Opinion
Docket No. 6783.
1946-03-26
ESTATE OF POMPEO M. MARESI, MARJORIE D. MARESI, EXECUTRIX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Murray F. Johnson, Esq., for the petitioner. C. C. Holmes, Esq., for the respondent.
The commuted value of the liability of decedent's estate for payments to decedent's divorced wife until she should die or remarry, held deductible from decedent's gross estate in an amount determinable by reference to American experience tables reflecting life expectancy and the probability of the remarriage of widows. Murray F. Johnson, Esq., for the petitioner. C. C. Holmes, Esq., for the respondent.
Respondent determined a deficiency in estate tax of $13,492.85. Pompeo M. Maresi, hereinafter referred to as decedent, died on August 12, 1940.
Petitioner having conceded certain adjustments made by respondent, two questions remain for consideration:
(1) May the commuted value of the liability for payments to decedent's divorced wife be deducted from the gross estate?
(2) In the event a deduction is allowable from the gross estate, has petitioner proved the commuted value of the payments?
Some of the facts have been stipulated.
FINDINGS OF FACT.
The stipulated facts are hereby found accordingly.
Decedent died on August 12, 1940, a resident of Scarsdale, Westchester County, New York. The Federal estate tax return was filed with the collector of internal revenue for the fourteenth district of New York on November 12, 1941. Marjorie D. Maresi is executrix of the will of decedent.
On November 13, 1931, an agreement was entered into by decedent and Helen G. Maresi, his first wife, which, after reciting that the parties were living separate and apart and that certain differences existed between them, provided, inter alia:
SECOND: The party of the second part (decedent) covenants and agrees that he, his heirs, executors and administrators, shall and will pay to the party of the first part (first wife) for her maintenance and support, so long as she shall live and until she remarries, the sum of Forty-eight hundred Dollars ($4,800.00) per annum, to continue until the 30th day of September, 1933, and beginning on the 1st day of October, 1933, and thereafter, the sum of Fifty-four hundred Dollars ($5,400.00) per annum, such annual sums to be paid in equal monthly installments on the first day of each and every month, beginning with the month of November, 1931, payment for which said month shall be made on the day of the execution and delivery of these presents the receipt whereof is hereby acknowledged; all such payments to be made to such bank or banker as the party of the first part shall from time to time designate in writing for her account; it being understood that said payments for the support and maintenance of said party of the first part shall cease in the event that in a suit commenced after March 1, 1932 said party of the second part shall obtain a decree of absolute divorce in the State of New York against said party of the first part; the said party of the first part will accept and hereby does accept the sums hereinabove agreed to be paid in full for her maintenance and support.
TENTH: The party of the first part covenants and agrees that she will and she hereby does relinquish, release and discharge all dower or right of dower which she may now have or might hereafter acquire in any property now owned or possessed, or which may hereafter be acquired, owned or possessed by the said party of the second part, by purchase, by operation of law or otherwise, and the said party of the first part further covenants and agrees that she will hereafter, at the request of the said party of the second part, execute and deliver any instruments in writing for the release of her said dower or other said writings which may be necessary or convenient to make effective the provisions of this paragraph of this agreement. The said party of the first part does hereby release any and all rights or claims, by way of inheritance, descent or distribution which the said party of the first part may now have, or, upon the death of the said party of the second part, may hereafter acquire by operation of law in any portion whatsoever of the property, both real and personal, of the said party of the second part.
On January 9, 1932, a judgment and decree was duly made and entered in the second judicial district of the State of Nevada in and for the County of Washoe in the divorce proceedings in which Helen Maresi was plaintiff and decedent was defendant. The decree provided, inter alia:
1. That plaintiff hereby is granted a divorce from the defendant, and the marriage heretofore and now existing between plaintiff, HELEN G. MARESI, and defendant, POMPEO M. MARESI, be dissolved absolutely and forever, and the same hereby is dissolved accordingly, and the said parties are, and each of them hereby is, freed and released from the bonds of matrimony, and all the duties and obligations thereof; and each of said parties is restored to the status of a single person.
2. That the support of the plaintiff, and the care, custody, control, support, maintenance and education of POMPEO HENRY MARESI, SYLVIA-FAY MARESI, and HELEN MARESI, the minor children of plaintiff and defendant; and the property rights of plaintiff and defendant be, and the same hereby are settled and decreed in accordance with the terms and provisions of the agreement between plaintiff and defendant, of date November 13, 1931; and further, the terms of the said agreement hereby fully are adopted, ratified and approved by the Court.
3. That neither plaintiff nor defendant shall have any right, claim or interest of any kind, nature or character whatsoever against the person, property or estate of the other, growing out of or that she or he might have acquired or may in the future acquire or possess by virtue of the marriage of plaintiff and defendant, save and except in accordance with the terms and provisions of the agreement between plaintiff and defendant, of date November 13, 1931.
This decree has not been amended, modified, or changed in any respect and was in full force and effect on August 12, 1940.
At the time of decedent's death he had fully paid all amounts due and payable up to that time, pursuant to the terms of the judgment and decree and the agreement.
Helen Maresi was born on June 28, 1891. She was living on August 12, 1940, and was then 49 years of age. Since the decree was entered, she has not remarried.
The present value of the payments to Helen Maresi on August 12, 1940, on the basis of the Combined Experience Mortality Table at 4 percent (table prescribed for life interests in respondent's regulations No. 105), combined with the Casualty Actuarial Society table on the probability of remarriage, would be $66,949.
The present value of these payments, based solely on Helen Maresi's life expectancy and without considering the contingency of remarriage, on the basis of the tables prescribed in respondent's regulations, would be $70,142.44.
The probability of a widow's remarriage was studied by the Casualty Actuarial Society and in 1932 they constructed the aforementioned table, which was based on the experience of agencies engaging in workmen's compensation insurance. Although there are foreign tables reflecting the probability of remarriage, it appears that there are no other American tables.
In a summary to a report on the table prepared by the Society, it is stated:
The American Remarriage Table based upon an adequate volume of American experience and constructed as outlined in the preceding paragraphs may with reasonable safety be adopted for country wide use.
Petitioner claimed a deduction on the estate tax return in the sum of $64,928.20 by reason of the liability of the estate to make payments to the decedent's divorced wife called for by the separation agreement and decree of divorce. Respondent disallowed the claim in full.
OPINION.
OPPER, Judge:
It is now well settled that a separation agreement fixing the scope of the husband's obligation of support and incorporated in a decree of divorce furnishes a foundation for deduction from the husband's gross estate of amounts paid accordingly. E.g., Edythe C. Young, Executrix, 39 B.T.A. 230; Estate of Silas B. Mason, 43 B.T.A. 813; Fleming v. Yoke (Dist. Ct., N. Dist. W.Va.), 53 Fed.Supp. 552; affirmed without opinion (C.C.A., 4th Cir.), 145 Fed.(2d) 472. So much respondent concedes, while expressing his disagreement with the conclusion reached. No reason is advanced, however, to impair its soundness nor the correctness of the cases already decided. Upon their authority the first question must be answered in petitioner's favor.
The only remaining issue is the amount of the deduction. It is evident that there would be no problem if the payments for which the estate is liable were to continue during the life of decedent's divorced wife. The difficulty is that they are to cease upon her remarriage. This leads to the not unnatural contention on the part of respondent that such a contingency is too tenuous to be measurable and, accordingly, that no deduction whatever is permissible. See Robinette v. Helvering, 318 U.S. 184.
Petitioner introduced in evidence exhibits and the testimony of a qualified actuary purporting to show that there was in existence an experience table dealing with the probabilities of remarriage of widows of various ages, based on the records of workmen's compensation insurance organizations. The figures are said to be applicable throughout the United States and to all levels of the social and economic community. From this, combined with a mortality table, it is possible, of course, to extract a figure for the supposed present value of the claim.
Although Robinette v. Helvering, supra, did in fact dismiss as too speculative for purposes of computation a contingency based upon marriage and the birth of issue, that case rested in part on the authority of Humes v. United States, 276 U.S. 487, and in part upon the fact that ‘petitioner does not refer us to any recognized method by which it would be possible to determine the value of such a contingent reversionary remainder.‘ As to the first basis, in Commissioner v. State Street Trust (C.C.A., 1st Cir.), 128 Fed.(2d) 618, decided long after the Humes case, a determination of the Board of Tax Appeals (Estate of Francis Browne Grinnell, 44 B.T.A. 1286) was modified and the case remanded with the statement:
In determining the amount of the deduction to which the taxpayer is entitled, it does not appear whether the Board took into account the contingency that the widow might remarry * * * we are of the opinion that the probability of remarriage is a factor which should be considered in determining the present value * * * Brotherhood v. Pinkston, 293 U.S. 96, 101 * * *
And, of course, it can not be said here as in the Robinette case that petitioner has referred us to no method for determining the value of the interest in question. Although it is true that a marriage table was offered in the Humes case, it appeared to relate solely to experience among women in the Scotch peerage, while the table proffered here is based upon American statistics.
The figures presently relied upon may leave much to be desired in the way of soundness and accuracy.
It does not appear that any insurance computations for reserve purposes, premium rates, or other action by insurers or actuaries has been predicated upon them or that they have ever before been employed in litigation. Cf. Humes v. United States, supra. It is also true that marriage, as distinguished from death, is at least generally a result of the participant's volition; and that the circumstances of an individual case, rather than the laws of probability, will shape the result in any given situation.
E.g., since the number of cases remaining ‘after the sixth year of widowhood was too small to yield reliable results, the calculations were not carried beyond that point‘ and ‘At some future date when more experience becomes available it may be desirable to introduce added refinements which are not practical at the present time.‘ 19 Proceedings of the Casualty Actuarial Society (May 26, 1933), pp. 291, 298.
Nevertheless, the claim is an undoubted liability of the estate and one which it will be under a continuing obligation to meet. It is, as we have already noted, the type of indebtedness for which under the decided cases petitioner is entitled to a deduction. The practice is to apply mortality tables without requiring proof of the physical condition of the subject of the specific inquiry. Ithaca Trust Co. v. United States, 279 U.S. 151; Estate Tax Regulations No. 105, sec. 81.10. And such facts, as we know, would, if anything, logically operate to decrease the probabilities of remarried during the eight years between the divorce and decedent's death, and her prospective loss of the annuity in the event of remarriage.
Respondent offers no more acceptable method for computing value. The contingency is not so uncertain as in the Robinette case, nor is the evidentiary foundation as speculative as was that in Humes v. United States, supra. Although the problem is difficult at best, we conclude, on the authority of the State Street Trust case, that a deduction on account of the liability in question, taking into consideration the probabilities of remarriage, should be allowed.
Reviewed by the Court.
Decision will be entered under Rule 50.