Thiele v. Commissioner

Estate of Walter Thiele, William H. Jeffers, Administrator c. t. a., Petitioner, v. Commissioner of Internal Revenue, Respondent Thiele v. Commissioner Docket No. 8366 United States Tax Court 9 T.C. 473; 1947 U.S. Tax Ct. LEXIS 91; September 29, 1947, Promulgated *91 Decision will be entered under Rule 50. Walter Thiele, the decedent herein, died December 25, 1940. His wife, Helen Agnes Thiele, died testate on February 26, 1940. Under her will she named her husband the sole legatee and executor of her estate. Her estate was still in the process of administration at the time of her husband's death. On February 26, 1940, Walter Thiele owed his wife $ 34,766.72, plus interest, for money he had previously borrowed from her. This amount, plus interest, was included in the wife's gross estate as an account receivable asset of her estate for Federal estate tax purposes, and was also included as an asset of her estate in the accounting filed with the surrogate in 1942. Thereafter, the surrogate court approved the account and ordered the administrator of the wife's estate to pay the administrator of the husband's estate the balance of the principal of the wife's estate including the said account and interest due from the husband's estate. Held, the estate of Walter Thiele is entitled, under section 812 (b) (3) of the Internal Revenue Code, to deduct from the value of its gross estate the amount of the said debt, plus interest, as a claim*92 against the estate. Wilbur H. Friedman, Esq., George F. Kurzman, Esq., and Gerald Silbert, Esq., for the petitioner. Thomas R. Charshee, Esq., for the respondent. Black, Judge. BLACK *473 This proceeding is for a redetermination of a deficiency of $ 8,675.62 in estate tax. Petitioner claims an overpayment of $ 8,917.23. *474 The amended petition alleges that the determination of tax set forth in the notice of deficiency is based upon the following errors: (a) Disallowance of administrator's commissions in the sum of $ 23,895.30. (b) Disallowance of attorneys' fees and disbursements in the sum of $ 15,018.99, plus the reasonable fees and disbursements in conducting this proceeding. (c) Disallowance of accountants' fees in the sum of $ 1,500.00. (d) Disallowance of deduction of a debt of the decedent in the sum of $ 34,766.72, plus accrued interest of $ 1,363.06. (e) Disallowance of deduction for obligations of the decedent in the sum of $ 29,744.57 and determination of previously taxed property in the sum of $ 157,654.63 instead of $ 187,210.37. Assignments of error (a), (b), and (c) have been settled by stipulation, and effect will be given thereto under Rule *94 50. Most of the facts relating to assignments of error (d) and (e) have also been stipulated. FINDINGS OF FACT. The stipulation of facts is incorporated herein by reference. Walter Thiele, hereinafter sometimes referred to as the decedent, was a resident of New York County, New York, until his death on December 25, 1940. William H. Jeffers, hereinafter sometimes referred to as the petitioner, is the duly qualified administrator, c. t. a., of the estate of Walter Thiele. The estate tax return for the estate of Walter Thiele was filed with the collector for the third district of New York on March 26, 1942. Helen Agnes Thiele, wife of Walter Thiele, died testate on February 26, 1940, a resident of New York County, New York. Under the terms of her will her husband, Walter Thiele, was the sole legatee and executor of her estate. He qualified as executor of his wife's estate, but after his death on December 25, 1940, Jeffers qualified as administrator, c. t. a., of the estate of Helen Agnes Thiele. At the time of the decedent's death the estate of Helen Agnes Thiele was still in process of administration. No accounting had yet been filed. However, an accounting was filed with the surrogate*95 of New York County on May 27, 1942. From time to time, prior to the death of his wife, the decedent had borrowed from his wife certain sums of money in cash. He did not give her any notes for the amounts so borrowed. At the time of her death he owed her $ 34,766.72, plus interest of $ 212.44, or a total of $ 34,979.16. After Helen Agnes Thiele died the administrator included as an asset in her gross estate in the Federal estate tax return, when filed on August 9, 1941, the said amount of $ 34,979.16 as an account receivable due from Walter Thiele. In the Federal estate tax return filed for the estate of Walter Thiele there were reported therein items of gross estate (using the optional *475 valuation date under section 811 (j) of the Internal Revenue Code) and deductions, as follows: Gross estate Deductions Real estate $ 51,750.00 Funeral expenses $ 1,614.21 Stocks and bonds 842,017.20 Executors' commissions 20,952.75 Mortgages 81,454.66 Attorneys' fees 22,500.00 Miscellaneous property 41,540.30 Miscellaneous administration expenses 2,556.54 Property previously taxed 188,111.16 Debts of decedent 323,667.96 Total 1,204,873.32 Total 371,291.46 *96 Among the detailed items considered in the return in arriving at the above item of "property previously taxed" in the amount of $ 188,111.16 are the following: Assets included in estate of Value under Income under Total Helen Agnes Thiele option option Debt due from Walter Thiele to Helen Agnes Thiele $ 34,766.72 $ 34,766.72 Accrued interest at 4% from Jan. 1, 1940, to death of Helen Agnes Thiele 212.44 212.44 Other items not here involved 179,920.95 $ 106.03 180,026.98 Total 214,900.11 106.03 215,006.14 Less liabilities: Federal estate tax of Helen Agnes Thiele $ 20,495.48 Less refund of 512.30 19,983.18 Attorneys' fees 2,750.00 Administrator c. t. a. commissions 4,161.80 26,894.98 26,894.98 Included in gross estate of Walter Thiele 188,005.13 106.03 188,111.16 Among the detailed items considered in the return in arriving at the above item of "debts of decedent" in the amount of $ 323,667.96 are the following: Debt due estate of Helen Agnes Thiele $ 34,766.72 Accrued interest at 4% from Jan. 1, 1940 to death of Helen Agnes Thiele 212.44 Accrued interest at 4% from Helen Agnes Thiele's death to Walter Thiele's death 1,150.62 Other items not here involved 287,538.18 Total deducted in decedent's return as debts 323,667.96 *97 The Federal estate tax return filed for the estate of Walter Thiele reported $ 123,000.20 as representing the total estate tax payable. This amount was paid at the time the return was filed. On April 3, 1943, the respondent determined a deficiency in estate tax against the estate of Walter Thiele in the amount of $ 21,535.28. This amount was paid on or about March 26, 1943. Among the adjustments that were made at that time were the elimination from "property previously taxed" of the debt of $ 34,766.72 and accrued interest of $ 212.44, and the increase of liabilities of the estate of Helen *476 Agnes Thiele from $ 26,894.98 to $ 29,555.74. As a result of these adjustments (and of other adjustments not in dispute) made by the respondent in his deficiency notice of April 3, 1943, the gross deduction for "property previously taxed" was determined to be $ 157,654.63, in lieu of the amount of $ 188,005.13 claimed on the return. In this notice of April 3, 1943, the respondent also disallowed as deductions of "debts of decedent" the debt of $ 34,766.72, together with the two interest items in connection therewith of $ 212.44 and $ 1,150.62. As a result of all of the above mentioned*98 adjustments, including those not in dispute, the net estate for basic tax and for additional tax was, in the notice dated April 3, 1943, determined to be $ 709,289.38 and $ 761,699.16, respectively, in lieu of the amounts of $ 619,115.76 and $ 669,753.52, respectively, stated on the return. On March 12, 1945, the respondent determined a second deficiency in estate tax against the estate of Walter Thiele in the amount of $ 8,675.62, and it is this second deficiency notice which furnishes the basis of this appeal. In this second deficiency notice the respondent allowed a credit for state estate tax of $ 25,031.61, instead of the $ 18,917.56 claimed on the return. On or about January 27, 1944, which was after the payment of the first deficiency but before the mailing of the second deficiency notice here in question, the estate of Walter Thiele filed a claim for refund of Federal estate taxes in the amount of $ 8,917.23. On March 7, 1944, petitioner received a letter from the internal revenue agent in charge, proposing to deny its claim for refund. Petitioner filed a protest thereto on March 24, 1944. No refund has ever been received on account of the Federal estate tax of the estate*99 of Walter Thiele. On May 11, 1944, the estate of Helen Agnes Thiele filed a claim for refund of Federal estate tax in the amount of $ 7,742.10, plus interest. No refund had been received on account of the claim up to the date of the hearing in the instant proceeding. Attached to the claim was a statement as follows: Helen Agnes Thiele died February 26, 1940. At the time of her death, her husband, Walter Thiele, was indebted to her in the sum of $ 34,979.16, which sum was included as an asset of her estate in the Federal estate tax return filed for her estate. Walter Thiele died December 25, 1940. In connection with the Federal estate tax return of his estate, it has been claimed that the debt due from him to his wife was deductible as a debt in his estate tax proceeding. This contention has been denied, on the ground that, as he was the sole legatee of his wife, the debt from him to her disappeared when she died, for the stated reason that a person cannot owe money to himself. If the debt is not allowable as a deduction to Walter Thiele for the stated reason, then it is contended that the debt was not owing to Mrs. Thiele at the time of her death, because at the moment of her*100 death it disappeared. This claim is advanced in the alternative to a claim heretofore filed on behalf of the Walter Thiele Estate seeking deduction of the debt. If the debt is allowed as a deduction in the Walter Thiele Estate, this claim will be withdrawn; but if *477 the said debt is not allowed as a deduction in the Walter Thiele Estate, then refund of Federal estate tax should be allowed to the Estate of Helen Agnes Thiele for the above reasons. In the accounting for the estate of Helen Agnes Thiele filed with the surrogate of New York County on or about May 27, 1942, the said debt due from Walter Thiele and accrued interest in the total amount of $ 34,979.16 was included as an asset of the estate of Helen Agnes Thiele. On July 30, 1942, the Surrogate's Court of the County of New York, in its decree on accounting, approved the account and ordered the administrator of the estate of Helen Agnes Thiele to pay to the administrator of the estate of Walter Thiele the balance of principal of the estate of Helen Agnes Thiele, including the account receivable of $ 34,979.16 as "being payment in full of the balance of principal due said Walter Thiele, now deceased, under the terms*101 of decedent's Will." The surrogate of New York County, in an order assessing tax dated December 1, 1942, in the New York estate tax proceeding of the estate of Walter Thiele, approved the treatment of this $ 34,979.16 as property previously taxed in the estate of Helen Agnes Thiele and allowed the debt of $ 34,766.72, plus interest of $ 212.44 and $ 1,150.62, as deductions for "debts of decedent" in determining the New York estate tax on the estate of Walter Thiele. The New York State Tax Commission was a party to that proceeding. On June 24, 1946, the decedent's sister, Elsa Yannopoulas, of Athens, Greece, signed a "receipt and release" for the entire estate of the decedent, which estate she inherited from her brother by intestacy. At the date of his death, Walter Thiele owed the estate of Helen Agnes Thiele the amount of $ 34,766.72, plus the two interest items of $ 212.44 and $ 1,150.62. Subsequent to the death of Walter Thiele, the estate of Walter Thiele paid the following items in connection with the administration of the estate of Helen Agnes Thiele: (a) Federal estate taxes on the estate of Helen Agnes Thiele paid on May 26, 1941 and Nov. 5, 1942 $ 22,414.29 (b) Legal expenses paid on or about Mar. 31, 1942 2,004.75 (c) Additional legal and administration expenses paid on or about Dec. 8, 1942 974.90 (d) Administrator's commissions paid on or about Dec. 8, 1942 4,100.63 (e) Accounting expenses paid on or about Dec. 8, 1942 250.00 29,744.57 *102 OPINION. The principal remaining issue in this proceeding is whether the estate of Walter Thiele is entitled to deduct from the value of the decedent's gross estate, as a claim against the estate, the amount *478 of $ 36,129.78 ($ 34,766.72 plus the two interest items of $ 212.44 and $ 1,150.62) which the decedent owed the estate of Helen Agnes Thiele at the date of his death. The applicable statute is section 812 (b) (3) of the Internal Revenue Code, the material provisions of which are set forth in the margin. 1 Petitioner concedes that, if this total amount of $ 36,129.78 is deductible under section 812 (b) (3), then the amount of $ 34,979.16 ($ 34,766.72 plus $ 212.44) should be restored to the gross estate of the decedent as property previously taxed, and a correspondingly lesser amount allowed as a deduction for property previously taxed under section 812 (c) of the code, as amended by section 407 (a) (1) and (c) (1) of the Revenue Act of 1942, the material provisions of which are in the margin. 2*104 See also sec. 401, Revenue Act of 1942. 3 In other words, petitioner contends, as to the principal remaining issue, that the manner in which the estate of Walter Thiele*103 treated the matter in the estate tax return as set out in our findings of fact was proper and should not have been disturbed by the respondent. The second issue, except for the correction of the amount from $ 29,555.74 to $ 29,744.57, is in the alternative. As shown in our findings, the estate of Walter Thiele reported, as a part of the gross estate, *479 property previously taxed in the amount of $ 188,111.16. This amount was arrived at by first listing the assets which had also been included in the estate of Helen Agnes Thiele in the amount of $ 214,900.11, plus an item of income under option of $ 106.03, and deducting therefrom liabilities of the estate of Helen Agnes Thiele in the amount of $ 26,894.98. The respondent later determined that the said liabilities amounted to $ 29,555.74 instead of $ 26,894.98. The parties have now stipulated that the said liabilities amounted to $ 29,744.57. It is the petitioner's contention*105 that, if the principal issue be decided against petitioner, then petitioner should be permitted to deduct directly under section 812 (b) of the code the amount of $ 29,744.57 instead of deducting such amount from the list of assets that had also been included in the estate of Helen Agnes Thiele in determining the amount of property previously taxed to be included in the gross estate of the estate of Walter Thiele. We shall consider first the principal issue, namely, whether the estate of Walter Thiele is entitled under section 812 (b) (3) of the Internal Revenue Code to deduct from the value of the gross estate the amount of $ 36,129.78 as a claim against the estate. The parties agree that Walter Thiele owed the sum of $ 34,979.16 to his wife, Helen Agnes Thiele, at the time of her death. In his brief the respondent states that "This record does not disclose that during her lifetime she ever waived this claim against her husband and it was therefore rightfully included as an asset in her estate." We agree with that statement. We think it is equally clear that this debt of Walter Thiele continued to exist as a valid and enforceable claim and existed as such on the date of Walter*106 Thiele's death. We do not understand the respondent to contend otherwise, for in his brief he also says "the claim of the estate of Helen Agnes Thiele could have been enforced against Walter Thiele or his estate * * *." In a proceeding to which the State Tax Commission of New York was a party, it was determined by the surrogate of New York County that at Walter Thiele's death he owed the estate of Helen Agnes Thiele the sum of $ 34,979.16, plus interest of $ 1,150.62. The claim in the amount of $ 34,979.16 was treated as an asset of the estate of Helen Agnes Thiele by the surrogate as late as July 30, 1942, at which time he directed that it be distributed, along with other assets, to the administrator of the estate of Walter Thiele. Under all the facts of record, we think the claim in the amount of $ 36,129.78 is deductible from the value of the decedent's gross estate under section 812 (b) (3), supra, and section 81.36 of Treasury Regulations 105, the material provisions of which are as follows: Sec. 81.36. Claims against the estate. -- The amounts that may be deducted under this heading are such only as represent personal obligations of the decedent existing at the time*107 of his death, whether or not then matured, and interest *480 thereon which had accrued at the time of death. * * * Only claims enforceable against the decedent's estate may be deducted. If the claim is founded upon a promise or agreement, the deduction therefor is limited to the extent that the liability was contracted bona fide and for an adequate and full consideration in money or money's worth. * * * It seems to us that the facts in this proceeding coincide with each of the requirements set forth in the above regulations. The respondent contends that, because the estate of Helen Agnes Thiele made no attempt to collect the debt from Walter Thiele during the remainder of his life and never presented to the surrogate its claim against the estate of Walter Thiele, we must regard the estate of Helen Agnes Thiele as having waived its claim against Walter Thiele and his estate, and as having extinguished it in its entirety when the surrogate directed on July 30, 1942, that the claim, along with other assets of the estate of Helen Agnes Thiele be distributed to the administrator of the estate of Walter Thiele; that we must regard the estate of Walter Thiele as having failed to prove*108 that the claim of the wife's estate was ever presented, allowed, or paid; and that, therefore, no amount is deductible from the value of the decedent's gross estate under section 812 (b) (3) of the Internal Revenue Code. He cites in support of these contentions the cases of Estate of George Rice, 7 T. C. 223; Jacobs v. Commissioner, 34 Fed. (2d) 233; and Estate of William P. Metcalf, 7 T. C. 153. In the Rice case the decedent died testate in 1941, a resident of New York City. His wife, Adele Stern Rice, died testate in 1937, less than five years before her husband's death. She named her husband the sole legatee and executor of her estate. Up to this point the Rice case is like the instant case. In the Rice case, instead of the husband owing the wife, the wife at the time of her death was indebted to her husband in the amount of $ 54,500. George Rice duly qualified as executor of his wife's estate in 1937. No other proceedings in the administration of the wife's estate were taken and no final accounting thereof was ever filed. As sole legatee, he received all the assets*109 of his wife's estate not used for the payment of debts and charges against her estate. Her gross estate was valued at $ 112,228.10. Her net estate, after deducting the debt of $ 54,500 to her husband and other debts and charges of $ 5,447.61, was $ 52,280.49. The debt to her husband was not specifically paid as such, which left $ 106,780.49 for her husband as sole legatee. At his death the husband still owned assets which had been included in his wife's estate at a value of $ 72,518.12. The question there involved was whether the estate of George Rice was entitled to a deduction for property previously taxed, without proportionate reduction under section 812 (c) of the code, as amended, of $ 72,518.12 as contended for by petitioner, or should be limited to $ 52,280.49, on the theory that when the $ 106,780.49 was turned over to the husband $ 54,500 of that amount *481 should be regarded as a payment of the wife's debt of that amount, thus leaving $ 52,280.49 as the maximum amount that could be regarded under section 812 (c) as "having been received by the decedent from * * * such prior decedent by gift, bequest, devise, or inheritance." We held that on the basis of the facts*110 stipulated the only conclusion that could be reached was that the husband waived his right to the payment of the $ 54,500 loan to his wife; that the entire $ 72,518.12 should be regarded as having been received by the second decedent from the first decedent by inheritance; and that the entire $ 72,518.12 should therefore be allowed as a deduction for property previously taxed, without proportionate reduction under section 812 (c), supra. It is apparent that the question involved in the Rice case is not the same as in the instant proceeding. Here, we are directly concerned with section 812 (b) (3), and only indirectly with section 812 (c). It should also be noted that "In determining the Federal estate tax on the estate of Adele Stern Rice, there were allowed as deductions," under section 812 (b) (3), "all of the items claimed to be deductible as debts of the decedent," including the said amount of $ 54,500 owed by the decedent to her husband. See Estate of George Rice, supra, p. 224. Thus in the Rice case the very same sort of a claim was allowed as a deduction to the wife's estate as is involved here, and there was no issue about it. *111 As we have already said, the issue which was involved in the Rice case is entirely different from the one which we have here. In the Jacobs case, supra, a widow elected to accept provisions of her husband's will in her favor in lieu of $ 75,000 stipulated in an antenuptial contract. The court held that such sum of $ 75,000 was not deductible from the value of the gross estate as a claim against the estate because it no longer existed when the widow elected to take under the will, and said: "The widow never claimed anything from the estate under the antenuptial contract, and the gross estate was not decreased one single cent by reason of the $ 75,000 stipulated in the antenuptial contract." The court then went on to define the word "claim" and quoted with approval a definition by the Supreme Court of Minnesota in Knutsen v. Krook, 111 Minn. 357, as follows: The word "claim," as generally employed, has a broad and comprehensive meaning, embracing every species of legal demand. 7 Cyc. 180. But, as employed in a particular statute, its meaning is often restricted and limited, and in statutes providing for the administration of the estates*112 of deceased persons, requiring a presentation of claims against the estate, is by the authorities generally construed as referring to demands of a pecuniary nature, and which could have been enforced against the deceased in his lifetime. In the instant proceeding the respondent concedes that the claim of the estate of Helen Agnes Thiele could have been enforced against Walter Thiele or his estate, but he says that "no claim was ever presented" and that "on the authority of the Jacobs case, the deduction *482 should be denied." The respondent's regulations, supra, do not make it a prerequisite to an allowance under section 812 (b) (3) that a claim be "presented." In the instant proceeding all the prerequisites stated in the regulations are present. The amount sought to be deducted represented a personal obligation of the decedent existing at the time of his death. It was enforceable against the decedent's estate, and no contention is made by the respondent that it had not been contracted bona fide and for an adequate and full consideration in money or money's worth. The only reason why it was not formally presented for payment was because the estate of Helen Agnes Thiele*113 was thoroughly solvent and did not need it to pay its obligations. If the estate had been insolvent, there can be no doubt that the claim would have been presented and paid. In view, however, of the solvency of the estate of Helen Agnes Thiele, it would have served no useful purpose, except perhaps to eliminate the present question, to have the husband's estate pay the wife's estate the amount in question just to be returned again to the husband's estate on the final distribution of the wife's estate. Ordinarily the law does not require the doing of a futile thing. Cf. Flynn v. Commissioner, 77 Fed. (2d) 180, 183. Furthermore, it was held in Commissioner v. Strauss, 77 Fed. (2d) 401, 405, that the statute allowing deductions from the value of the gross estate for claims against the estate "does not require the allowance of the debt by the court or its payment by the estate in order that it may be deducted from the gross estate." To the same effect see Commissioner v. Windrow, 89 Fed. (2d) 69; Helvering v. O'Donnell, 94 Fed. (2d) 852; and Commissioner v. Hallock, 102 Fed. (2d) 1.*114 See also Buck v. Helvering, 73 Fed. (2d) 760, 764, reversing 25 B. T. A. 780. In the Metcalf case, supra, the third case relied upon by the respondent, certain real estate taxes, penalties, etc., in the total amount of $ 14,825 had accrued and constituted a lien on certain of the decedent's property prior to his death. A suit was instituted by the taxing authorities to enforce the lien and collect, but was compromised by the estate for $ 7,678.18. We held in that case that only the $ 7,678.18 was deductible under section 812 (b) (3), on the ground that "the unpaid balance of $ 7,146.82 no longer represented an enforceable claim against the decedent's estate, since the indebtedness to that extent was extinguished." In relying upon the Metcalf case, the respondent in his brief argues as follows: In the instant case, not only was no claim ever presented against Walter Thiele or his estate, but when the claim was handed over to his estate, it "was extinguished" or "compromised" at zero. We need not again consider the respondent's contention relative to no claim having been presented, as we indicated above that*115 that was *483 not one of the prerequisites for allowance of a deduction under section 812 (b) (3). Neither do we agree with the respondent's contention that the claim was extinguished or compromised at zero or at any figure less than the face amount of the claim. The estate of Helen Agnes Thiele at all times regarded and treated the claim at its full face value, and properly so, we think. Prior to the final distribution of the estate of Helen Agnes Thiele on July 30, 1942, the estate of Walter Thiele was at all times liable for the full amount of the claim, plus interest. Thereafter, the estate of Walter Thiele held assets of the value of the claim, plus interest, as a legatee of the estate of Helen Agnes Thiele. In re Foster's Estate, 38 Misc. Rep. 347; 77 N. Y. S. 922. The position of the Walter Thiele estate was the same as if the claim had been paid by Walter Thiele's estate to the Helen Agnes Thiele estate and distributed by that estate to the estate of Walter Thiele. In Buck v. Helvering, supra, John A. Buck died testate on April 6, 1923. On April 1, 1922, Mrs. Buck loaned*116 her husband from her separate funds the sum of $ 95,000. In holding that the estate of John A. Buck was entitled to deduct this loan from the value of the gross estate as a claim against the estate, the Ninth Circuit said: Mary M. Buck had a legal enforceable claim for $ 95,000 against the estate upon her husband's death. The fact that she did not file a claim against the estate is immaterial as she was a beneficiary under the law taking an amount exceeding the amount of her claim. The action of the Board of Tax Appeals in disallowing the deduction claimed for this amount is reversed. In the Buck case, in deciding against the taxpayer on an issue similar to the one we have here, the Board of Tax Appeals did so upon a question of failure of proof, namely, that the taxpayer did not prove that the wife had made a loan to the husband, but, on the contrary, the evidence indicated that the money which the wife advanced to the husband was a gift. This holding the Ninth Circuit reversed and held as above stated, that the advancement was a loan, hence should be allowed as a deduction even though never presented by the wife as a claim against her husband's estate and never paid by*117 the estate. In the instant case we have no issue whatever as to the bona fides of the loan. The parties have stipulated that Mrs. Thiele had during her lifetime made the loan in question to her husband and that he owed it to her at the time of her death. We hold, therefore, that petitioner is entitled under section 812 (b) (3) of the Internal Revenue Code to deduct from the value of the gross estate the amount of $ 36,129.78 as a claim against the estate. Buck v. Helvering; Commissioner v. Straus; Commissioner v. Windrow; Helvering v. O'Donnell; Commissioner v. Hallock; and Treasury Regulations 105, sec. 81.36, all supra. *484 In his brief the respondent states that "In the event that this Court decides that the said claimed deduction as a debt should be allowed, the amount of $ 34,979.16, representing the account receivable, should be restored to and included in the amount of property previously taxed." As stated at the beginning of this opinion the petitioner concedes that this should be done. Having decided the principal issue in favor of the petitioner, it thus becomes unnecessary to decide the second and alternative issue, except to say that*118 the amount of $ 29,744.57 should be substituted for the amount of $ 29,555.74 in deducting the liabilities from the assets included in the estate of Helen Agnes Thiele in arriving at the correct amount of property previously taxed to be included in the gross estate of the estate of Walter Thiele. Decision will be entered under Rule 50. Footnotes 1. SEC. 812. NET ESTATE. For the purpose of the tax the value of the net estate shall be determined, in the case of a citizen or resident of the United States by deducting from the value of the gross estate -- * * * * (b) Expenses, Losses, Indebtedness, and Taxes. -- Such amounts -- * * * * (3) for claims against the estate, * * * * as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered * * *. The deduction herein allowed in the case of claims against the estate, unpaid mortgages, or any indebtedness shall, when founded upon 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. * * *↩ 2. SEC. 812. NET ESTATE. For the purpose of the tax the value of the net estate shall be determined, in the case of a citizen or resident of the United States by deducting from the value of the gross estate -- * * * * (c) Property Previously Taxed. -- An amount equal to the value of any property (A) forming a part of the gross estate situated in the United States of any person who died within five years prior to the death of the decedent * * * where such property can be identified as having been received by the decedent from * * * such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received. This deduction shall be allowed only where * * * an estate tax imposed under this chapter or any prior Act of Congress, was finally determined and paid by or on behalf of * * * such prior decedent * * * and only in the amount finally determined as the value of such property in determining the * * * gross estate of such prior decedent, and only to the extent that the value of such property is included in the decedent's gross estate * * *. * * * The deduction allowable under this subsection shall be reduced by an amount which bears the same ratio to the amounts allowed as deductions under subsections (a), (b) and (d) as the amount otherwise deductible under this subsection bears to the value of the decedent's gross estate. Where the property referred to in this subsection consists of two or more items the aggregate value of such items shall be used for the purpose of computing the deduction.↩ 3. "Since the decedent died prior to the date of the enactment of the Revenue Act of 1942 and after February 10, 1939, the only part of section 407 (a) (1) of the Revenue Act of 1942 which is effective here is the reference therein to "an estate tax imposed under this chapter or any prior Act of Congress."↩