Estate of Rand v. Commissioner

Estate of Albert Rand, Also Known as Albert E. Rand, Morris Fink, Kalman Rand, Henry Rozen and Richard Freed, by Its Administratrix, Bessie Rand, Petitioner, v. Commissioner of Internal Revenue, Respondent Estate of Rand v. Commissioner Docket No. 58396 United States Tax Court 28 T.C. 1002; 1957 U.S. Tax Ct. LEXIS 114; August 21, 1957, Filed *114 Decision will be entered under Rule 50. Held, assets found in possession of decedent at time of death were proceeds of business owned solely by decedent's wife, were her property, and were not includible in decedent's gross estate. Benjamin L. Lasky, Esq., for the petitioner. A. Jesse Duke, Jr., Esq., for the respondent. Van Fossan, Judge. VAN FOSSAN *1002 On April 19, 1955, the respondent determined a deficiency of $ 10,483.38 in estate tax for the Estate of Albert Rand, also known as Albert E. Rand, Morris Fink, Kalman Rand, Henry Rozen, and Richard Freed. *1003 The question presented is whether assets consisting of real estate, cash, stocks and bonds, and other property, totaling $ 204,148.69, were properly included in the gross estate of Albert Rand. FINDINGS OF FACT. Bessie Rand (hereinafter sometimes referred to as Bessie) and decedent, Albert Rand (hereinafter sometimes referred to as Albert), were married August 30, 1920. Following their marriage Bessie worked for 1 year and then, with her own funds, purchased a stationery store. Albert, afflicted with a nervous condition, sometimes worked 2 or 3 days a week as a chauffeur at weddings and funerals. *115 Bessie operated the store about a year and then ill health, coupled with Albert's inability to lend substantial assistance, forced her to sell it. After the sale of the store Albert and Bessie were parted for 6 years. During that time Bessie lived with her mother and sister. In the winter she worked in a factory and for two summers she operated concessions on Coney Island. Albert made no contribution to her support during their separation and had no money of his own at the time of their reunion in 1929. After their reunion Albert again worked intermittently as a chauffeur. Bessie used the money he brought home for their household expenses, supplementing it with her own. She was never able to save any part of the money which he gave her. In 1933 Bessie obtained a liquor license in her own name and, with her own funds, built a liquor store in Brooklyn. A pregnancy forced her to sell the store before it was completed. On March 5, 1936, Bessie purchased a liquor store (hereinafter sometimes called Rand Liquor Store) at 1029 Bedford Avenue, Brooklyn, New York, and has at all times since been the sole and absolute owner of the business and has to date held continuous licenses from*116 the State liquor authority of the State of New York. In the period between 1936 and Albert's death, this business was the chief source of Bessie's income. She supported her four children, paid her husband's medical bills, and took care of all the household expenses. From the time Bessie purchased the Rand Liquor Store in 1936 until his death in 1950, Albert did not work regularly, was not engaged in business, and had no source of income. Bessie claimed Albert as an exemption for income tax purposes for each year she was engaged in business at 1029 Bedford Avenue, up to and including the fiscal year ending February 28, 1951. During this period Albert suffered from a heart ailment and, possibly, hypertension. He relieved the clerk at the store at lunchtime and tended the store during the dinner hour so that Bessie might return home and care for her children. He also made the bank deposits and handled the finances. *1004 Albert deposited money in several bank accounts and in safe-deposit boxes under his own or assumed names. He also opened an account with Orvis Brothers & Company, stockbrokers. He consulted Bessie when he made transactions in this account. One check for*117 $ 710.52, written in favor of Orvis Brothers, dated July 31, 1947, was signed by Albert Rand as attorney for Bessie Rand. This power of attorney was created on July 28, 1947, so that Albert could care for the store during an illness incurred by Bessie. Bessie did not ask Albert for an exact accounting of the funds he held. When she needed money she would go to the bank with him and he would get it for her. Title to a residence at 1970 Ocean Avenue, Brooklyn, New York, was recorded in Albert's name. Bessie, with her own funds, paid the consideration for the purchase price and made the monthly mortgage payments from the time of purchase. She also paid taxes, insurance, heating, and expenses for general upkeep. Bessie never paid any rent to anyone for the residence. In 1945 property at 1029 Bedford Avenue was acquired in Albert's name. Bessie paid the consideration for the property with 3 checks, dated April 27, June 15, and July 16, 1945, totaling $ 3,500. She also paid the taxes, insurance, and all other expenses on the property. She paid no rent for the property after it was acquired in her husband's name in 1945. During 1943 and 1944 Bessie wrote 11 checks totaling $ 6,600, *118 payable to the Treasurer of the United States. These checks were all printed with the name of the Rand Liquor Store and all were signed by Bessie Rand. The checks represented the consideration for various Government bonds she purchased for her children. During her married life Bessie made no gift or promise of gift of property or cash to her husband. Albert Rand died September 28, 1950. He was survived by Bessie Rand and four children. Bessie Rand was appointed administratrix of his estate on March 8, 1951. On April 5, 1951, an estate tax preliminary notice was filed with the collector of internal revenue for the first district of Brooklyn, New York, stating in part as follows: "This notice is given without prejudice to the claim of the undersigned (Bessie Rand) to all of the assets listed below as property belonging to the undersigned." On April 28, 1952, an estate tax return was filed with the director of internal revenue, first district of Brooklyn, New York. On April 19, 1955, the Commissioner of Internal Revenue addressed a notice of deficiency to the Estate of Albert Rand, also known as Albert E. Rand, Morris Fink, Kalman Rand, Henry Rozen, and Richard Freed, Mrs. Bessie*119 Rand, Administratrix, setting out a deficiency of $ 10,483.38. In the statement attached to the notice of *1005 deficiency the Commissioner included the following assets in the gross estate of Albert Rand: Real estate $ 26,000.00 Stocks and bonds 8,338.94 Mortgages, notes, and cash 125,657.11 Insurance 14,092.39 Jointly owned property 28,876.25 Other miscellaneous property 1,184.00 Total 204,148.69 OPINION. The question presented is whether the respondent correctly included certain assets, consisting of real estate, cash, stocks and bonds, and other property, totaling $ 204,148.69, in the gross estate of Albert Rand. There is no question raised as to the value. Bessie Rand, the widow of Albert Rand and administratrix of his estate, contends that the accumulation of these assets resulted solely from her efforts and that, in fact, they belonged to her and should not be included in his gross estate. We agree with this contention. The evidence consists primarily of the uncontradicted testimony of Bessie Rand, corroborated by various exhibits. Her testimony can be summarized as follows: Ill health plagued Albert Rand for many years, limiting his activities. *120 Following Albert and Bessie's marriage in 1920 he worked only part time as a chauffeur. For 6 years during a separation from Bessie he contributed nothing to her support and at the time of their reunion in 1929 he had no money of his own. Prior to 1936 Bessie entered into two business ventures, both of which she had to sell because illness or pregnancy, coupled with Albert's inability to give substantial assistance, rendered her incapable of tending them. On March 5, 1936, Bessie purchased a liquor store at 1029 Bedford Avenue, Brooklyn, New York, and has since been its sole and absolute owner. From 1936 until Albert's death the liquor store was Bessie's chief source of income. She supported their four children, paid Albert's medical bills, and took care of all household expenses. From the time Bessie purchased the liquor store until his death in 1950 Albert neither worked regularly nor had any source of income. He tended the store at mealtimes and made up the bank deposits. To compensate for his feeling of inadequacy and lack of security, Bessie allowed him to handle the store finances. Albert deposited money in several bank accounts and in safe-deposit boxes maintained under*121 his own or assumed names. He also had an account with Orvis Brothers & Company, stockbrokers. Bessie never demanded *1006 an exact accounting of the funds Albert had. When she needed money she would go with him to the bank and he would get it for her. Albert also consulted Bessie before making transactions in the stock account. Title to two parcels of real estate, one at 1970 Ocean Avenue and the other at 1029 Bedford Avenue, was recorded in Albert's name. However, the purchase price and the expenses attendant to ownership and maintenance of the two properties were all paid by Bessie. Other evidence tends to support Bessie's testimony. Three canceled checks dated April 27, June 15, and July 16, 1945, total to the figure attested by her to be the purchase price of the real property at 1029 Bedford Avenue. Eleven canceled checks written in favor of the Treasurer of the United States, stamped with the name of the Rand Liquor Store and signed by Bessie Rand, were stated by her to represent the consideration paid for various Government bonds purchased for her children. Two medical statements, one in 1935 and the other in 1950, indicate that Albert was in poor health. The *122 stipulation of facts sets forth Bessie Rand as the sole owner of the Rand Liquor Store since March 5, 1936. On July 28, 1947, a power of attorney was executed, enabling Albert to carry on the affairs of the store during an illness suffered by Bessie. This action indicates that Albert was not ordinarily regarded as having authority to transact the business of the store and that special steps had to be undertaken to empower him to do so. A check written to Orvis Brothers, stockbrokers, and signed by Albert as attorney for Bessie Rand, supports Bessie's assertion that transactions he made in the stock account were approved by her. The respondent introduced no evidence contradicting Bessie's testimony, and cross-examination served only to strengthen her case. It is elementary that the burden of proof rests with the taxpayer. In this case the evidence is overwhelmingly in favor of the petitioner. To view it otherwise would be to disregard substantially all of the uncontradicted testimony. This we cannot do. Where, as here, the taxpayer presents credible, competent, and relevant evidence on every necessary element, the presumption in favor of the Commissioner's determination disappears*123 and, absent any law questions, the outcome of the case depends upon the preponderating weight of the evidence. The testimony of Bessie Rand is competent, relevant, and uncontradicted that the assets in question were in fact the proceeds of the Rand Liquor Store. It is stipulated that Bessie was the sole and absolute owner of the store. Bessie testified that she made no gifts to Albert, and there is no evidence that she did. Therefore, it must be concluded that she, and not Albert's estate, is the rightful owner of these assets and that they should not be included in Albert's gross estate. Decision will be entered under Rule 50.