Garrison v. Commissioner

MARY S. GARRISON AND ST. LOUIS UNION TRUST CO., EXECUTORS AND TRUSTEES UNDER THE WILL OF OLIVER L. GARRISON, DECEASED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Garrison v. Commissioner Docket No. 31627. United States Board of Tax Appeals 21 B.T.A. 904; 1930 BTA LEXIS 1769; December 26, 1930, Promulgated *1769 1. ESTATE TAXES. - Held that respondent did not err in including in the gross estate of the decedent the value of the real estate situated in Missouri which was held by the decedent and his wife as tenants by the entirety. Tyler v. United States,281 U.S. 497. 2. Held, further, the fact that real estate in Missouri may not be included in the gross estate of a decedent under the provisions of section 302(a), Act of 1924 (Crooks v. Harrelson,282 U.S. 55) does not operate to prevent property held by the decedent and another as tenants by the entirety from being included in the gross estate where it meets the requirements of section 302(e). 3. The share of decedent's personal property which his widow elected to take instead of dower is properly includable in the gross estate of the decedent. Crooks v. Hibbard, 33 Fed.(2d) 567 followed. Henry J. Richardson, Esq., for the petitioners. Frank T. Horner, Esq., for the respondent. MCMAHON *904 This is a proceeding for the redetermination of an alleged deficiency in estate taxes on the estate of Oliver L. Garrison, who died*1770 on April 6, 1925, in the amount of $14,069.58. It is also contended by the petitioners that the estate is entitled to a refund of $803. The following errors are alleged in the petition: (a) The respondent has included in computing the gross estate five parcels of real estate situated in the County of St. Louis, State of Missouri, valued by respondent at $92,140, which property was owned by the late Oliver L. Garrison and his wife, Mary S. Garrison, as tenants by the entirety. (b) The respondent has included in computing the gross estate personal property of the late Oliver L. Garrison at a value of $912,887.29 without reduction on account of the widow's child's share in said personalty under the laws of the State of Missouri. (c) The respondent has computed the tax under Title III of the Revenue Act of 1924 on the estate of the late Oliver L. Garrison, resulting in the aforesaid deficiency in a manner which is in contravention of Article I, section 9 and clause 4 of the Constitution of the United States as to items (a) and (b) aforesaid, same being a direct tax not in proportion to any census or enumeration and not an excise tax upon the transfer of any property by decedent. *1771 *905 After the hearing in this proceeding the petitioner was allowed to amend the petition to allege that the respondent erred in including in the gross estate of the decedent the real estate located in the State of Missouri valued at $92,140 for the further reason that real estate is not subject to administration expenses under the laws of the State of Missouri. FINDINGS OF FACT. The petitioners are the duly qualified trustees under the will of Oliver L. Garrison, who died, a resident of the County of St. Louis, Missouri, on April 6, 1925. Oliver L. Garrison was survived by his widow, Mary S. Garrison, and three children, Oliver L. Garrison, Jr., Clifford R. Garrison and Hazel Garrison Elder. Oliver L. Garrison and his wife acquired during 1912 and 1913 and continuously owned, as tenants by the entirety, until the date of the death of the decedent, five parcels of real estate situated in the County of St. Louis, Missouri. The respondent, in computing the gross estate of the decedent, included therein these five parcels of real estate at a value of $92,140. Oliver L. Garrison, before his death, was the owner of personal property which the respondent valued at*1772 $912,887.29. The respondent included the full amount in the gross estate of the decedent. Of the total estate tax of $43,819.77 as determined by the respondent, the amount of $29,750.19 has been paid. OPINION. MCMAHON: Petitioners contend that the respondent erred in including in the gross estate of the decedent an amount of $92,140, the value of real estate located in Missouri which decedent and his wife owned as tenants by the entirety. Petitioners contend that this land was not properly a part of the decedent's gross estate because (1) real estate located in Missouri is not subject to administration expenses of the estate; and (2) the estate tax is imposed upon the transfer of the net estate of the decedent, and where land is held by the decedent and his wife as tenants by the entirety, the death of the decedent does not operate to transfer the property to the wife. In , the Supreme Court of the United States held that land, situated in Missouri, held by a decedent at the time of his death is not subject to the expenses of administration of his estate and, therefore, should not be included in the gross estate in*1773 computing the estate tax. The court held that subdivision (a) of section 402 of the Revenue Act of 1918 does not require the inclusion of such land in the gross estate. However, the court did not hold that because real property *906 in Missouri is not includable in the gross estate under subdivision (a) of section 402 of the Revenue Act of 1918, it may not, under certain circumstances, be included in the gross estate under other subdivisions of that section. In that regard the court said: In support of the claim that a literal construction is not admissible, it is said that by other provisions of § 402 certain interests in real property, such as dower, etc., are made subject to the tax without regard to the conditions set forth in subdivision (a), and that this results in an incongruity amounting to an absurdity. But unless the Constitution be violated, Congress may select the subjects of taxation and qualify them differently as it sees fit; and if it does so in plain terms, as it has done here, it is not within the province of the court to modify the law by construction. In any event, conceding that the conditions assailed here produced the incongruous results complained*1774 of, they fall far short of that degree of absurdity contemplated by the Holy Trinity Church case, or by any other decision of this court. * * * In so far as we are concerned in the instant proceeding, section 302 of the Revenue Act of 1924 is similar to section 402 of the Revenue Act of 1918. While it is true that the real property is not a part of the gross estate of the decedent by virtue of the provision of subdivision (a) of section 302 of the Revenue Act of 1924, we must still determine whether, under any other provision of section 302, it is includable in the gross estate. Section 302 of the Revenue Act of 1924 further provides that the gross estate of the decedent shall be determined by including the value at the time of his death of all property: To the extent of the interest therein held * * * as tenants by the entirety by the decedent and spouse, * * * except such part thereof as may be shown to have originally belonged to such other person and never to decedent for less than a fair consideration in money or money's worth: * * * In the instant proceeding there is no evidence to show that any part of the land constituting the tenancy by the entirety had, prior*1775 to its creation, ever belonged to the surviving spouse. By the express provisions of section 302 of the Revenue Act of 1924, the full value of the property held by the decedent and his wife must be included in the gross estate of the decedent for estate-tax purposes. ; ; ; and . We must hold that the respondent did not err in including in the gross estate of the decedent the full value of the land held at the time of his death by him and his wife as tenants by the entirety. Before his death the decedent was the owner of personal property valued at $912,887.29. The respondent included the full amount in the gross estate of the decedent for estate-tax purposes. The petitioner *907 contends that the respondent erred in including the full amount in the gross estate and that one-third of this amount should be excluded because, under the laws of the State of Missouri, this amount of the personalty was the widow's property absolutely, was not subject*1776 to distribution as part of the estate of the decedent, and was not transferred by the death of the decedent as that term is used in the Act. At the hearing petitioner cited , in which the District Court, Western District of Missouri, held that under the law of Missouri the widow's share in the personalty of the decedent which she had elected to take in lieu of dower was her property absolutely, was never transferred from the decedent and, therefore, was not subject to the estate tax. The holding of the District Court was reversed by the . Since the hearing in the instant proceeding the Supreme Court, on January 13, 1930, denied a petition for certiorari in that case and the petitioner in the instant proceeding has apparently abandoned this contention. In any event, the decision of the United States Circuit Court of Appeals is governing and we must hold that the respondent did not err in including in the gross estate of the decedent the full amount of the personal property which he owned prior to his death. Reviewed by the Board. *1777 Judgment will be entered for the respondent.