DocketNumber： No. 3818-98
Citation Numbers： 78 T.C.M. 900, 1999 Tax Ct. Memo LEXIS 452, 1999 T.C. Memo. 396
Judges： "Chiechi, Carolyn P."
Filed Date： 12/7/1999
Status： Non-Precedential
Modified Date： 4/17/2021
Decision will be entered under Rule 155.
MEMORANDUM FINDINGS OF FACT AND OPINION
CHIECHI, JUDGE: Respondent determined a deficiency of $ 15,248 in Federal estate tax (estate tax) with respect to the estate of Constance R. Grant (the estate). The issue remaining for decision is whether the estate is entitled to deduct certain amounts claimed under
On October 1, 1991, Ms. Grant, who was residing and domiciled in Montgomery County, Maryland, executed a declaration of trust (declaration of trust) under which she placed most of her real and personal property into a revocable trust known as the "CONSTANCE R. GRANT REVOCABLE TRUST" (Trust). The declaration of trust provided in pertinent part:
2. Trust Estate. I hereby transfer, assign,
convey and quit claim unto myself, as Trustee, and unto
my successors in trust all of the property enumerated
in Schedule A hereto attached, to have and to hold such
property, and any other property which may be added to
the Trust Estate pursuant to the provisions hereof, all
of which property is hereinafter collectively referred
to as the "Trust Estate".
3. Trust and Successor Trustee. So long as I am alive and
competent, I shall serve as Trustee of the Trust Estate. In the
event of the death or resignation of the Donor [decedent] as
Trustee, or if the Donor's personal physician certifies in
writing to the Donor's children, PRESTON WALKER GRANT, JR. and
KATHRYN LYNN GRANT ADAMS, that, in his judgment, 1999 Tax Ct. Memo LEXIS 452">*454 the Donor is
physically or mentally unable to administer the Trust Estate,
then PRESTON WALKER GRANT, JR., KATHRYN LYNN GRANT ADAMS and
DONALD R. WILSON, shall serve as Successor Trustees. If the
Donor's physician subsequently certifies in writing to the
Successor Trustees that the donor has recovered and is currently
mentally and physically able to serve as Trustee, the
appointment of the Substitute Trustee shall terminate and the
Donor shall be restored as Trustee.
* * * * * * *
4. Revocation. I hereby reserve the right at any time, and
from time to time, during my lifetime, to revoke the Trust
Estate, in whole or in part, or to change, alter, modify or
amend any of the terms and provisions hereof, and to withdraw
all funds and other property, in whole or in part, without the
consent of any other person.
* * * * * * *
7. Distribution of Income and Principal During My Lifetime.
During my lifetime, I shall have the power to withdraw any part
or all of the net income and principal of the Trust. Any net
income not withdrawn shall be added to the principal.
* * * * * 1999 Tax Ct. Memo LEXIS 452">*455 * *
8. Distribution on Death. Upon my death, the "Net Assets"
(as hereinafter defined) of the Trust Estate shall be
distributed by my Successor Trustee to my children PRESTON
WALKER GRANT, JR. and KATHRYN LYNN ADAMS, in equal shares per
stirpes, whereupon this trust shall terminate.
(a) My Successor Trustees, in their sole discretion,
are authorized to distribute the Net Assets of the Trust Estate
to my children in kind or in cash, or partly in each. If they
elect to distribute wholly or partly in cash, they are
authorized, in their sole discretion, to sell so much or all of
the Net Assets of the Trust Estate as they deems [sic]
appropriate for that purpose.
In distributing any tangible personal property of the Trust
Estate to my children, I request my Successor Trustee to
distribute such property to my children equally, but so far as
practicable, in accordance with the preference of each child.
In the event of any disagreement as to the allocation of any
item of tangible personal property, the allocation shall be made
by the Successor Trustee other than PRESTON WALKER GRANT, JR.
and KATHRYN LYNN GRANT ADAMS (the "Independent 1999 Tax Ct. Memo LEXIS 452">*456 Trustee"). * * *
(b) The term "Net Assets" shall mean the gross assets
of the Trust Estate less any taxes or other expenses paid
pursuant to the provisions of Paragraph 11 hereof.
* * * * * * *
10. Powers Of Trustee. The Trustee and any Successor
Trustee hereunder shall have the fiduciary powers enumerated in
Section 15-102 of the Estates and Trusts Article, Annotated Code
of Maryland, as amended from time to time, specifically
including the right to employ appropriate assistance in the
administration of the Trust, including accountants, attorneys
and investment advisors.
In addition, the Trustee hereunder shall have the
power to invest in common trust funds and uninsured money market
funds; to invest and keep the Trust funds invested in such
stocks, common or preferred, bonds, mortgages or other property
as he/she may deem advisable or proper, without being restricted
by any manner whatsoever as to the character of any investment
by any statute, rule of law, or Court governing the investment
of trust funds. My Trustee is authorized to borrow funds and
pledge trust property without Court approval, and to 1999 Tax Ct. Memo LEXIS 452">*457 sell,
lease, or otherwise convey any property of the Trust Estate on
such terms and conditions as my Trustee may deem advisable, and
to execute such deeds, mortgages, leases or other instruments as
may be necessary or desirable to effectuate the encumbrance or
conveyance of any trust property.
* * * * * * *
12. Court Administration. It is my express intention that
the Trust hereby created shall not be administered under the
supervision of any Court. * * *
13. Maryland Law. This agreement has been executed by me in
the State of Maryland, and all questions relating to its
validity, construction and administration shall be determined in
accordance with the laws of the State of Maryland.
14. Compensation of Independent Trustee. I direct that
DONALD R. WILSON or such other Independent Trustee who serves as
Successor Trustee hereunder, shall receive a reasonable
compensation from the Trust Estate for his or her services.
On October 1, 1991, the same date on which Ms. Grant executed the declaration of trust, she executed a last will and testament (decedent's will). Decedent's will provided in pertinent part:
1999 Tax Ct. Memo LEXIS 452">*458 ITEM I
I direct my Personal Representatives, hereinafter
named, to pay the expenses of my last illness, funeral
and burial, in such amount as they may deem proper and
without regard to any limitation in the applicable
local law as to the amount of such expense.
ITEM II
All of the rest, residue and remainder of my
estate of whatsoever kind and wheresoever situate [sic]
I give, devise and bequeath absolutely in fee simple
unto my children, PRESTON WALKER GRANT, JR. and KATHRYN
LYNN GRANT ADAMS, in equal shares per stirpes.
In distributing any tangible property hereunder to
my children, such property shall be distributed
equally, but so far as practical, in accordance with
the preference of each child.
ITEM III
I grant unto my Personal Representative [sic] all
of the powers enumerated in the Estates and Trusts
Article, Title 7, Section 401, Annotated Code of Maryland
relating to powers granted to Personal Representatives.
ITEM IV
I appoint my children, PRESTON WALKER GRANT, JR.
and KATHRYN LYNN GRANT ADAMS, as Personal Representatives. * * *
On April 2, 1994, Ms. Grant, who was still a resident 1999 Tax Ct. Memo LEXIS 452">*459 and domiciliary of Maryland, died. After decedent's death, Mr. Grant, Ms. Adams, and Donald R. Wilson served as the successor trustees of the Trust.
Only $ 11,253 of decedent's gross estate passed to her children Mr. Grant and Ms. Adams outside of the Trust (non-Trust property). The non-Trust property consisted of $ 256 in cash and traveler's checks; life insurance valued at $ 1,025; $ 7,228 in a jointly owned money market mutual fund; and $ 2,744 of other miscellaneous property. The balance of decedent's gross estate, which had an aggregate value of $ 865,480, passed to her children pursuant to paragraph 8 of the declaration of trust (nonprobate property). The nonprobate property consisted of, inter alia, decedent's residence located at 13730 Deakins Lane, Germantown, Maryland (decedent's residence), stocks and bonds, five money market mutual funds, a money market bank account, a checking bank account, jewelry, and household effects and furniture.
On or about January 4, 1995, Mr. Grant and Ms. Adams, as personal representatives of the estate, filed Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return (estate tax return), which showed estate tax due of $ 60,118. 1999 Tax Ct. Memo LEXIS 452">*460 In determining that amount of estate tax due, the estate tax return claimed a credit for state death taxes of $ 23,911. The Register of Wills, Montgomery County, Maryland, had determined that Maryland inheritance tax of $ 8,663.30 was due on $ 866,330 of the decedent's nonprobate assets consisting of $ 405,000 of real property and $ 461,330 of personal property.
The estate tax return reported as part of decedent's gross estate, inter alia, the following assets: decedent's residence valued as of the date of decedent's death pursuant to an appraisal at $ 405,000; stocks, including dividends, valued at $ 263,830; five money market mutual funds with total funds, including dividends, of $ 121,603; a checking bank account with funds of $ 31,274; a money market bank account with funds of $ 17,879; and a joint money market mutual fund with funds of $ 7,228. According to Schedule G of the estate tax return, the value of the decedent's nonprobate property was $ 865,480. That return also indicated that decedent did not have any debts and that there were no mortgages or liens on any property which she owned. The estate tax return claimed deductions for (1) $ 5,481 of Schedule J expenses ("Funeral 1999 Tax Ct. Memo LEXIS 452">*461 Expenses and Expenses Incurred in Administering Property Subject to Claims"), which included $ 1,865 of attorney's fees, and (2) $ 48,102 of Schedule L expenses ("Expenses Incurred in Administering Property Not Subject to Claims") (Schedule L).
None of the expenses claimed in Schedule L was approved by a Maryland court. Those expenses consisted of: (1) $ 11,250 and $ 5,625 of executors' fees paid to Mr. Grant and Ms. Adams, respectively; 1999 Tax Ct. Memo LEXIS 452">*462 RFD 1 Box 3031, Killington VT 05751
4/11/94 Killington VT to Darnestown MD - $ 149
505 mi, $ 2.75 tolls
4/24-25/94 Darnestown MD to Killington VT
via New Haven CT to broker for
transfer of stocks - 534 mi,
$ 13.85 tolls, Motel 6 New Haven
4/24 $ 42.55 212
5/2/94 Killington VT to Darnestown MD -
520 mi, $ 2.75 tolls 154
6/5/94 Darnestown MD to Killington VT -
505 mi, $ 2.75 tolls 149
6/16/94 Killington VT to Darnestown MD -
505 mi, $ 2.75 tolls 149
7/14/94 Darnestown MD to Killington VT -
505 mi, $ 2.75 tolls 149
7/19/94 Killington VT to Darnestown MD -
525 mi, $ 4.65 tolls 157
8/8/94 Darnestown MD to Killington VT -
525 mi, $ 3.65 tolls 156
8/19/94 Killington VT to Darnestown MD -
525 mi, $ 4.65 tolls 157
9/22/94 Darnestown MD to Killington VT -
525 mi, $ 3.65 tolls 156
11/28/94 Killington VT to Darnestown MD -
525 mi, $ 4.65 tolls 157
12/11/94 Darnestown1999 Tax Ct. Memo LEXIS 452">*463 MD to Killington VT -
525 mi, $ 3.65 tolls 156
5 Travel expenses to settle estate:
Kathryn Lynn Grant Adams, personal representative
RR1 Box 6180 Plummers Ridge, Union (town of
Milton) NH 03887
4/3/94 Milton NH to Darnestown MD - 540
mi, $ 10.85 tolls, $ 5.73 food on road $ 173
4/24/94 Darnestown MD to New Haven CT to
broker for transfer of stocks -
318 mi, $ 13.85 tolls, Motel 6 New
Haven $ 42.55 149
4/25/94 New Haven CT to Darnestown MD -
318 mi, $ 8.85 tolls, $ 14.26 food 115
5/20/94 Darnestown MD to Milton NH - 540
mi, $ 14.85 tolls 171
5/28/94 Milton NH to Darnestown MD - 540
mi, $ 10.85 tolls 167
8/19/94 Darnestown MD to Milton NH - 540
mi, $ 14.85 tolls 171
8/25/94 Milton NH to Darnestown MD - 540
mi, $ 10.85 tolls 167
8/27/94 Darnestown MD to Milton NH - 540
mi, $ 14.85 tolls 171
9/1/94 Milton NH to Logan Airport, Boston
- 85 mi, $ 1.00 toll 26
Delta Airlines - Boston to Wash.1999 Tax Ct. Memo LEXIS 452">*464 DC
to Boston 60
meal at airport 4
9/5/94 meal at Washington airport 10
parking at Logan Airport 50
Logan Airport to Milton NH - 88 mi,
$ 2.00 tolls 28
9/12/94 Milton NH to Darnestown MD - 540
mi, $ 10.85 tolls 167
10/25/94 Darnestown MD to Milton NH - 540
mi, $ 14.85 tolls 171
10/28/94 Milton NH to Darnestown MD - 549
mi, $ 9.45 tolls, $ 5.16 food 174
6 Geoffrey C. Adams, RR1 Box 6180 Plummers
Ridge, Union NH 03887 - expenses of travel
from home in Milton NH with helper, both to
work on house
6/10/94 to MD - 551 mi, $ 8.85 tolls, $ 29.73
meals $ 198
6/14/94 return - 470 mi, $ 13.85 tolls 150
6/24/94 to MD - 565 mi, $ 8.85 tolls, $ 32.92
meals 206
6/27/94 return - 455 mi, $ 13.85 tolls,
$ 22.00 meals 168
local miles in MD for supplies & dumping
trash - 493 mi 143
7 Aetna Casualty Co., Hartford CT
10/21/94 Excess liability policy 1999 Tax Ct. Memo LEXIS 452">*465 premium 36
8 Banner Glass, Rockville MD
replace glass table top - 8/15 $ 97.56 98
9 Barrons, Gaithersburg MD 97
6/28/94 siding - $ 13.23
7/6/94 shutters - $ 83.90
10 Bell Atlantic/C&P Telephone 400
4/8/94 bill $ 112.39 9/8/94 bill $ 32.89
5/8/94 bill $ 58.61 10/8/94 bill $ 25.74
6/8/94 bill $ 46.63 11/8/94 bill $ 25.13
7/8/94 bill $ 41.73 12/8/94 bill $ 25.48
8/8/94 bill $ 31.82
11 Bettar Appliance, Kensington MD 80
12/2/94 oven selector switch - $ 79.80
12 Mark Canon, c/o Mr. & Mrs. Michael Canon 389
04617
6/11-15/94 labor & expenses: yard work,
window cleaning, trash hauling - 38-1/4 hr at
$ 8/hr, 11 trips to dump, misc. expenses
13 Steve Chorba, 314 Elm St., Milton, NH 03851 $ 790
6/10-13/94 labor: yard work, window
cleaning - 44-3/4 hr at $ 8/hr,
misc. expenses $ 400
6/24-27/94 labor: yard work - 35 hr at $ 8/hr,
misc. expenses $ 350
7/7/94 labor: unloading furniture, etc. in
Milton NH $ 20
8/31/94 labor: storing furniture in Milton
1999 Tax Ct. Memo LEXIS 452">*466 NH $ 20
14 Christopher's Quince Orchard Hardware,
Gaithersburg MD - various miscellaneous
supplies for lawn, garden & landscaping;
painting; tile repair & grouting; window
repairs; flagstone & concrete cleaning and
finishing; plumbing repair; nails, screws &
other misc. hardware 617
5/04/94 - $ 13.11 7/01/94 - $ 4.18 9/10/94 - $ 8.49
5/16/94 - $ 10.69 7/09/94 - $ 10.67 9/13/94 - $ 9.01
6/01/94 - $ 14.60 7/12/94 - $ 3.04 9/14/94 - $ 9.75
6/18/94 - $ 108.66 7/15/94 - $ 3.46 9/15/94 - $ 2.72
6/19/94 - $ 103.90 7/16/94 - $ 6.07 9/30/94 - $ 24.19
6/19/94 - $ 19.82 7/16/94 - $ 6.49 10/01/94 - $ 10.38
6/20/94 - $ 46.18 7/24/94 - $ 3.48 10/01/94 - $ 4.19
6/25/94 - $ 9.76 7/30/94 - $ 9.97 10/08/94 - $ 3.77
6/25/94 - $ 2.09 8/01/94 - $ 7.56 10/09/94 - $ 8.39
6/25/94 - $ 11.54 8/12/94 - $ 19.40 10/14/94 - $ 13.82
6/25/94 - $ 32.72 9/04/94 - $ 46.18 10/16/94 - $ 8.39
6/29/94 - $ 5.01 9/04/94 - $ 0.48 9/30/94 - $ 8.39
9/09/94 - $ 6.07
15 Color Tile, Gaithersburg MD 15
7/6/94 grout saw - $ 10.49
8/23/94 additional blades 1999 Tax Ct. Memo LEXIS 452">*467 $ 4.19
16 CPI Photo, Lake Forest Mall, Gaithersburg 54
MD
11/9/94 duplicates & enlargements of
property-$ 54.39
17 Crown Gasoline, Quince Orchard, 5
Gaithersburg MD
5/26/94 gas for mowing - $ 5.00
18 CVS Pharmacy, Quince Orchard, Gaithersburg $ 18
MD
8/9/94 floor protectors, shelf paper -
$ 10.45
8/11/94 floor protectors - $ 4.18
10/9/94 floor protectors - $ 3.55
19 Darnestown Office Products, Quince Orchard, 2
Gaithersburg MD 10/8/94 tape - $ 1.88
20 Darnestown Texaco, Darnestown MD 13
6/12/94 gas for mowing & trimming - $ 6.34
9/2/94 " " " - $ 7.00
21 Fisher Lumber (Leland L. Fisher, INC.), 12
Rockville MD
7/11/94 grouting supplies - $ 11.81
22 Gaithersburg Ford-Kubota Tractor Co., 9
Gaithersburg MD
9/10/94 repair parts for mower - $ 5.04
9/20/94 " " " " - $ 4.19
23 Gaithersburg Paint Center, Gaithersburg MD 31
5/22/94 exterior window & trim paint &
supplies-$ 31.40
24 Ron Gilk, Germantown MD 336
6/9/94 seal driveway - $ 336.00
25 P. Walker Grant, 1999 Tax Ct. Memo LEXIS 452">*468 Jr. reimbursement for ex- 347
penses of moving personal property and furniture
to heirs' homes in rented truck
7/6-8/94 gas $ 141.25, tolls $ 15.10,
motel $ 31.80
9/5-7/94 gas $ 140.87, tolls $ 17.80
26 Griffith-Steuart/Steuart Fuels (Div. of 590
Griffith Consumers), Baltimore MD - heating
oil
3/28/94 $ 229.70 11/29/94 $ 76.86
9/20/94 $ 101.53 12/21/94 $ 133.64
11/7/94 $ 48.36
27 Hechinger, Rockville & Gaithersburg MD $ 120
5/21/94 paint supplies - $ 1.46
6/26/94 carpentry supplies - $ 4.43
8/4/94 garden rake - $ 10.49
8/10/94 flagstone sealer - $ 17.09
8/15/94 " " - $ 17.09
10/12/94 grass seed - $ 23.08
10/14/94 " " - $ 46.16
28 Home Depot, Gaithersburg MD 377
5/15/94 painting supplies, primer - $ 28.74
5/31/94 driveway sealer - $ 29.67
6/5/94 paint & carpentry supplies - $ 43.63
6/26/94 carpentry material - $ 13.89
7/11/94 electrical devices & trim, door &
window hardware - $ 206.07
7/23/94 trim & hardware items - $ 24.47
8/30/94 marble cleaning & finish supplies - $ 20.76
9/2/94 " " " " - $ 9.81
29 Lizz Huntzberry, 1999 Tax Ct. Memo LEXIS 452">*469 Chewsville Rd., Smithburg 355
MD
5/31/94 lawn mowing & trimming - $ 195.00
8/8/94 " " " " - $ 160.00
30 Johnson's Flower & Garden Center, Quince 72
Orchard, Gaithersburg MD
7/30/94 plants & fertilizer
31 K-Mart, Kentlands Square, Gaithersburg MD 35
8/9/94 Perlite soil additive - $ 4.77
9/7/94 bath mats - $ 26.23
9/19/94 vacuum cleaner bags - $ 4.19
32 Kinko's, Gaithersburg MD 2
10/12/94 copies of property plat - $ 1.84
33 King & Sons, Burtonville MD 170
6/3/94 pump & inspect septic tank -
$ 170.00
34 Lighting Designers, Rockville MD 143
5/18/94 replacement front door & kitchen
light fixtures - $ 142.59
35 Lowe's, Kentlands Square, Gaithersburg MD $ 203
supplies for garden, masonry, plumbing,
painting
6/11/94 - $ 4.28 8/07/94 - $ 33.14 9/14/94 - $ 12.80
8/03/94 - $ 7.56 8/09/94 - $ 12.42 9/15/94 - $ 10.74
8/4/94 - $ 3.19 8/13/94 - $ 6.19 9/17/94 - $ 18.51
8/6/94 - $ 45.72 9/09/94 - $ 4.27 10/14/94 - $ 31.23
8/6/94 - $ 5.11 9/13/94 - $ 7.85
36 South 1999 Tax Ct. Memo LEXIS 452">*470 T. Lynn, 13701 Deakins Lane 200
Germantown MD 20874
5/31/94 Deakins Lane roadway maintenance - $ 100.00
11/22/94 " " " " -
$ 100.00
37 Meadows Farms, Germantown MD 272
9/3/94 topsoil - $ 271.92
38 Montgomery County, MD, Rockville MD 5,746
4/22/94 additional death certificates - $ 72.00
9/15/94 property taxes - $ 5,673.69
39 Original Custom Interiors, Herald Harbor MD 60
8/8/94 drapery alteration - $ 60.00
40 Penn Auto, Gaithersburg MD 7
5/24/94 fuses for mowing tractor - $ 1.57
8/1/94 oil filler cap for tractor - $ 5.24
41 J C Penney, Lake Forest Mall, Gaithersburg 36
MD
9/18/94 drapes and hardware - $ 36.23
42 Pepco (Potomac Electric Power Co.), 1,571
Washington DC
2/23/94-3/25/94 $ 76.72 7/22/94-8/22/94 $ 224.68
3/25/94-4/21/94 $ 63.20 8/22/94-9/20/94 $ 164.97
4/21/94-5/19/94 $ 69.26 9/20/94-10/21/94 $ 112.34
5/19/94-6/21/94 $ 356.24 10/21/94-11/18/94 $ 52.36
6/21/94-7/22/94 $ 451.52
43 Plumbing World, Gaithersburg MD 5
9/9/94 plumbing repair materials - $ 5.46
44 Polyzo's 1999 Tax Ct. Memo LEXIS 452">*471 Painting Inc., Silver Spring MD $ 4,750
7/15/94 interior & exterior painting -
$ 4,000.00
7/26/94 " " " " -
$ 750.00
45 Potomac Nursery, Potomac MD 196
9/4/94 plants - $ 180.74
9/13/94 grass seed - $ 15.74
46 Potomac Valley Bank, branch at Potomac MD 45
4/11/94 safe deposit box rental - $ 45.00
47 Pro-Graf 1-HR Photo, Gaithersburg MD 58
11/10/94 property photos developing &
printing-
$ 24.07
11/19/94 " " " " -
$ 33.52
48 Rent-A-Wreck, Rockville MD 619
7/8/94 truck rental, move effects to NH &
VT-
$ 318.33
9/7/94 " " " " " " -
$ 300.93
49 Safeway, Quince Orchard, Gaithersburg MD 32
7/4/94 packing materials - $ 13.61
8/10/94 plants - $ 6.28
11/5/94 light bulbs - $ 12.14
50 Sears, Roebuck & Co., Lake Forest Mall, 42
Gaithersburg MD
7/28/94 drapery traverse rod - $ 41.99
51 Southern States Co-op Inc., Gaithersburg MD 4
11/25/94 fence repair material 1999 Tax Ct. Memo LEXIS 452">*472 - $ 3.67
52 Staples, Rockville MD 4
10/9/94 masking tape - $ 4.47
53 Strosniders Hardware, Potomac MD $ 108
6/11/94 window & sash cleaning materials -
$ 65.08
6/12/94 broken window repair materials -
$ 36.04
6/13/94 grass trimmer line - $ 7.33
54 Timberidge Farm, Mt. Airy MD 5
11/25/94 fence repair lumber - $ 5.00
55 Universal Floors Inc., Gaithersburg MD 3,505
7/26/94 refinish hardwood floors -
$ 1,405.00
8/3/94 " " " -
$ 2,100.00
56 USPS 46
4/8, 5/5 & 9/2/94 stamps - $ 40.60
5/28/94 postage - $ 2.75
10/7 & 10/19/94 postage - $ 1.73
11/10/94 postage
57 several local high school kids, full names 142
& addresses unknown, for misc. labor
8/13/94 move furniture-2 for 3 hrs at
$ 7/hr-$ 42.00
9/4/94 yard work, windows-2 for day at $ 50-
$ 100.00
58 P. Walker Grant, Jr. - reimbursement for
local mileage incurred in settling estate
2101 mi at $ 0.29/mi PAID 609
59 Kathryn Lynn Grant Adams - reimbursement
for local mileage incurred 1999 Tax Ct. Memo LEXIS 452">*473 in settling estate
704 mi at $ 0.29/mi PAID 204
60 Move trailer of furniture to temporary
storage in Milton NH after sale of house -
540 miles, estimate quoted at $ 2/mi ESTIMATED 1,080
After decedent's death, the Trust filed its initial Form 1041, U.S. Income Tax Return for Estates and Trusts (Trust income tax return), for the period April 2, 1994 (the date of decedent's death) through December 31, 1994. The Trust income tax return showed, inter alia, in Schedule B ("Income Distribution Deduction") distributable net income totaling $ 3,086, which consisted of $ 3,006 of adjusted total income and $ 80 of adjusted tax-exempt interest, and "Other amounts paid, credited, or otherwise required to be distributed" of $ 314,968.
In December 1996, approximately two years and eight months after decedent's death, decedent's residence was sold for approximately 1999 Tax Ct. Memo LEXIS 452">*474 $ 440,000.
Respondent issued a notice of deficiency (notice) with respect to decedent's estate. In the notice, respondent disal- lowed executors' fees of $ 16,875 and other expenses totaling $ 29,502, and allowed accountant's fees of $ 840 and appraisal fees totaling $ 885, that were claimed in Schedule L. In addition, respondent allowed as Schedule L expenses $ 2,203 of trustees' fees that were not claimed in Schedule L and $ 1,865 of attorney's fees that were claimed in Schedule J of the estate tax return.
OPINION
The estate bears the burden of demonstrating error in respondent's determinations and in establishing its entitlement to deduct under
The estate contends that it is entitled to deduct under
In determining the taxable estate,
Usually, these expenses are incurred in connection with
the administration of a trust established by a decedent
during his lifetime. * * *
(b) These expenses may be allowed as deductions
only to the extent that they would be allowed as deductions
under the first category [of deductions set forth
in section 20.2053-1(a)(1), Estate Tax Regs.] if the
property were subject to claims. See
only expenses in administering property not subject to
claims which are allowed as deductions are those occasioned by
the decedent's 1999 Tax Ct. Memo LEXIS 452">*476 death and incurred in settling the decedent's
interest in the property or vesting good title to the property
in the beneficiaries. Expenses not coming within the
description in the preceding sentence but incurred on behalf of
the transferees are not deductible.
(c) The principles set forth in paragraphs (b),
(c), and (d) of
of executor's commissions, attorney's fees, and miscellaneous
administration expenses of the first category [of deductions set
forth in section 20.2053-1(a)(1), Estate Tax Regs.]) are applied
in determining the extent to which trustee's commissions,
attorney's and accountant's fees, and miscellaneous
administration expenses are allowed in connection with the
administration of property not subject to claims.
The only dispute between the parties under
"administration expenses" of the first category * * *
[under
as are actually and necessarily incurred in the administration
of the decedent's estate; that is, in the collection of assets,
payment of debts, and distribution of property to persons
entitled to it. * * * Expenditures not essential to the proper
settlement of the estate, but incurred for the individual
benefit of the heirs, legatees, or devisees, may not be taken as
deductions. Administration expenses include (1) executor's
commissions; (2) attorney's fees; and (3) miscellaneous
expenses. * * *
We turn first to the executors' fees totaling $ 16,875 which the estate contends are allowable as deductions under
The executor * * * may deduct his commissions in such
an amount as has actually been paid * * *. If the
amount of the commissions has not been fixed by decree
of the proper court, the deduction will be allowed
* * * to the extent that all three of the following
conditions are satisfied:
(i) The district director is reasonably satisfied
that the commissions claimed will be paid;
(ii) The amount claimed as a deduction is within
the amount allowable by the laws of the jurisdiction in
which the estate 1999 Tax Ct. Memo LEXIS 452">*479 is being administered; and
(iii) It is in accordance with the usually accepted
practice in the jurisdiction to allow such an amount in estates
of similar size and character.
In support of its position that it is entitled to deduct under
(b) Computation of compensation. -- Unless the will
provides a larger measure of compensation, upon petition filed
in reasonable detail by the personal representative * * * the
court may allow the commissions it considers appropriate. The
commissions may not exceed those computed in accordance with the
table in this subsection.
If the property subject to The commission may
administration is: not exceed:
Not over $ 20,000 9%
Over $ 20,000 $ 1,800 plus 3.6% of the
excess over $ 20,000
According to the estate, the maximum compensation, determined pursuant to
Total 32,237
The estate reasons that, because it claimed only $ 16,875 as executors' fees for its personal representatives, and not the maximum compensation of $ 32,237 that it believes it could have claimed under
We reject the estate's position that the personal representatives of decedent's estate would have been entitled to maximum compensation under
We also reject the estate's position that "Meeting the tests for allowability by local law, it [the amount of executors' fees claimed by the estate] is also allowable by federal law." In determining the deductibility of administration expenses under
The estate contends that none of the time spent by Mr. Grant and Ms. Adams, which was used to determine the amount of executors' fees claimed in Schedule L, was for management of the Trust and that all of that time was spent to settle the estate. On the record before us, we disagree. Nothing in the record supports that contention. To the contrary, the record shows that the value of decedent's nonprobate property, as reported in Schedule G of the estate tax return, was $ 865,480, whereas the value of the non-Trust property was only $ 11,253. The record also establishes that virtually all of the miscellaneous administration expenses were incurred with respect to decedent's nonprobate property. Based on the record presented, we believe that most of the time spent by Mr. 1999 Tax Ct. Memo LEXIS 452">*485 Grant and Ms. Adams must have related to that nonprobate property.
On the record before us, we find that the estate has failed to show that it is entitled to deduct as executors' fees under
The estate argues that, assuming arguendo that some of the time spent by Mr. Grant and Ms. Adams were considered to have been spent by them as successor trustees of the Trust, the estate would be entitled under
(4) One tenth of one percent upon any excess.
* * *
* * * * * * *
(e) Final distribution. -- Upon the final distribution of
any trust estate, or portion of it, an allowance is payable
commensurate with the labor and responsibility involved in
making the distribution, including the making of any division,
the ascertainment of the parties entitled, the ascertainment and
payment of taxes, and any necessary transfer of assets. The
allowance is subject to revision or determination by any circuit
court having jurisdiction. In the absence of special
circumstances the allowance shall be equal to one half of one
percent upon the fair value of the corpus distributed. [Md.
Code Ann., Est. & Trusts,
Respondent 1999 Tax Ct. Memo LEXIS 452">*489 concedes that the estate is entitled under
We turn now to the $ 23,828 of miscellaneous administration expenses that the estate claimed in Schedule L and that remain in dispute. 1999 Tax Ct. Memo LEXIS 452">*491 26, and 42: telephone bills with closing dates from April 8, 1994, through December 8, 1994; home heating fuel bills with closing dates from March 28, 1994, through December 21, 1994; and electric bills with closing dates from February 23, 1994, through November 18, 1994; 1999 Tax Ct. Memo LEXIS 452">*492 hardwood floors; (6) items 13, 25, 48, 49, 57, and 60: various expenses for moving furniture and other household effects and personal property of decedent from Maryland to New Hampshire and temporary storage of furniture in New Hampshire after the sale of decedent's residence in December 1996; and (7) items 7, 16, 31, 32, 38, 46, 47, and 56: various miscellaneous expenses, including expenses for "Excess liability policy premium", "duplicates & enlargements of property"; bath mats and vacuum cleaner bags; copies of property plat; additional death certificates; safe deposit rental; developing and printing property photos; and postage.
It is significant that, except for the descriptions of the $ 23,828 of miscellaneous administration expenses at issue which are set forth in Schedule L of the estate tax return, the record is devoid of any evidence elaborating on those claimed expenses. In the briefs that the estate filed in this case, the estate makes various factual allegations about those expenses. Many 1999 Tax Ct. Memo LEXIS 452">*493 of those allegations are not supported by the record in this case and consequently have been disregarded by the Court. See Rule 143(b).
(d) Miscellaneous administration expenses.
(1) Miscellaneous administration expenses include such
expenses as court costs, surrogates' fees, accountants'
fees, appraisers' fees, clerk hire, etc. Expenses
necessarily incurred in preserving and distributing the
estate are deductible, including the cost of storing or
maintaining property of the estate, if it is impossible
to effect immediate distribution to the beneficiaries.
Expenses for preserving and caring for the property may
not include outlays for additions or improvements; nor
will such expenses be allowed for a longer period than
the executor is reasonably required to retain the
property.
(2) Expenses for selling property of the estate
are deductible if the sale is necessary in order to pay
the decedent's debts, expenses of administration, or
taxes, to preserve the estate, or to effect distribution. The
phrase "expenses for 1999 Tax Ct. Memo LEXIS 452">*494 selling property" includes brokerage fees
and other expenses attending the sale, such as the fees of an
auctioneer if it is reasonably necessary to employ one. * * *
On the record before us, we find that the estate has failed to establish that the expenses claimed in Schedule L for the travel of Mr. Grant and Ms. Adams from Vermont and New Hampshire, respectively, to Maryland were necessarily incurred in preserving and distributing the estate's assets. In this connection, the Attorney General of Maryland has determined upon at least two occasions that incidental expenses incurred by nonresident executors in the course of the ordinary business of administering an estate in Maryland, including long distance telephone calls, hotel expenses, and airplane tickets, will not be considered expenses necessary to protect the estate if incurred only because the executors are nonresidents. See
On the record before us, we further find that the estate 1999 Tax Ct. Memo LEXIS 452">*496 has failed to establish that the expenses claimed in Schedule L to reimburse Mr. Grant and Ms. Adams for a total of 2,805 miles of "local mileage incurred in settling estate" were necessarily incurred in preserving and distributing the estate's assets. The record is devoid of any evidence explaining what Mr. Grant and Ms. Adams did when they traveled over 2,800 miles in Maryland.
The estate claims that virtually all of the other expenses at issue were incurred (1) "to maintain, or prevent some degradation in, the condition of" decedent's residence; (2) "for repairs to enhance the salability of" decedent's residence; and (3) "for selling" decedent's residence.
On the record before us, we find that the estate had sufficient cash and liquid cash type assets to pay not only taxes but also all of its debts and expenses without selling decedent's residence. We therefore reject the estate's position that the sale of decedent's residence satisfies
Nonetheless, we believe on the record presented that it was not possible to distribute all of decedent's property, including decedent's residence and the household and other personal effects located at that residence, immediately after decedent's death. Consequently, we find that certain expenses incurred in maintaining that residence, including certain utility expenses (i.e., telephone, home heating fuel, and electricity provided at decedent's residence
Based on our examination of the entire record in this case, and bearing in mind that the estate has the burden of proving its entitlement under 1. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect on the date of the death of Constance R. Grant (decedent or Ms. Grant). All Rule references are to the Tax Court Rules of Practice and Procedure.↩ 2. Kathryn Lynn Grant Adams (Ms. Adams), the only other child of decedent, also served as a personal representative of the estate. The record does not disclose where Ms. Adams resided at the time the petition was filed in this case. 3. The executors' fees were calculated by multiplying an hourly rate of $ 75 times (1) 150 hours in the case of Mr. Grant and (2) 75 hours in the case of Ms. Adams.↩ 4. The estate rounded the miscellaneous administration expenses claimed in Schedule L to the nearest dollar. For convenience, we shall do the same.↩ 5. On brief, the estate concedes that it is not entitled to deduct $ 5,674 of real estate taxes that were claimed as part of item 38 in Schedule L of the estate tax return because those taxes accrued before the date of decedent's death. 6. The estate argues that the personal representatives of decedent's estate also were entitled to a commission on the proceeds of the sale of decedent's residence of up to 9% of those proceeds. In support of that argument, the estate apparently relies on 7. The estate arrived at $ 845,480 by deducting $ 20,000 from $ 865,480, i.e., the value of the nonprobate property reported in Schedule G of the estate tax return. 8. The value of decedent's non-Trust property as of the date of decedent's death was $ 11,253. Included within that non-Trust property was a money market mutual fund account with a balance of $ 7,228, which decedent and Ms. Adams jointly owned on the date of decedent's death. The parties do not address whether under Maryland law that jointly owned money market mutual fund account would be considered property subject to administration. We assume for purposes of this Opinion that the jointly owned money market mutual fund account was property subject to administration in Maryland, an assumption which favors the estate in calculating the maximum compensation payable to a personal representative under 9. Respondent concedes that the estate is entitled to deduct executors' fees determined under 10. We note that although the estate stated in Schedule L that the executors' fees claimed were calculated on the basis of 150 hours spent by Mr. Grant at $ 75 an hour and 75 hours spent by Ms. Adams at $ 75 an hour, the record contains no explanation as to how the $ 75 hourly rate was determined. In addition, it is noteworthy that Mr. Grant and Ms. Adams, the personal representatives of the estate and two of the three successor trustees of the Trust, hired an attorney, an accountant, and appraisers who assisted them in administering decedent's estate. The fees for those individuals employed by Mr. Grant and Ms. Adams that were claimed as deductions in the estate tax return were allowed as administration expenses by respondent. Finally, we note that the estate makes no claim that the personal representatives of decedent's probate estate are entitled to extraordinary executors' fees under Maryland law. The record contains no order of a Maryland court allowing any such extraordinary fees, nor is there any evidence in the record showing that an application for such an order was ever made to a Maryland court. Moreover, the summary prepared by the estate's personal representatives that is part of the record and that sets forth the nature of the various tasks performed by them and the amount of time spent on such tasks does not establish that any such tasks were extraordinary. To the contrary, the tasks listed in that summary establish that the work performed by the estate's personal representatives constituted the ordinary work of administering decedent's probate estate. To illustrate, the tasks listed on the summary prepared by the estate's personal representatives include the following: Find, identify, and gather information, papers, and effects; obtain death certificates; meet with lawyer and arrange appraisal of personal effects; meet with accountant; collect and organize papers including checks, bills, dividend records; effect stock transfers; prepare small estate/personal representative papers; start inventory; arrange for house appraisal; miscellaneous administration; miscellaneous accounting; appraisal for jewelry and silver; preparing for estate tax return. On the record before us, we find that the estate has failed to show that it is entitled to any extraordinary executors' fees under Maryland law. 11. We note that the declaration of trust provided that the independent successor trustee of the Trust, Donald R. Wilson, or such other independent successor trustee, was to receive "a reasonable compensation from the Trust Estate for his or her services." The declaration of trust did not provide for any compensation to be paid to Mr. Grant and Ms. Adams, who were to serve with Donald R. Wilson as successor trustees of the Trust.↩ 12. Respondent apparently calculated the amount of trustees' commissions allowable under 13. See supra note 5.↩ 14. Respondent concedes that the estate is allowed to deduct $ 229 for home heating fuel and $ 140 for electricity, which amounts were incurred prior to decedent's death.↩ 15. Although since those opinions of the Attorney General of Maryland were issued there have been some changes in It is our opinion that the enactment of the present provisions of the Estates and Trusts Article was not intended to substantially change the law * * * and that the same result as reached in the above opinions [ and prevail. Nor did the changes to 16. Although not altogether clear from the record, it appears that, except for decedent's residence, most of decedent's nonprobate property was distributed by the end of 1994.↩ 17. On brief, the estate indicates that the expenses "for repairs to enhance the salability of" decedent's residence are set forth in Schedule L as items 6, 8, 9, 12, 13 (to the extent of $ 750), 14, 15, 19, 21, 23, 24, 27, 28, 30, 31, 34, 35, 37, 39, 41, 44, 45, 49 (to the extent of $ 18), 50, 52, 55, and 57. 18. On brief, the estate indicates that the expenses "for selling" decedent's residence are set forth in Schedule L as items 16, 32, 33, and 47. ↩ 19. Schedule L shows electric bills at decedent's residence for the period May 19, 1994, through Sept. 20, 1994, totaling $ 1,197.41. For example, the electric bill for the period May 19, 1994, through June 21, 1994, was $ 356.24, and the electric bill for the period June 21, 1994, through July 22, 1994, was $ 451.52. Although the periods to which those bills relate covered late spring and early summer 1994, there is no explanation in the record why those bills were so high. One possible explanation is that someone was living at the house during those periods. Without further explanation as to why it was necessary to incur such high electric bills during the period May 19, 1994, through Sept. 20, 1994, the Court will allow only $ 100 per month for each of the four months of electric bills covered by that period, or a total of $ 400. The Court will allow in full the amount of the remaining electric bills that were not conceded by respondent.↩ 20. The expenses allowed by the Court consist of all or certain of the expenses claimed in Schedule L of the estate tax return as items 7, 10, 11, 13, 17, 18, 20, 22, 25, 26, 29, 38, 40, 42, 43, 46, 48, 49, 51, 53, 54, 56, and 57.↩Footnotes