Appeal of Estate of Hoffman

[1364] OPINION. Trammell: The question involved in this appeal is whether tlie estate of Isabella C. Hoffman is entitled to a deduction in excess of that allowed by the Commissioner, under the provisions of section 408 (a) (2) of the Revenue Act of 1921, on account of property forming a part of her gross estate which the taxpayer alleges has been identified as having been received from a prior decedent by gift, bequest, devise, or inheritance, or as having been acquired in exchange for property so received, and if so, the extent of such deduction in excess of that allowed by the Commissioner. The value of the gross estate of Charles Hoffman, the prior decedent, was $695,602.60. The net estate was $374,072.15, and the estate tax levied thereon was $10,462.89, which was duly paid. In determining the tax liability of the estate of Isabella C. Hoffman the Commissioner allowed $207,600 as a deduction on account of property previously included for tax, but disallowed $166,472.15 claimed by the taxpayer, upon the. ground that there had been more than one transfer of the securities and other property making up that amount. It was contended by the Commissioner that that part of the estate was not received by gift, devise, or inheritance from the estate of Charles Hoffman and was not received in exchange for property so received within the meaning of the statute. The taxpayer apparently assumed that all of the assets of which Charles Hoffman died seized and possessed either went to Isabella C. Hoffman under the terms of the will or were transferred by her in her will by virtue of a general power of appointment. The will of Charles Hoffman left to Isabella C. Hoffman only one-half of his property, real and personal.' The other one-half he did not give to his wife by will but gave her a general power of appointment thereof, together with the income, rents, and profits from the [1365] property during her natural life. At her death she was given power to designate or appoint by her last will and testament the person or persons to whom it should go, and, in the absence of the exercise of such power, it was to go to his son and daughter or to the survivor. The Commissioner in his brief alleges that Isabella C. Hoffman did not exercise the power of appointment conferred upon her by her husband’s will. From an examination of the two wills introduced in evidence we are of the opinion that the power of appointment was not exercised. Isabella 0: Hoffman did not in her will appoint or designate any person to whom the property over which she had the power of appointment should go. She merely gave, devised, and bequeathed her own property, making no reference whatever to property not owned by her and over which she had the power of appointment. The pertinent provisions of section 402 of the Revenue Act of 1921 are as follows: 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 situated— * * * <e) To the extent of any property passing under a general power of appointment exercised by the decedent (1) by will, or (2) by deed executed in contemplation of, or intended to take effect in possession or enjoyment at or after, his death, except in case of a bona fide sale for a fair consideration in money or money’s worth. Since we find that the said Isabella 0. Hoffman did not exercise the power of appointment given her in the will of Charles Hoffman, no property passed under a general power of appointment as , contemplated in section 402 (e), above quoted. Only one-half of the property belonging to Charles Hoffman at the time of his death passed under his will to Isabella C. Hoffman. The other half passed under the will of Charles Hoffman directly to his children by virtue of the fact that Isabella C. Hoffman failed to exercise the power of appointment vested in her. This being true, an amount in excess of the value of the property which is claimed as a deduction was never a part of the estate of Isabella O. Hoffman. With respect to the property which was a part of the estate of the present decedent, we do not agree with the contention of the Commissioner. In our opinion, if property can be identified as having been included in the estate of a prior decedent, the estate of the subsequent decedent is entitled to a deduction on account thereof. There is no limitation to one exchange if the property remains segre [1366] gated and distinguishable. Here there was no commingling of funds or assets. The assets could be and were kept identified. Upon consideration. of all the-facts we are of-the opinion that the assets in the amount of $166,472.15 were included in the estate of the prior decedent and were subjected to tax. All of the property of the present decedent, which consisted of only one-half of the estate of the prior decedent, was subjected to the estate tax as a part of her husband’s estate, or was received in exchange for property so taxed. Order of redet&rmdnation will te entered on 10 days' notice, wnder Rule 50.