independent operative effect.↩
7. As to Mrs. Levin's interest in that account, see pp. 12-15,
8. Any interpretation of a will which we may be called upon to make is a matter of state law.
9. Petitioner requested on brief that we hold against respondent as to any increased deficiency. No increase in deficiency was ever asserted by respondent. See generally section 6211;