Gerry v. Commissioner

EDMUND W. GERRY, EXECUTOR, ESTATE OF ARATUS EVERETT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Gerry v. Commissioner Docket No. 25744. United States Board of Tax Appeals 22 B.T.A. 748; 1931 BTA LEXIS 2067; March 17, 1931, Promulgated *2067 1. Held, the gifts here in controversy were not made in contemplation of nor intended to take effect in possession or enjoyment at or after the decedent's death, within the meaning of section 402(c) of the Revenue Act of 1921. 2. Held, further, that the petitioner paid estate tax on December 1, 1925, in the sum of $2,752.86, with which he should be credited on the deficiency in tax shown in the deficiency notice. Thomas R. Dempsey, Esq., A. Calder Mackay, Esq., and Arthur McGregor, Esq., for the petitioner. Frank T. Horner, Esq., for the respondent. SEAWELL *748 The Commissioner has determined a deficiency in estate tax on the transfer of the net estate of Aratus Everett of $10,075.95. The petition as originally filed raised only the issue whether the Commissioner erred in including in the gross estate, as subject to tax as transfers in contemplation of death, property of the value of $228,450.31, representing gifts by the decedent to his children. At the hearing the petitioner was permitted to so amend his petition as to allege payment of $2,752.86 estate tax, for which credit had not been given, and if such transfers*2068 were held not to be in contemplation of death, he would be entitled to a refund of approximately $750. The respondent was permitted to file an amended answer, in which the question, not raised in the deficiency notice, is presented, as to whether the value of the property transferred as aforesaid is not taxable as a transfer made in contemplation of death or intended to take effect in possession or enjoyment at or after the decedent's death, within the meaning of section 402(c) of the Revenue Act of 1921. *749 FINDINGS OF FACT. The petitioner, a resident of Ventura, Calif., is the duly appointed, qualified and acting executor of the last will and testament of Aratus Everett, who died April 26, 1923. The decedent in 1910 owned about 1,500 acres of land in Ventura County, California, which he was farming, and at times he rented other land for farming purposes. During the winter months he employed from 12 to 25 men and during harvest time 200 or more. Charles Barnard, an abstractor, prepared for the decedent four deeds conveying approximately 60 acres of land to each of decedent's children, which deeds were on May 30, 1910, signed and their execution acknowledged*2069 by the decedent and his wife before said Barnard as notary public. Prior to said date, he had his land surveyed and designated to Barnard what land he wished to convey to each of his children. All the deeds were of like character and purported to be for love and affection which the donors had for the donees and for the "better maintenance, support, protection and livelihood" of the latter. Almost immediately after the deeds were executed they were sent by mail to the Ventura Abstract Company, with a written request from each of the said children that said donee's deed be recorded when said company received satisfactory evidence of the death of Aratus Everett. There was nothing in the deeds to indicate that the several grantees were not to have immediate possession of the respective tracts conveyed; Clarence A. Everett made provision for irrigation on his lot some time prior to June 6, 1922, and received, during the year 1922 from his father, the decedent, the returns for fruit grown on his lot. Under date of May 31, 1922, a note addressed to the aforesaid Charles Barnard and signed by Ernest E. Everett and Nora Sydow Everett authorized him to record the deed to a part of the*2070 Los Posas Ranch made to them by A. Everett and "held by" the said Barnard "in escrow." It was not made to appear that this note referred to either of the deeds executed May 30, 1910, referred to above, or referred to in the typewritten communication accompanying the note here mentioned. With the same note was received a typewritten communication requesting that the four deeds, bearing date of May 30, 1910, from Aratus Everett and wife to their four children, be recorded and that other deeds conveying small parcels of, or rights of way over, lands owned by some of the grantors and embraced within aforesaid deeds be thereafter recorded. This paper contained the signatures of the decedent, his wife and their four children. The four deeds heretofore mentioned, conveying approximately 60 acres to each of decedent's children, were recorded June 7, 1922, and the property so conveyed was of a value of $228,450.31. *750 Under date of June 6, 1922, the decedent and wife, his son Ernest E. Everett and wife, and decedent's daughter Edith Belle Birkenshaw and husband, entered into a sale agreement with A. H. Hitch and his son James Hitch to convey to them about 1,200 acres of land*2071 and certain personal property consisting of stock, certain feed stuff and tools and equipment on the farm, the land contained in the deeds executed by the decedent and his wife in 1910 to his last named son and daughter being included in said sale agreement with said Hitch and son. By the terms of said agreement the consideration to be paid by Hitch and son was to be paid 66.10 per cent to the decedent, 16.60 per cent to Ernest E. Everett, and 17.30 per cent to Edith Belle Birkenshaw. The will of the decedent, bearing date of September 30, 1918, gave and bequeathed to his wife the annual sum of $1,000, payable to her during her life, as provided (so recited) in the four deeds to his children, dated May 30, 1910. No provision of the character recited is shown to have been in any of said deeds. The $1,000 annual payment was in the will declared to be a lien on decedent's estate. The same lot previously (in 1910) conveyed to a child was in the will devised to said child and all the residue of decedent's estate was devised and bequeathed to his children, share and share alike. The decedent was, from 1902 until his death, afflicted with diabetes, but it did not materially impair*2072 his physical health or mental vigor nor deter him from pursuing actively his occupation of farmer. One Dr. Livingstone, who was a Fellow of the American College of Surgeons and had many years practice and experience in hospitals, was decedent's regular physician, and as such attended and frequently examined him, giving him professional advice and supervision from 1902 to the date of his death on April 26, 1923. The decedent knew he had diabetes, but never complained of angina pectoris, and Dr. Livingstone had never found any trace of it and decedent's blood pressure was never such as to cause any alarm or special treatment to be given him for the same. The vigor and activity of the decedent, physically and mentally, from 1902 to the day of his death, were remarkable. Neither in 1910, when the conveyances in question were made and delivered to his children, nor in 1922 when the same were recorded, was decedent's condition such as to alarm him or impress him with the idea that his death was near or impending or that his health was worse or different from what it had been for years. His general health was good and substantially the same from 1902 to 1923. When 71 years of age he*2073 learned to drive an automobile, bought one and drove home in the same, operating it himself. After that he used the automobile on his large farm, continuing to operate it himself. In 1921 he made *751 a trip of several hundred miles, driving his own automobile and at night erecting his own camp tent. He was then able to get on and off his horse without assistance and would at times ride his horse all day. The decedent, in the sale of about 1,200 acres of land to A. H. Hitch and son, considered he was getting for such land more than it was worth. The price offered was such that decedent first contemplated selling more than the 1,200 acres, but finally decided to keep about 400 acres in order that he might have something to do in the way of farming. On the tract he agreed to sell Hitch and son he had planned to make certain improvements, build a barn, lay certain pipe lines, etc., and by agreement with Hitch, decedent proceeded to do the work contemplated, Hitch agreeing to pay him for the same. The tract of approximately 400 acres which decedent retained to furnish him employment was so situated that it required a drive of about 14 miles from his residence to reach it, *2074 but after the sale to Hitch and son he continued as formerly to drive there in his automobile to carry on his farming operations. Shortly prior to his death, the decedent went temporarily to a hospital in Los Angeles to try out the new remedy of insulin as a cure for his diabetes and while there, in April, 1923, was attended by a Dr. Van Fleet. After leaving the hospital he bought a "trailer" which he was taking home with him so he might have it to haul things to and from Santa Rosa, and while on his way home, after driving his automobile part of the distance, he stopped at the home of his niece for the midday meal and ate heartily of a certain kind of ham which he liked so well that he inquired where he could buy it, and shortly after dinner bought some of the same kind of ham, and made other purchases at the store, and while putting the hams and other purchases into his automobile, remarked that he was "feeling awful funny," sank down and died on the sidewalk by the car. He had never before had any sinking or fainting spells, but had at times had indigestion, when exercising soon after eating. On the day of his death, decedent was slightly over 78 years of age. Dr. Van Fleet*2075 does not testify in the case, but in a death certificate in evidence states the cause of decedent's death was "Angina Pectoris" and that a contributing cause was "Diabetes Mellitus." His certificate further states there was no autopsy and his diagnosis was based on "physical findings." There is nothing indicating that Dr. Van Fleet ever attended or knew the decedent before April, 1923, or that at the time he was his physician he diagnosed his case as angina pectoris. In computing the deficiency in estate tax of $10,075.95 the petitioner has not been given credit for $2,752.86 heretofore paid as such. *752 OPINION. SEAWELL: The first question presented is whether the conveyances made by the decedent to his children as set forth in our findings of fact were made in contemplation of or intended to take effect in possession or enjoyment at or after his death. The applicable provisions of the statute are contained in section 402(c) of the Revenue Act of 1921 and read as follows: SEC. 402. That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever*2076 situated - * * * (c) To the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair consideration in money or money's worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title. The Commissioner determined that said conveyances were made in contemplation of death and that the value of the property, $228,450.31, conveyed by the decedent to his children, should, in determining the net estate, be included in the gross estate. There have been so many decisions in which the term "contemplation of death" has been defined and commented upon that an extended discussion of the subject would result*2077 in repetition and duplication of effort and serve no useful purpose. Our decision herein is controlled or sustained by the following cases and numerous others cited therein: ; ; ; ; ; and . The evidence shows very clearly that the decedent was a man of rather unusual physical and mental vigor and activity. His farming operations on his ranch of more than 1,500 acres so indicated. He knew he had diabetes and was frequently under examination and supervision by his physician, but his general health was good and his condition apparently was about the same from 1902 until his death in 1923. His disease did not prevent him from attending to business nor does the evidence show it to have been such as to cause him to expect death in the near future any time during the twenty years *753 that he was so afflicted. *2078 If the decedent died of angina pectoris, as Dr. Van Fleet's certificate indicates, there is no other evidence so indicating and no evidence whatever that the decedent knew or believed he had it. Dr. Livingstone, his regular physician, on cross-examination testified as follows: Q. Did the diabetic condition have any deleterious or bad effect upon the heart in his case? A. No, his heart was such that he was able to go about actively, and another thing, he was very brisk in his walk at all times, always walked with a spring and speed, more than most young people, in fact. Q. In your examination of his heart did you find any trace of angina pectoris? A. No, he never complained of angina pectoris. When the decedent made the deeds of gift to his children in 1910, for their "better maintenance, support, protection and livelihood," and delivered the deeds to them, the evidence does not indicate that he was then alarmed about his health or anticipated or contemplated death in the near future, nor does the evidence shown anything of the kind when the children in 1922 requested that their deeds of May 30, 1910, be then put to record. The evidence indicates that decedent*2079 thought he was getting for his property more than it was worth when he made his sale agreement with A. H. Hitch and son. The sale agreement recognized that a portion of the property to be conveyed to Hitch and son was owned by two of decedent's children and for that reason it was necessary that they should join in the agreement, which provided that a part of the consideration for the transfer should be paid them. The agreement for the sale was dated and executed on June 6, 1922, the deeds to the four children of the decedent having been executed and, the evidence indicates, delivered to them May 30 or 31, 1910, though said deeds were not actually recorded until June 7, 1922. In California, recordation is not necessary to effect complete transfer of title. ; . In our opinion, upon the whole evidence, Aratus Everett had no expectation, belief or apprehension when he made the transfers to his children, May 30, 1910, that his death was near or would occur in the near future, nor were they made in contemplation of death or to take effect at or after death within the meaning of section 402(e) of the Revenue*2080 Act of 1921. Decedent's conduct and activities at the time and subsequent thereto, even up to the day of his death, April 26, 1923, show that he was not contemplating death at an early date. If said four deeds from the decedent to his children in 1910 were in that year completed and effective, which in the circumstances of the instant case we hold, there is then no statutory presumption arising that said deeds were made in contemplation of death or only intended to take effect in possession or enjoyment after decedent's death because said *754 deeds were not actually recorded until within two years of decedent's death. The terms of the sale agreement with Hitch and son show that the son and daughter of decedent, whose property was being conveyed to Hitch and son, were to share in the proceeds of such sale prior to the death of the decedent. It follows, therefore, that the respondent erred in including in the decedent's gross estate the value of the property, $228,450.31, transferred by decedent to his children on May 30, 1910. The evidence shows that the petitioner paid estate tax, on December 1, 1925, in the sum of $2,752.86, for which no credit is shown by the deficiency*2081 notice to have been given. The petitioner is entitled to such credit and we so adjudge. Judgment will be entered under Rule 50.