Estate of Ingraham v. Commissioner

Estate of Frances T. Ingraham, Deceased, Guaranty Trust Company of New York, Executor, Petitioner, v. Commissioner of Internal Revenue, Respondent Estate of Ingraham v. Commissioner Docket No. 8914 United States Tax Court 8 T.C. 701; 1947 U.S. Tax Ct. LEXIS 241; March 31, 1947, Promulgated *241 Decision will be entered under Rule 50. The failure of an executor and tax-exempt charitable legatees to file formal signed consents under oath with the Commissioner for the computation of income as permitted by section 134 (g), Revenue Act of 1942, held, to bar the estate's right to exclude decedent's income accrued between January 1, 1942, and decedent's death on June 26, 1942. Edward J. O'Connor, Esq., for the petitioner. Clay C. Holmes, Esq., for the respondent. *242 Johnson, Judge. JOHNSON *701 The Commissioner determined a deficiency of $ 4,743.53 in the income tax of the decedent, Frances T. Ingraham, for the taxable period *702 January 1 to June 26, 1942, the date of decedent's death, based on dividends in the amount of $ 3,955.37 and interest amounting to $ 1,053.68 accruing on securities which petitioner failed to include in the income tax return for said period prior to death. The Commissioner, in the deficiency notice, determined that petitioner had not complied with section 134 (g) of the Revenue Code of 1942, and therefore that said amounts accrued at date of death should have been includible in computing the net income of the decedent for such period. Another item of $ 400 defaulted interest coupon of Missouri Pacific bond included in income by the Commissioner is not now involved, since respondent in his brief concedes that he was in error in his determination that it was includible. FINDINGS OF FACT. This proceeding was submitted on a stipulation and exhibits, which are incorporated by reference as findings of fact. From these it appears that petitioner is the duly appointed and acting executor of the estate of Frances*243 T. Ingraham, who died testate on June 26, 1942, while a resident of the State of New York, and hereinafter referred to as decedent. Petitioner, a corporation, was named as executor in decedent's will and duly qualified as such in the Surrogate's Court of Kings County, State of New York, on November 5, 1942. The "Fourth" paragraph of decedent's will divided her residuary estate into 25 equal parts, of which 20 were bequeathed to the following organizations: Board of Foreign Missions of the Methodist Episcopal Church for the use and benefit of Ingraham Institute, or for its own purpose (7 parts). Federal Council of the Churches of Christ in America (1 part). Wesleyan University, Middletown, Connecticut (4 parts). Brooklyn Institute of Arts and Sciences (1 part). Brooklyn Methodist Episcopal Home for the Aged and Infirm (1 part). Brooklyn Deaconess Home of the Methodist Episcopal Church (1/2 part). Board of Foreign Missions of the Methodist Episcopal Church for use and benefit of Frances Taft Ingraham Hospital of Tsownsien, Shantung, China, or for its own purposes (1/2 part). New York East Annual Conference of the Methodist Episcopal Church (1 part). Young Men's Christian Association*244 of Brooklyn (1 part). Young Women's Christian Association of Brooklyn (1 part). Brooklyn Association for Improving the Condition of the Poor (1 part). American Bible Society, New York City (1 part). The remaining 5 equal parts were bequeathed to the aforesaid organizations or to such other similar organizations as her brother, George S. Ingraham, might name in his lifetime, if he survived her. *703 George S. Ingraham died on July 17, 1944, without having executed the power to name different organizations and the aforesaid organizations also received the 5 equal parts in the same proportions as the 20 parts. All of the 12 residuary legatees named in the will are charitable, educational, or religious organizations exempt from income tax under section 101 of the Internal Revenue Code. Petitioner, as executor of decedent's will, filed decedent's income tax return with the collector of internal revenue for the first district of New York, on July 13, 1943, for the period January 1 to June 26, 1942, the date of decedent's death, on the cash receipts basis. Petitioner did not include in taxable income of the decedent for said period dividends amounting to $ 3,955.37 and interest amounting*245 to $ 1,053.68 accrued on securities comprising part of the residuary estate bequeathed in paragraph "Fourth" to the organizations therein named, which income was distributable to them under the will. Petitioner notified the collector of internal revenue, first district, Brooklyn, New York, by letter dated September 22, 1943, as follows: Guaranty Trust Company of New York 140 Broadway New York 15, N. Y. September 22, 1943. Personal Trust Division Collector of Internal Revenue First District Brooklyn, New York In re: Estate of Frances T. Ingraham -- E 8059. Dear Sir: The Federal income tax of the above estate for the prior-to-death period (January 1, 1942, through June 26, 1942) was computed on a cash basis as permitted under Section 134 (g) of the Revenue Act of 1942. As duly appointed executor of said estate, we hereby consent to a cash basis for computation of income tax liability of the decedent, pursuant to the provisions of Section 134 (g) of the Revenue Act of 1942. Very truly yours, [Signed] A. W. LeGassick Assistant Trust Officer OPINION. The issue here involved is whether the petitioner, as executor, and the beneficiaries under the will of the decedent have complied*246 with the provisions of section 134 (g) of the Revenue Act of 1942. If so, petitioner was correct in excluding from the income tax return of decedent the amounts of dividends and interest accrued during the period January 1 to June 26, 1942 (date of decedent's *704 death). If not, then respondent correctly determined that such sums should have been included in the net income of the decedent for such period. Section 134 (g) is a relief section and was designed to minimize the effect of including in the final return of a decedent, filed for the period prior to death, income that would have been received over a period had the decedent remained alive. To be eligible for benefits thereunder its requirements must be complied with. We quote from section 134 (g): * * * The provisions of this subsection shall not be applicable unless there are filed with the Commissioner (in accordance with regulations prescribed by the Commissioner with the approval of the Secretary, and at the time prescribed by such regulations) signed consents made under oath by the fiduciary representing the estate and by each such person (or if any such person is no longer in existence or is under disability, *247 by his legal representative) that with respect to such amounts the tax of the estate, or the tax of such person, as the case may be, shall be computed under the provisions of this subsection for each taxable period ending on or after the date of the death of the decedent and the tax of the decedent shall be computed under such provisions for the taxable period of the decedent in which falls the date of his death. * * * It thus appears that the specific requirements under the statute are (a) there must be filed with the Commissioner of Internal Revenue, not with the district collector; (b) signed consent under oath by executor representing the estate; (c) signed consent under oath by each beneficiary; (d) these must be filed in accordance with regulations prescribed by the Commissioner, and (e) these must be filed "at the time prescribed by such regulations." Regulations as authorized and directed in section 134 (g) were issued by the Commissioner and approved by the Secretary, and are contained in Regulations 111, section 29.126-4. The provisions of the regulations which are deemed pertinent here and contain requirements in addition to those imposed by the statute are as follows: *248 (1) All of such consents with respect to any one decedent shall be filed at the same time with the Commissioner of Internal Revenue, Washington, D. C. (2) The consents must be filed not later than one year after the time prescribed for filing the return for the last taxable year of the decedent (not including any extension of time for such filing) or January 1, 1944, whichever is later. (3) The executor * * * must submit, under oath, a statement accompanying the consents and containing * * * [certain elaborate information detailed in the regulations]. [Sec. 29.126-4 (b).] The evidence in this case discloses that the requirements of neither the statute nor the regulations were complied with by either the petitioner as executor or the residuary legatees under the will. Petitioner did not, within the prescribed time (nor at any time) file with the *705 Commissioner of Internal Revenue, at Washington, D. C., as the fiduciary representing the estate, a signed consent under oath, accompanied by a statement under oath containing information pertaining to the estate, as required. Petitioner's only attempt at compliance was an informal letter, not sworn to, dated September 22, 1943, *249 addressed to the Collector of Internal Revenue, First District, Brooklyn, New York, and signed by "A. W. LeGassick, Assistant Trust Officer" of petitioner corporation. This letter did not contain the information required by the regulations. We can not agree with petitioner that the filing of the income tax return was sufficient to cover this omission, since the information necessary to be filed under oath under the regulations was far more comprehensive and embraced much additional information not contained in the income tax return. The beneficiaries or residuary legatees under the will did not, within the prescribed time, file consent under oath with the Commissioner of Internal Revenue in Washington, D. C. There was no attempt on their part at compliance with the law or the regulations, but they did file, on October 5, 1945, more than a year after the time required, what petitioner designates in his brief as "verified statements." We do not deem this sufficient compliance on the part of the beneficiaries. Both the petitioner, as executor, and the beneficiaries must comply with the law; this they have not done. We do not think there is any merit in petitioner's contention that, *250 since the residuary legatees were tax exempt, they were therefore not required to comply with section 134 (g). Neither the law nor the regulations exempt tax-exempt corporations from compliance. Such was the holding of this Court in two cases involving an application of section 44 (d), Internal Revenue Code, which exempts from tax the transmission of installment obligations by death if a bond is filed to secure the "return as income" of any installment payment received by the transferee "of the same proportion of such payment as would be returnable as income by the decedent if he had lived." In Estate of Lucy Radulovich, 37 B. T. A. 890, we held the exemption applicable, even though the recipient legatee was a tax-exempt charitable corporation, and in Estate of Jacob F. Haubeil, 41 B. T. A. 1244, we denied the exemption because the administrator had not filed the bond in the manner prescribed although he had tardily tendered "Treasury notes accompanied only by an affidavit." Again the legatee was a charitable, tax-exempt corporation. Although construing a different section of the code, these decisions are controlling. *251 Decision will be entered under Rule 50.