Fincham v. Commissioner

EMMA FINCHAM, EXECUTRIX, ESTATE OF EDWARD FINCHAM, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Fincham v. Commissioner Docket No. 30071. United States Board of Tax Appeals 16 B.T.A. 1418; 1929 BTA LEXIS 2377; July 25, 1929, Promulgated *2377 1. Value of certain parcels of real estate in 1924 determined for estate-tax purposes. 2. Certain transfers of real estate by decedent to his children more than 5 years prior to death were not made in contemplation of death. George Barrett, Esq., and Ray G. Ransom, C.P.A., for the petitioner. Arthur H. Murray, Esq., for the respondent. LANSDON *1419 The respondent has asserted a deficiency in estate tax in the amount of $1,026.38. Petitioner alleges that the Commissioner erred in the following respects: (1) By including in the taxable estate the value of the homestead and other property exempt from estate taxation under the laws of Kansas: (2) By increasing the value of certain properties included in the taxable estate in excess of the actual value thereof at date of decedent's death; and (3) By including in the taxable estate certain properties transferred by the decedent to his children more than two years prior to the date of his death. FINDINGS OF FACT. Petitioner is the executrix of the estate of Edward Fincham. She resides and has her office at Pratt, kans. Edward Fincham, the decedent, settled in Pratt County, *2378 Kansas, in 1884 as a pioneer and there resided until the date of his death, September 20, 1924. During such residence he was engaged in general Farming, stock raising, and in the purchase and sale of farm lands in Kansas and Oklahoma. His family consisted of his wife, seven daughters and one son. All the children remained at home up to and in some instances beyond maturity and assisted their father in his farm work and in his other business activities. All participated in general farm labor, such as herding cattle, sheep and hogs, working in the fields, milking cows, making butter and delivering the same to purchasers. Except for a short period each year during the planting season, decedent employed no paid farm labor. Prior to 1918 the decedent, assisted by the industry of his children, acquired a substantial estate of the value of approximately $300,000. Included in the gross estate of the decedent were five tracts of real estate, valued by the administratrix for estate-tax purposes in the respective amounts of $7,000, $7,000, $8,000, $4,000 and $4,000. These properties consisted of farm lands in Pratt and other western Kansas counties. In the year 1924 the value of such*2379 lands was not in any instance in excess of the figures at which they were listed in the estate-tax return filed by the petitioner. In December, 1918, decident, by deeds then duly delivered, transferred 25 quarter sections of land to his children and thereafter exercised no dominion, ownership or control of any sort over such land. From the date of their receipt of such lands decedent's children exercised full dominion, ownership and control thereof, collecting all rents and in some instances selling tracts of the same and retaining for themselves all the proceeds of such sales. The lands so deeded by *1420 the decedent to his children were not transferred in contemplation of death, nor was it intended that the donees should enter into the enjoyment and use of the same only after the death of the donor. In 1918 decedent was about 70 years old. Except for slight dizziness early in that year, he was then and for many years had been in vigorous and robust health. Subsequent to the transfers here in question he was in good health, but at one time consulted a physician and learned that his blood pressure, supposed to have caused dizziness in the early part of 1918, was normal. *2380 He pursued all his usual activities for more than five years after transferring the lands in question to his children. On September 20, 1924, he died of interstitial nephritis. Petitioner duly made and filed an estate-tax return and paid the tax shown thereon to be due. Upon audit of such return the Commissioner added $52,000 to the value of the taxable estate on account of the transfers made to the children of the decedent in 1918, alleging that such transfers were made in contemplation of death, increased the reported valuation of certain parcels of real estate owned by the decedent at date of death from $30,000 to $36,200, and determined the deficiency here in controversy. OPINION. LANSDON: We are unable to determine from the record whether the executrix included the value of the homestead and other property of the decedent exempt from taxation under the laws of Kansas in the gross taxable estate which she reported and upon which she paid estate taxes. In any event counsel for respondent confessed error in respect of the value of such homestead, of an automobile, and of other property personally owned by the decedent in the respective amounts of $8,000, $785, and $350, *2381 as exempt under the laws of Kansas. In the recomputation of petitioner's tax liability such amounts should be excluded from the value of the taxable estate of the decedent. The evidence convinces us that the Commissioner erroneously increased the value of five parcels of land included in the decedent's taxable estate from the reported value of $30,000 to a tentative value for estate-tax purposes of $36,200. Three witnesses, all land owners in Pratt County, and all familiar with land values in that and other western Kansas counties, testified that the reported values in their judgment represented the actual value of such lands in 1924. The respondent offered no evidence in rebuttal and was unable by cross-examination to impeach or impair the value of the testimony taken in behalf of the petitioner. We, therefore, hold that the Commissioner erroneously increased the reported value of such lands in the amount of $6,200. *1421 The petitioner has adduced evidence that convinces us that the transfers of 25 quarter sections of land by the decedent to his children in 1918 were not made in contemplation of death. The value of such lands in the amount of $52,000 was erroneously*2382 added to the taxable estate of the decedent, and in the recomputation of tax liability thereon should be excluded therefrom. Decision for the petitioner will be entered under Rule 50.