Opinion
Scott P. Crampton, of Washington, D. C. (George E. H. Goodner, of Washington, D. C., on the brief), for plaintiff.
Elizabeth B. Davis, of Washington, D. C., Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.
Before WHALEY, Chief Justice, and WHITAKER, MADDEN, LITTLETON, and JONES, Judges.
This case having been heard by the Court of Claims, the court, upon the evidence and the report of a commissioner, makes the following special findings of fact:
1. Elizabeth A. Wilson, an individual residing at Wilson, Arkansas, died on June 15, 1943, at the age of eighty years, having been born March 18, 1863. She was the widow of R. E. Lee Wilson who died testate on September 27, 1933.
2. The present plaintiff is the duly appointed administrator, with will annexed, of the estate of Elizabeth A. Wilson, hereinafter referred to as the decedent. On December 15, 1943, the administrator was substituted as the party plaintiff.
3. On or before March 15, 1935, the decedent filed with the collector for the District of Arkansas an income tax return for the year 1934. That return disclosed no net income and no tax liability.
4. On or before March 15, 1936, decedent filed with the collector for the District of Arkansas an income tax return for the year 1935. That return disclosed taxable net income of $11,116.36, and a tax liability of $406.28. That tax was paid as follows:
March 15, 1936 .....................
$104.57
April 15, 1936 ......................
104.57
June 15, 1936 .......................
104.57
December 15, 1936 ....................
92.57
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Total ...........................
$406.28
5. On or before March 15, 1937, decedent filed with the collector for the District of Arkansas an income tax return for the year 1936. That return disclosed taxable net income of $39,829.84, and a tax liability of $6,380.35. That tax was paid as follows:
March 12, 1937 .....................
$1,595.09
June 15, 1937 .......................
1,595.09
September 15, 1937 ..................
1,595.09
December 15, 1937 ...................
1,595.09
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Total ...........................
$6,380.36
6. The Commissioner of Internal Revenue examined the returns referred to above and determined the net income to be as follows:
Year:
Net Income
1934...........................
$6,174.12
1935...........................
16,356.22
1936...........................
39,829.84
7. Based on the foregoing amounts of net income the Commissioner determined deficiencies in tax for the years 1934 and 1935, which deficiencies with interest were paid as follows:
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Year
Deficiencies
Interest
Date Paid
-----------
----------
--------
------------
1934..........
$ 50.88
$ 5.25
December 11, 1936.
1935..........
622.16
26.83
December 11, 1936.
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8. R. E. Lee Wilson made no provision in his will for his widow, Elizabeth A. Wilson, and left only nominal amounts to his three children. After his death, his three children and other beneficiaries named in the will instituted proceedings in the Circuit Court of Osceola District of Mississippi County, Arkansas, to contest the will, Elizabeth A. Wilson being named the defendant. However, before a trial and decision of the case, a settlement was agreed upon and signed by the plaintiffs in that case which was later approved by the court. Elizabeth A. Wilson did not sign that agreement. The agreement was made subject to Elizabeth A. Wilson's dower interest in the real estate owned by R. E. Lee Wilson at the time of his death and located in Arkansas. That real estate consisted of five pieces of property more particularly described in the next finding.
9. In the settlement of the Federal estate tax liability of decedent's husband, the Commissioner determined that the fair market value of the decedent's (widow's) life interest in one-third of each of four of the five properties (referred to in the preceding finding) at the time of her husband's death was as follows:
Name of Real Estate:
Value of interest,
School District No. 25 Property....
$ 7,267.50
Luxora School District Property....
4,974.31
Hot Springs Property...............
1,205.22
Rufus Lawrence Property............
1,426.67
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Total...........................
$14,873.70
The fifth property, the Boy Scouts of America Property, produced no income. None of these properties was ever occupied by the decedent as a homestead.
10. The foregoing values of decedent's interest in those properties were based on her life expectancy of eight years as of the date of her husband's death and her expected income from the properties. There has been no change in these figures by either party since the agreement to them for estate tax purposes. The properties designated in finding 9 as School District No. 25 Property, Luxora School District Property and Rufus Lawrence Property were farm lands, and the Hot Springs Property was residential property. All of those four properties were rented and the decedent's income therefrom consisted of one-third of the rental proceeds after the necessary expenses were deducted. The rentals of these properties were handled through the office of Lee Wilson & Company, the amounts of rentals were collected by that office and decedent's share was either paid to her or credited to her account.
11. In 1933 decedent received no dower income from her husband's properties. In 1934, 1935, and 1936, the dower income received by her from these properties was as follows:
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Property
1934
1935
1936
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School District No. 25 Property................
$1,352.67
$5,961.28
$2,954.47
Luxora School District Property................
114.60
1,122.88
4,333.51
Hot Springs Property.....
(69.23)
89.50
2.05
Rufus Lawrence Property................
..........
282.66
282.66
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---------
---------
Totals................
$1,398.04
$7,456.32
$7,572.69
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In arriving at the net income on which the taxes assessed against decedent were computed, the Commissioner included these total amounts as taxable income received from those properties in the respective years.
12. The decedent filed timely claims for refund of the tax and interest which were paid for the foregoing taxable years. Those claims were based on the ground that the Commissioner had overstated the decedent's taxable income for each of the respective years by including therein the respective amounts received by decedent as payment of her dower interest.
The Commissioner rejected those claims in full by registered letter dated October 4, 1940, and no part of the amount so claimed has been refunded either to the decedent or to recover.
WHITAKER, Judge.
The question presented in this case is whether or not the income received by Elizabeth A. Wilson from her dower interest in the estate of her husband R. E. Lee Wilson is taxable to her as income.
R. E. Lee Wilson died on September 27, 1933, seized and possessed of five parcels of real estate. From four of these parcels his widow received rent in the year 1934 in the amount of $1,398.04, in the year 1935, $7,456.32, and in the year 1936, § 7,572.69. These sums were included within her gross income. This is alleged to have been erroneous.
When R. E. Lee Wilson died the value of his widow's dower interest in the real estate of which he died seized and possessed was fixed at $14,873.70. Plaintiff contends that the widow's estate is entitled to recover this value before the income from the property is taxable to it. This we think is erroneous.
What the widow got on the death of her husband was a life estate in one-third of the real estate of which he died seized and possessed. Under section 22(b)(3) of the Revenue Act of 1934, 48 Stat. 680, 687, and a similar section of the Revenue Act of 1936, 49 Stat. 1648, 1657, 26 U.S.C.A. Int.Rev.Code, § 22(b)(3), the value of this interest is not income to the recipient in the year in which it was received, but under these sections 'the income from such property shall be included in gross income.' The value of Mrs. Wilson's dower interest was not included in her income in the year in which it was received; it is the income from this interest which has been included in her income. This seems to be clearly in accordance with the provisions of the Acts.
In Tree et al. v. United States, 102 Ct.Cl. 128, 55 F.Supp. 438, it was conceded that if the income included in plaintiff's gross income had been income from her dower interest in her deceased husband's estate it would have been taxable to her. This concession was made necessary not only by the provisions of the Act, but also by our decision in Brooks v. United States, 6 F.Supp. 844, 79 Ct.Cl. 470, and by the decision of the Supreme Court in Irwin v. Gavit, 268 U.S. 161, 45 S.Ct. 475, 476, 69 L.Ed. 897.
In Brooks v. United States, supra, the plaintiff insisted that he had the right to recover the value of his life estate in a trust fund created by the will of his grandmother before he was taxable on the income therefrom. This contention was rejected by us on the authority of Irwin v. Gavit, supra, and other cases.
In Irwin v. Gavit, supra, the plaintiff insisted that he was not taxable on the income which he was entitled to receive from a trust estate created by his mother-in-law, a portion of the income from which he was entitled to receive over a period not to exceed 15 years. The court rejected that contention, saying: '* * * The language quoted leaves no doubt in our minds that if a fund were given to trustees for A for life with remainder over, the income received by the trustees and paid over to A would be income of A under the statute. It seems to us hardly less clear that even if there were a specific provision that A should have no interest in the corpus, the payments would be income none the less, within the meaning of the statute and the Constitution, and by popular speech. In the first case it is true that the bequest might be said to be of the corpus for life, in the second it might be said to be of the income. But we think that the provision of the act that exempts bequests assumes the gift of a corpus and contrasts it with the income arising from it, but was not intended to exempt income properly so-called simply because of a severance between it and the principal found. No such conclusion can be drawn from Eisner v. Macomber, 252 U.S. 189, 206, 207, 40 S.Ct. 189, 64 L.Ed. 521, 9 A.L.R. 1570. The money was income in the hands of the trustees and we know of nothing in the law that prevented its being paid and received as income by the donee.'
Under the authority of the cases cited, we must hold that plaintiff's part of the income from the property in which Elizabeth A. Wilson had a dower interest was properly included in her gross income.
Plaintiff's petition is dismissed. It is so ordered.
WHALEY, Chief Justice, and MADDEN and LITTLETON, Judges, concur.
JONES, Judge, took no part in the decision of this case.