Opinion
No. 7444.
May 3, 1937.
McCrady, McClure, Nicklas Hirschfield (by R.A. McCrady), of Pittsburgh, Pa., for plaintiffs.
Chas. F. Uhl, U.S. Atty., and Orris Bennett, Asst. U.S. Atty., both of Pittsburgh, Pa., for defendant.
At Law. Action by Roland A. McCrady and another, executors of the estate of the estate of James H. McCrady, Sr., deceased, against D.B. Heiner, Collector of Internal Revenue for the Twenty-Third District of Pennsylvania.
Judgment for plaintiffs in part and for defendant in part.
This is an action to recover the amount of a tax paid by plaintiffs which they allege was the result of an illegal assessment against properties held by the decedent and his spouse as tenants by the entireties. Jury trial was waived. The court, after hearing, makes the following findings of fact and conclusions of law:
Findings of Fact.
1. Plaintiffs filed in due course their return for federal estate tax on the estate of James H. McCrady, Sr., who died October 12, 1929, and paid said tax according to said return.
2. On April 13, 1932, the Commissioner of Internal Revenue entered a deficiency assessment of $3,803.70; of said amount, the sum of $760.74 represented the share due the Government of the United States. The balance of $3,042.96 represents 80 per cent. to the commonwealth of Pennsylvania.
3. The said sum of $760.74, together with interest thereon amounting to $87.63, was paid by the plaintiffs to the said D.B. Heiner, defendant, as follows:
$760.74 on November 10, 1932, $ 71.40 on November 10, 1932, $ 16.23 on November 9, 1932.
4. Plaintiffs consent to the assessment of a part of the deficiency, to wit, a difference between $760.74 and $688.13, or the sum of $72.61, which they admit was properly due and owing and correctly paid to the United States.
5. Plaintiffs filed their claim for refund on February 7, 1933, and same was rejected on February 20, 1933, by the Commissioner of Internal Revenue for the stated reason that the property involved was purchased, paid for, and given by the decedent to his wife, who furnished no part of the purchase price thereof.
6. The Commissioner of Internal Revenue, in the determination of the deficiency, included as a part of the gross estate of the decedent real estate of the value of $58,000, made up as follows: Rankin property, valued at $20,000, Edgewood property, valued at $20,000, West Springfield farm property, valued at $18,000.
7. The Edgewood property was acquired by deed dated December 7, 1899, by Elizabeth Y. McCrady from Albert L. Swift and Ella B. Swift, and she held the title to the same until March 27, 1928, when an estate by entireties was created therein with her husband, James H. McCrady, Sr., the decedent. At the time of the creation of this estate, James H. McCrady, Sr., gave no pecuniary consideration therefor.
8. The Rankin property was conveyed on October 29, 1896, by Samuel Y. Smail to Elizabeth Y. McCrady, and she held title thereto until March 27, 1928, when an estate by the entireties was created therein with her husband. At the time of the creation of the estate he gave no consideration therefor.
9. The West Springfield property was conveyed by the decedent to his wife on June 10, 1911. On March 27, 1928, she created an estate by the entireties for herself and husband, who, at that time, gave no consideration therefor.
10. The Edgewood property and the Rankin property were purchased, paid for, and given to the wife of decedent on December 8, 1899, and October 29, 1896, respectively, and the West Springfield property which stood in the name of the decedent on June 10, 1911, was on that date a gift by him to his wife.
11. The Rankin property, acquired in 1896, was used as a home until 1899, when the Edgewood property was acquired, and it thereafter was used as a home. The West Springfield property was farm property and has always been used as a summer home. After 1899 the Rankin property was rented and the income therefrom reported for tax purposes by the wife of decedent.
12. The plaintiffs have paid to the commonwealth of Pennsylvania 80 per cent. of the deficiency assessment amounting to $3,042.96.
The facts are stated in the foregoing findings of fact. The question involved is whether the three pieces of real estate owned by the decedent and his wife as tenants by the entireties at the time of decedent's death should be included in the gross estate of the decedent. The answer to this question is to be determined by the Revenue Act of 1926, § 302(e), 44 Stat. 70 ( 26 U.S.C.A. § 411(e), which provides:
"Sec. 302. 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 the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof [1] as may be shown to have originally belonged to such other person [2] and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth."
Excepted from the gross estate of the decedent is the interest of the decedent in property held by him and his spouse as tenants by entireties which originally belonged to the surviving spouse and which had never been received or acquired by the surviving spouse from the decedent.
The Rankin and Edgewood properties originally belonged to the surviving spouse. They were never received or acquired by the surviving spouse from the decedent. That decedent paid for these properties did not make him the owner thereof, nor did they belong to him. The decedent never having been the owner thereof, the surviving spouse did not receive or acquire said properties or an interest therein from the decedent.
The West Springfield property originally belonged to decedent and was received as a gift by the surviving spouse from the decedent.
I, therefore, conclude that the Rankin and Edgewood properties should not be included in the gross estate of the decedent and that the West Springfield property should be included in the gross estate of the decedent. This conclusion is reached upon what is deemed to be a fair interpretation of the legislative intent as manifested by the terms of the act involved. Our attention has not been called to any case in which the precise question, or questions, involved in this case has been previously determined by any court. See Tyler et al. v. U.S., 281 U.S. 497, 50 S.Ct. 356, 74 L.Ed. 991, 69 A.L.R. 758; and Tait v. Safe Deposit Trust Co. of Baltimore, 70 F.2d 79 (C.C.A.4).