Hallenbeck v. Commissioner

JOHN J. HALLENBECK, EXECUTOR, ESTATE OF HARRY C. HALLENBECK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Hallenbeck v. Commissioner Docket No. 12470. United States Board of Tax Appeals 10 B.T.A. 1034; 1928 BTA LEXIS 3980; February 27, 1928, Promulgated *3980 Taxes paid by the executor to the State of New York under the transfer tax statute and legal deductions from gross income of the estate for the taxable period. Frank A. Kister, Esq., for the petitioner. W. F. Gibbs, Esq., for the respondent. LITTLETON *1034 The Commissioner determined a deficiency in income tax of $1,360.68 for the year 1921. The petitioner contends that $1,070.55, being the total transfer tax (including interest) assessed by order of the Surrogate's Court of New York against four legatees named in the will, is a proper deduction from gross income of the estate. The will provided that the gifts going to the legatees should be exonerated from the payment of any transfer tax, any such tax to be borne as an expense of administration. The Commissioner's position is that the tax was a charge against the corpus of the estate and is not a proper deduction in arriving at taxable net income. The facts are stipulated. FINDINGS OF FACT. The executor is a resident of New York, N.Y. Harry C. Hallenbeck died a resident of Monmouth County, N.J., on April 11, 1918, leaving a last will and testament which was duly admitted to probate*3981 by the Surrogate of said county on April 24, 1918. Letters testamentary thereon were duly issued to John J. Hallenbeck as executor, who duly qualified, and is still acting as such. A proceeding was duly brought in the Surrogate's Court of New York County to fix the transfer tax due the State of New York upon *1035 said estate, and resulted in the entry of an order assessing tax against the beneficiaries under the will as follows: Marion Steele Hallenbeck, daughter-in-law $130.02 Emily Sterling, no relation 328.72 Mary Sterling, no relation 345.02 Dora E. Mangles, sister 81.05 Total 884.81 Interest on said amount at 6 per cent per annum from April 11, 1918, date of decedent's death, to October 29, 1921, date of payment 185.74 Making a total tax and interest, when paid 1,070.55 Item three of the will of Harry C. Hallenbeck is as follows: I give to my Executor and Trustee, his survivor or lawfully appointed successor, the sum of Eighty Thousand Dollars ($80,000) in trust nevertheless to divide the same into four (4) equal separate funds of Twenty Thousand Dollars ($20,000) each and to invest and keep the same invested and to pay the net income*3982 upon the first fund to my daughter-in-law, Marion Steele Hallenbeck, and upon the second fund to Emily Sterling, and upon the third fund to Mary Sterling, and upon the fourth fund to my Sister, Dora E. Mangles, during their respective lives. Upon the death of each of said life beneficiaries, the principal of each of said funds so set apart for her, shall become a part of my residuary estate to the distributed as hereinafter directed. Paragraph three of the fifth item of said will is as follows: I direct that all the above gifts to Marion Steele Hallenbeck, Emily Sterling and Mary Sterling and Dora E. Mangles, shall be exonerated from the payment of transfer or inheritance taxes of every nature and description, which is to be borne as an expense of administration of my estate and charged against the residuary thereof so that said legatees shall receive their respective gifts without diminution. OPINION. LITTLETON: The question is whether $1,070.55 transfer tax paid by the petitioner as executor of the will of Harry C. Hallenbeck, by reason of the assessment and order of the Surrogate's Court of New York and the laws thereof, is a proper deduction from the gross income of*3983 the estate of the testator. The will expressly provided that the bequests to the legatees named should be exonerated from the payment of any transfer or inheritance tax. In the circumstances of this case, as disclosed by the record, and in view of the decisions rendered by this Board and by the Supreme Court of the United States bearing on the subject, we do not deem any discussion necessary, but will content ourselves with citing cases which are controlling and determinative of the issue in favor of the petitioner. *1036 Under the decisions bearing upon the deductibility of the New York transfer tax from gross income of the estate, the amount of $1,070.55, paid by the petitioner as executor to the State of New York, was a proper deduction from the gross income for the taxable period. Matter of Home Trust Co. v. Law, 204 App.Div.(N.y.) 590; affd. ; ; ; ; *3984 ; ; . Judgment will be entered on 15 days' notice, under Rule 50.