Schatzinger v. Commissioner

SABINA SCHATZINGER, EXECUTRIX, ESTATE OF BERNHARD SCHATZINGER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Schatzinger v. Commissioner Docket No. 11383. United States Board of Tax Appeals 12 B.T.A. 1353; 1928 BTA LEXIS 3353; July 16, 1928, Promulgated *3353 A deficiency in personal income taxes due from the decedent for a taxable year prior to his death and assessed against his estate after his death, is a claim against the estate and an allowable deduction in computing the net estate subject to the estate tax. L. L. Campbell, Esq., for the petitioner. Maxwell E. McDowell, Esq., for the respondent. VAN FOSSAN *1353 This is a proceeding for the redetermination of estate taxes as to which the Commissioner has determined a deficiency of $12,391.79. It is alleged that the Commissioner erred in: (1) The valuation of 506 shares of stock of the Country Home Co. (2) The valuation of 13,320 shares of stock of the Leasing & Building Co. (3) Disallowing a deduction of $33,591.72, representing Federal income taxes of the decedent assessed against the estate. *1354 By amendment to the original petition the petitioner claimed additional deductions from the gross estate in the sum of $5,500 for attorney's fees and $15,000 for one year's support and maintenance allowed by the State laws to the widow of the decedent. At the hearing the parties stipulated the values of the shares of stock*3354 referred to in (1) and (2) of the above assignments of error, and likewise agreed that the additional deductions of $5,500 and $15,000 claimed were proper and allowable. The parties further stipulated all material facts relative to the deduction of $33,591.72 claimed for taxes assessed. FINDINGS OF FACT. Bernhard Schatzinger, deceased, died on the 18th day of June, 1923, in the City of Cleveland, State of Ohio, leaving a last will and testament in which the petitioner was named as executrix. Said will and testament was duly admitted to probate and the petitioner was duly qualified as executrix of the estate of the decedent. On or about June 11, 1924, petitioner filed with the Commissioner of Internal Revenue her Federal estate-tax return disclosing a tax of $12,255.86, which was subsequently, and within due time, paid. At the time of his death the decedent owned 506 shares of stock of the Country Home Co., which passed to and became a part of his estate. On June 18, 1923, the date of decedent's death, said stock was of the value of $130 per share. At the time of his death the decedent owned 13,320 shares of stock of the Leasing & Building Co. which passed to and became*3355 a part of his estate. On June 18, 1923, the date of decedent's death, said stock was of the value of $30 per share. In the administration of the estate the petitioner engaged the services and sought the advice of an attorney in connection with Federal taxes assessed and proposed against the estate, at a cost of $5,500. Under the laws of the State of Ohio the widow of the decedent has been allowed by appraisers of the estate appointed by the probate court, the sum of $15,000 to be paid by the estate for her support and maintainance for one year following the death of the decedent. In January, 1925, the respondent assessed against the petitioner a deficiency in income and profits taxes in the sum of $33,591.72, due from the decedent for the taxable year 1919, notice of which additional assessment was mailed to the petitioner January 9, 1925. The time within which an appeal could be perfected to the Board of Tax Appeals with respect to said assessment has expired and no appeal has been perfected. Said assessment of additional income taxes, or *1355 any part thereof, has not been paid by the petitioner. The time within which payment thereof may be made, proper claim*3356 for refund filed, and other proper legal relief sought, has not expired. Said assessment has been duly certified to the collector of internal revenue for the Cleveland district, who is duly protecting the interests of the Government as to collection of the same. On December 15, 1925, the respondent mailed to the petitioner a notice of his determination of a deficiency in estate taxes in the sum of $12,391.79. On January 27, 1926, the petitioner filed with the Board of Tax Appeals this appeal from said determination. OPINION. VAN FOSSAN: The stipulation entered into at the hearing from which, and the pleadings, our findings of fact are made, disposes of all issues but one, and that a question of law. The one issue requiring consideration here in whether or not the deficiency in personal income taxes due by the decedent for the taxable year 1919, in the sum of $33,591.72, which was assessed against the estate in January, 1925, is an allowable deduction in computing the net estate subject to the estate tax. Section 403 of the Revenue Act of 1921, so far as material here, provides that for the purpose of the estate tax the value of the net estate shall be determined: *3357 (a) In the case of a resident, by deducting from the value of the gross estate - (1) Such amounts for funeral expenses, administration expenses, claims against the estate * * * as are allowed by the laws of the jurisdiction * * * under which the estate is being administered, but not including any income taxes upon income received after the death of the decedent, or any estate, succession, legacy, or inheritance taxes. (Italics ours.) Section 303(a)(1) of the 1924 Act contains substantially the same provisions. It is not essential to the allowance of deductions under the foregoing provisions that the amounts claimed shall have been paid or even allowed by the estate. Whether or not the claims have been paid or allowed by the estate is immaterial in determining the allowability of the deduction for such claims in computing the net estate subject to Federal estate taxes. ; and . The estate of a deceased person is liable for Federal income taxes due from its decedent for a taxable year prior to his death, which remain unpaid at the date of his death, and*3358 the assessment of a deficiency in such taxes against the estate is beyond question such a claim against the estate as may be "allowed by the laws of the jurisdiction * * * under which the estate is being administered." *1356 The deficiency in income taxes of this decedent for the taxable year 1919 in the sum of $33,591.72 assessed against the estate is a liability of and a claim against the estate, and the amount thereof clearly is an allowable deduction in computing the net estate under the above cited provision of the Revenue Act, even though the same has not yet been paid. The respondent erred in refusing to allow this deduction. The parties, by stipulation, agreed that the sum of $15,000, allowable from the estate under the laws of Ohio for one year's support and maintenance of the decedent's widow, and the sum of $5,500, for attorney's fees and expenses due from the estate, are proper and allowable deductions in computing the net estate subject to the Federal estate tax, in addition to the deductions already allowed by the respondent. The deficiency, if any, shall be redetermined in accordance with this opinion and findings of fact. Judgment will be entered*3359 under Rule 50.