Opinion
Docket No. 4163.
1945-08-30
ESTATE OF NATHALIE KOUSSEVITSKY, SERGE KOUSSEVITSKY, EXECUTOR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Robert G. Dodge, Esq., and Walter A. Barrows, Esq., for the petitioner. Carl A. Stutsman, Jr., Esq., for the respondent.
1. About one month before decedent died she transferred certain securities standing in her name in an agency account at a bank to the joint names of her husband and herself ‘either or the survivor.‘ In the deficiency notice the respondent determined that a part of these securities ‘originally belonged‘ to the husband and that only the balance should be included in decedent's gross estate under section 811(e), I.R.C. Later, it was stipulated that all of the securities ‘originally belonged‘ to the husband and respondent conceded that, under the exception contained in 811(e), no part of the joint account was includible under section 811(e). The respondent then affirmatively alleged that the entire joint account was includible in decedent's gross estate under either section 811(c) or section 811(d)(1), or both. Held:
(1) Except for transfers made in contemplation of death, Congress never intended either section 811(c) or section 811(d)(1) to apply to jointly held property which is covered by section 811(e).
(2) The burden of proof on the affirmative allegation that the transfer was made in contemplation of death was on the respondent, but the burden of proceeding shifted to petitioner after the respondent had made a prima facie case.
(3) On the evidence, the transfer was not made in contemplation of death.
2. On the date of death decedent and her husband owned other property in a joint savings account. On the evidence, held, all of this property ‘originally belonged‘ to the husband and no part thereof was includible in decedent's gross estate under section 811(e). Robert G. Dodge, Esq., and Walter A. Barrows, Esq., for the petitioner. Carl A. Stutsman, Jr., Esq., for the respondent.
This proceeding involves an estate tax deficiency in the amount of $21,810.20. At the hearing the respondent filed an ‘Amendment to Answer‘ in which he prays for a deficiency of $32,587.87 instead of the deficiency originally determined.
As shown in a statement attached to the deficiency notice, the deficiency results from the ‘inclusion in the gross estate for the reason that the joint owner has not established contribution‘ of five items of jointly owned property, as follows:
+---------------------------------------------------------------------------+ ¦Item 1-Real estate and furnishings situated in Lenox, Mass ¦$20,000.00¦ +----------------------------------------------------------------+----------¦ ¦Item 2-Value of assets in agency account State Street¦ ¦ ¦ +-----------------------------------------------------+----------+----------¦ ¦Trust Co. Total value at or nearest the date ¦ ¦ ¦ +-----------------------------------------------------+----------+----------¦ ¦of death ¦$90,483.67¦ ¦ +-----------------------------------------------------+----------+----------¦ ¦Less contribution established by joint owner ¦35,925.57 ¦ ¦ +-----------------------------------------------------+----------+----------¦ ¦ ¦----------¦54,558.10 ¦ +-----------------------------------------------------+----------+----------¦ ¦Item 3-Joint checking account State Street Trust Co ¦ ¦7,116.30 ¦ +----------------------------------------------------------------+----------¦ ¦Item 4-Joint account Cambridge Savings Bank Deposit Book #612353¦3,548.98 ¦ +----------------------------------------------------------------+----------¦ ¦Item 5-Joint account Lloyds & National Provincial Foreign Bank, ¦ ¦ +----------------------------------------------------------------+----------¦ ¦Ltd., London, England ¦375.87 ¦ +---------------------------------------------------------------------------+
By an appropriate assignment of error petitioner contests the inclusion in the gross estate of all five items, and alleges:
The notice of deficiency states that these items are included in the gross estate because the joint owner has not established contribution. The petitioner alleges that all of said property, or the property of which it is the proceeds, originally belonged to him, that none of it prior to the joint ownership was received or acquired by him from the decedent, that none of it originally belonged to the decedent, and that therefore none of it is part of her gross estate under Section 811(e)(1) of the Internal Revenue Code.
In his ‘Amendment to Answer,‘ which concerns item 2 only, the respondent alleges as follows:
6. On or about May 7, 1930, decedent opened an agency account at the State Street Trust Company in Boston by a deposit in said account of certain securities held in her name. This account was maintained in the sole name of decedent and was her sole property until about December 17, 1941.
7. On or about December 17, 1941, the decedent instructed the State Street Trust Company to change the aforesaid account from one in her sole name to an account in the name of herself and her husband, Serge Koussevitsky, as joint tenants with right of survivorship. The account was so changed on that date and was continued in that form until decedent's death.
8. The balance in said account as of January 11, 1942, the date of death, was $90,483.67.
9. In the notice of deficiency herein the respondent included the sum of $54,558.10, a portion of the balance in this account as of the date of death, as a part of the gross estate, and respondent now contends that the entire amount of said account should be included in said gross estate.
10. The aforesaid transfer of December 17, 1941, was a transfer in contemplation of death to the extent of the then balance in said account and was also a transfer includible in the gross estate within the scope of Section 811(d)(1) of the Internal Revenue Code.
Petitioner in his ‘Reply‘ admits the allegations contained in paragraphs 6, 7, and 8 of the ‘Amendment to Answer,‘ but denies that any part of item 2 should be included in decedent's gross estate.
In a stipulation filed at the hearing the respondent concedes that items 1, 3, 5, and $2,000 of item 4, should not be included in decedent's gross estate. Effect will be given to this concession in the recomputation under Rule 50.
At the hearing it was also ‘agreed between counsel that any question of additional attorneys' fees paid to petitioner's counsel may be included under Rule 50.‘ Effect will also be given to this agreement in the recomputation under Rule 50.
The only remaining issues, therefore, are whether any part of the $90,483.67 of item 2 is includible in the decedent's gross estate under either section 811(c) or section 811(d)(1) of the Internal Revenue Code and whether any part of the remaining $1,548.98 of item 4 is includible under section 811(e).
FINDINGS OF FACT.
Nathalie Koussevitsky,
the decedent, died January 11, 1942, at the age of 61, a resident of the State of Massachusetts, and Serge Koussevitsky, her husband, was duly appointed executor of her will. An estate tax return on Form 706 was filed with the collector for the district of Massachusetts on March 8, 1943.
In the record the name is sometimes spelled Natalie Koussevitzky. We have adopted the spelling used in the caption of the petition.
Facts as to item 2.— The property referred to in the statement attached to the deficiency notice as item 2 originally belonged to the decedent's husband, the surviving joint tenant, and prior to December 17, 1941, was never received by the latter from the decedent. At the time of the decedent's death on January 11, 1942, this property belonged to the decedent and her husband as joint tenants, with right of survivorship, and was then held by the State Street Trust Co. as their agent. This joint tenancy was created on December 17, 1941, by the decedent's transfer thereto of the property then belonging to her and held by the State Street Trust Co. in an agency account in the name of the decedent alone. This agency account had been opened by the decedent in her own name in 1930 by the deposit of securities (part of which were pledged to secure a loan) having a net value of approximately $14,000. In 1934 the decedent added to this agency account the property then in another agency account belonging to her and in her name with Lee Higginson & Co., which at that time had a value of approximately $8,500. In 1939 the decedent added $30,000 to the trust company agency account by a check drawn by her on the joint checking account with her husband at the State Street Trust Co. In 1940 the decedent added $10,000 in the same manner. All of this property originally belonged to the decedent's husband and had never been received by him from the decedent.
In May 1941 the decedent's husband added from his own separate funds $15,000 to the trust company agency account belonging to and in the decedent's name. In November 1941 the decedent's husband added $20,000 in the same manner.
It was the property in this agency account belonging to decedent which on December 17, 1941, was transferred by the decedent to her husband and herself as joint tenants, with right of survivorship, with the trust company continuing as agent of the joint owners.
The decedent's husband, sometimes referred to herein as Koussevitsky, has conducted the Boston Symphony Orchestra for about 21 years. His secretary is Olga Naumoff, sometimes referred to herein as Miss Naumoff. She is a niece of the decedent and has lived with the Koussvitsky for the past 16 years.
On or about November 13, 1941, Koussevitsky and Miss Naumoff had a conference with F. B. Eastman of the State Street Trust Co. relative to the investment of certain of Koussevitsky's money which he had been placing in his wife's agency account. As a result of this conference Eastman on November 18, 1941, wrote Koussevitsky a letter in which, among other things, he stated:
We are writing to place before you our Trust Committee's suggestions for investing the sum of $20,000 which you recently added to Mrs. Koussevitzky's Agency Account. The matter was carefully considered by our Committee and they have voted to suggest investing (here follows detailed suggestions relative to the investment of the $20,000 referred to in the opening sentence of the letter).
Since talking with you another question has come to my mind, which I thought it best to mention to you for your consideration. The money which you are adding from time to time to Mrs. Koussevitzky's account actually constitutes a gift by you to her. This raises two points: First, that I presume the person who looks after your taxes should consider the question of making a ‘gift tax‘ return whenever you add such property. Second, that for purpose of investment control, as well as inheritance taxes, the money thus added to Mrs. Koussevitzky's Agency Account becomes hers absolutely. As to the inheritance tax aspect of the matter, if Mrs. Koussevitzky should predecease you, there would be an inheritance tax upon the property coming to you. In this situation and in view of the fact that you have been giving, and probably would continue to give, additional property to Mrs. Koussevitzky's account, I wonder whether you would wish to consider having the Agency Account either divided into two accounts, one for you and one for Mrs. Koussevitzky, or else make the account a joint account, in which ‘either or the survivor‘ has the ownership. I should be pleased to talk further with you or with your Secretary if you think that this point is of value to you.
The above mentioned letter was received by Miss Naumoff while Koussevitsky was away on one of his tours. Miss Naumoff opened the letter and ‘left it‘ until Koussevitsky returned from his tour, which was late in November 1941. She did not show the letter to Mrs. Koussevitsky.
At some time before December 17, 1941, Miss Naumoff obtained a power of attorney from both of the Koussvitsky, which entitled her to sign checks. Mrs. Koussevitsky had always looked after such matters, but it was becoming difficult for her to write. At the time Miss Naumoff obtained the power of attorney from Mrs. Koussevitsky, Miss Naumoff also brought up the question of changing Mrs. Koussevitsky's agency account at the State Street Trust Co. into a joint account. She told Mrs. Koussevitsky that such a change would make it much easier for her in that she would be relieved of a considerable amount of business responsibility.
Shortly before December 16, 1941, Miss Naumoff called Eastman on the telephone and arranged for another conference among Koussevitsky, Miss Naumoff, and Eastman, which was held on December 16, 1941. At this conference Eastman was told that Mrs. Koussevitsky had decided to change her agency account into a joint account, and Eastman was asked what documents would be necessary to effect such a change. Eastman then called one Lynch into the conference, and he discussed joint tenancy to some extent. Nothing was said at this conference about the reason for creating the joint tenancy, except that it would be more convenient for Mrs. Koussevitsky, as it would relieve her of responsibility of signing documents. Nothing was said about taxes.
At no time did Miss Naumoff say anything to Mrs. Koussevitsky about taxes of any kind. Miss Naumoff never heard the matter of estate taxes or inheritance taxes discussed with Mrs. Koussevitsky by anyone. Mrs. Koussevitsky did not discuss any of these matters with Eastman. Koussevitsky never talked with Mrs. Koussevitsky about making the agency account into a joint account.
On December 17, 1941, Miss Naumoff typed and Mrs. Koussevitsky signed a letter addressed to the State Street Trust Co., the body of which was as follows:
I have an Agency Account with your bank. From time to time Mr. Koussevitzky has added to this account from his own salary sums of money which he considered as being his share in my account. The amount he has added thus far, which really makes up his share, amounts to about $70,000.00. The result is that of a total of $93,000.00 which my account is worth, about $70,000.00 is Mr. Koussevitzky's share and belongs to him.
To carry out our original intention, which was to hold this property jointly but not as tenants by the entirety so that each would be entitled to one half of the principal and income to be divisible at any time the whole to go to the survivor, will you please transfer the securities now in this account and standing in my name to the joint names of
Serge and Natalie Koussevitzky (sic)
either or the survivor
and obtain from Mr. Koussevitzky a letter of instruction covering his interest in this Agency Account.
The above mentioned letter was dated December 17, 1941, and was duly received by the State Street Trust Co.
On December 30, 1941, Koussevitsky signed and delivered to the State Street Trust Co. a letter of instructions covering his interest in the joint account established by his wife on December 17, 1941. Among the specific instructions were that the names in which the securities in the joint account were to be issued were ‘Serge Koussevitzky and (Mrs.) Natalie Koussevitzky as Joint Tenants with Right of Survivorship but not as Tenants by the Entirety‘; that the trust company was to ‘Credit income to joint account in your Banking Department in name of Serge and Natalie Koussevitzky namely, my share (50%) of the income‘; and that ‘you are not to make up my income tax returns but send to me a special tabulation of 50% of the income to be reported in my tax returns.‘ Each year it was the custom of the bank to make out Mrs. Koussevitsky's income tax return, but Koussevitsky had someone else make out his return.
Koussevitsky was primarily concerned with the field of music. He regarded his wife as the business head of the family. She had more time to devote to such matters than did he.
Mrs. Koussevitsky's health was very good down to 1940. She was troubled with minor ailments only such as colds, sore throat, and bronchitis. She was a cheerful, artistic, temperamental person, nervous at times and inclined to worry over domestic details. Dr. Roger I. Lee, the Koussevitsky family physician for 20 years, frequently took Mrs. Koussevitsky's blood pressure, which he found to be a little high at times, but he did not regard it as at all serious. Whenever her blood pressure was taken Mrs. Koussevitsky would generally become a little nervous, which was not conducive to accurate readings, and Dr. Lee was not always sure whether she actually had high blood pressure. On December 7, 1941, the reading was 170 over 90 which Dr. Lee regarded as ‘a very respectable figure for anybody age 61.‘ One of the reasons for taking her blood pressure so frequently was to get her accustomed to it so that she would not become nervous when it was taken and more accurate readings could result.
After the fall of Paris in June 1940, Mrs. Koussevitsky worried a great deal about the situation abroad, as all of her relatives were there except for Miss Naumoff and a nephew who was in South America.
On July 4, 1940, Mrs. Koussevitsky suffered a slight stroke (cerebral hemorrhage) and fell, injuring her left arm and left leg. It did not affect her speech or her face and was regarded by Dr. Lee as a ‘mild affair.‘ From this she made practically a complete recovery. In November 1940 Mrs. Koussevitsky had some hemorrhoids removed in the hospital in Pittsfield and at that time was in good condition, except for her left arm, which was a little swollen.
In April 1941 the Koussvitsky went to Saratoga and took some of the baths while there. In May 1941 they went to their summer place in Lenox. In October 1941 she had an attack of bladder inflammation which she had had in Russia. This yielded to the appropriate treatment. On or about November 24, 1941, she had a little clumsiness with her right arm, but by December 21, 1941, this clumsiness had all disappeared. Dr. Lee thought this might have been a slight cerebral accident. During Christmas week of 1941 she was up and about and was very well. Mrs. Koussevitsky had a nurse a good deal of the time after July 4, 1940. Dr. Lee felt that she was better off when she had the nursing care. The nurse did a certain amount of massaging and rubbing and looked after various things, and also relieved Koussevitsky.
On January 11, 1942, Koussevitsky, as was his custom when he was away on tour, called his wife on the telephone at about 11 a.m. and talked with her and found her in excellent spirits. At 5 p.m. she had tea with Miss Naumoff. About 6 p.m. she complained of some headache and the nurse put her to bed. The headache became worse and she lapsed into unconsciousness. At 6:30 p.m. she was in deep coma, and she died at 10:55 p.m. of a massive cerebral hemorrhage. The certificate of death gives cerebral hemorrhage, 6 hours duration, and hypertension 15 years duration, as the ‘Immediate cause of death,‘ and it gives pulmonary tuberculosis as ‘Other conditions.‘
Mrs. Koussevitsky knew the general nature of a stroke and what it means, as her brother had had one. Dr. Lee had told her exactly what she had had on July 4, 1940. She did not seem to be bothered about it, because her brother had his stroke about three or four years before she did and he was still living at the time of her death.
In November and December 1941 Mrs. Koussevitsky had no expectation that she was soon to die, nor did those about her, including Dr. Lee. Mrs. Koussevitsky never said anything to Dr. Lee to indicate that she anticipated dying soon. He testified that it seemed to be far from her thought and that she expected to spend many more summers in Lenox. She never said anything to Miss Naumoff indicating that she was worried about her health. She never made any suggestion of approaching death. She never said anything indicating that she thought she was going to die. In November she was feeling very well, and in December she was improving and feeling cheerful. Koussevitsky never had any talk with her about approaching death. He always expected that he would die first. In December 1941 Mrs. Koussevitsky was doing all right and there was nothing in her condition to lead Dr. Lee to anticipate the stroke that killed her or to anticipate an early death. Koussevitsky went away with the Orchestra on trips in November and December 1941 and January 1942, which he would not have done had he thought there was any danger. He had no idea that his wife was going to die soon. He recalls Dr. Lee saying just before he went on the long trip that she was noticeably improved, and he testified that no one thought of her death.
On May 15, 1939, which was approximately two years and seven months prior to the transfer of December 17, 1941, Mrs. Koussevitsky executed her will and gave all her property to her husband. They had no children. Mrs. Koussevitsky never had any property of her own except that which came from Koussevitsky.
The transfer on December 17, 1941, from Mrs. Koussevitsky's agency account to their joint account was not made in contemplation of death, but was made to carry out their original intention, which was that all property placed in the agency account should be owned jointly by them.
Facts as to item 4.— The property referred to in the statement attached to the deficiency notice as item 4 consisted of a savings account in the Cambridge Savings Bank, opened February 8, 1940, in the names of the decedent's husband and herself and payable to either or the survivor, and the account continued in that form until the decedent's death. Deposits were made in this account as follows:
+---------------------+ ¦Feb. 8, 1940 ¦$1,000¦ +--------------+------¦ ¦Mar. 4, 1940 ¦900 ¦ +--------------+------¦ ¦Apr. 11, 1940 ¦1,000 ¦ +--------------+------¦ ¦May 7, 1940 ¦500 ¦ +---------------------+
Of each of these deposits, $500 represented a check of the Union Central Life Insurance Co. payable to Koussevitsky and endorsed by him. Checks were drawn by the decedent on the joint checking account of herself and husband at the State Street Trust Co. as follows:
+---------------------+ ¦Feb. 8, 1940 ¦$617.60¦ +-------------+-------¦ ¦Mar. 4, 1940 ¦400.00 ¦ +-------------+-------¦ ¦Apr. 9, 1940 ¦600.00 ¦ +---------------------+
The money in the joint checking account from which these checks were drawn originally belonged to Koussevitsky and was never received by him from the decedent. The amount of the savings account as of the date of decedent's death was $3,548.98. The difference between that amount and the deposits of $3,400 represented interest credited to the account by the bank. The above deposits of $3,400, other than the $2,000 from the Union Central Bank Insurance Co., came from funds withdrawn from the joint checking account by the decedent on February 8, March 4, and April 9, 1940.
Any part of the stipulation and admitted allegations of the pleadings not specifically set forth herein is incorporated herein by reference and made a part of these findings of fact.
OPINION.
BLACK, Judge:
The issues have been stated previously. We shall consider first whether any part of the $90,483.67 of item 2 is includible in the decedent's gross estate.
In the deficiency notice the respondent determined that only $54,558.10 of item 2 should be included, and that this amount should be included under section 811(e) of the Internal Revenue Code,
for the reason that the survivor of the joint account, Koussevitsky, had only established that $35,925.57 of the $90,483.67 originally belonged to him and had never been received or acquired by him from the decedent for less than an adequate and full consideration in money or money's worth. The parties have now stipulated that the entire $90,483.67 comes within the exception mentioned in 811(e); that is, the entire $90,483.67 originally belonged to Koussevitsky and had never been received or acquired by him from the decedent, and for that reason the respondent now concedes that no part of the $90,483.67 is includible in the decedent's gross estate under section 811(e). Cf. United States v. Jacobs, 306 U.S. 363.
SEC. 811. GROSS ESTATE.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, except real property situated outside of the United States—(e) JOINT INTERESTS.— 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 as may be shown to have originally belonged to such other person 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 * * *
In discussing joint tenancy in general as affected by the provisions of section 811(e), the petitioner states in his brief:
* * * The only material inquiry is whether the decedent had an interest as joint tenant at the time of his death and if so where the property originated. If A owns property and gives it to B, and B conveys it to A and B as joint tenants, the gift from A to B is entirely immaterial so far as the estate tax is concerned, and all of the property would be included in A's estate if he dies first and none of it will be included in B's estate if he dies first. (See U.S. v. Jacobs, 306 U.S. 363, 371; Stuart v. Hassett, 41 F.Supp; 905, D.C., Mass)
The authorities cited by petitioner in the above quotation from his brief undoubtedly have held that under the circumstances detailed above the value of all the property owned and held in the joint tenancy should be included in A's estate if he dies first. The cases cited did not hold, however, that if B died first none of the value of the property held in joint tenancy would be included in his estate. That question was not involved. However, as we have already stated, respondent now concedes in the instant case that, in view of the fact that the property held in the joint tenancy or the funds with which it was purchased originally belonged to Koussevitsky, the surviving joint tenant, none of it is to be included in Mrs. Koussevitsky's estate under section 811(e), notwithstanding the fact that she conveyed it all to the joint tenancy after having previously acquired it from her husband as gifts. In view of this concession by respondent, we find it unnecessary to go further in our analysis of the provisions of section 811(e) in this particular respect.
The respondent, however, has amended his answer and has affirmatively alleged that the entire $90,483.67 is includible in the decedent's gross estate under either section 811(c) or 811(d)(1) of the code, or both. The material provisions of these subsections are set forth in the margin.
SEC. 811. GROSS ESTATE.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, except real property situated outside of the United States—(c) TRANSFERS IN CONTEMPLATION OF, OR TAKING EFFECT AT DEATH.— To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full 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 consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this subchapter;(d) REVOCABLE TRANSFERS—(1) TRANSFERS AFTER JUNE 22, 1936.— To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke, or terminate, or where any such power is relinquished in contemplation of decedent's death.
Petitioner contends that Congress, in providing under section 811 of the code what property should be included in a decedent's gross estate has, under subsection (e), legislated specifically with respect to joint interests and has specifically excepted certain property from inclusion in the gross estate, and that, since the property in question comes within the exception, the respondent should not be permitted to include the property in the gross estate under some more general provision of the statute.
We do not think that the above contention is true in so far as the ‘contemplation of death‘ provision contained in subsection (c) is concerned. If the transfer on December 17, 1941, from the agency account to the joint account had been made in contemplation of death, then we think the property would be includible in the decedent's gross estate, for, having been made in contemplation of death, it would be the same for tax purposes as if the decedent had never made the transfer and at the time of death still owned the property previously transferred. We think that under such a situation that part of subsection (c) dealing with transfers made in contemplation of death would be more specific than subsection (e) and would therefore take precedence over subsection (e), and the full value of the property transferred would be includible in decedent's estate. But if the transfer on December 17, 1941, was not made in contemplation of death it would be effective for all purposes, including tax purposes, and the property must be considered as jointly owned at death and subsection (e) would be more specific than any other subsection of the statute, and to include the property in the gross estate under some more general provision would have the effect of completely nullifying the specific exception provided for in the more specific subsection of the statute. This is a question of statutory interpretation and it is the ‘more specific indications of legislative intent‘ that we are seeking to determine. Cf. Helvering v. Safe Deposit & Trust Co. of Baltimore, 316 U.S. 56. Moreover, there is nothing to indicate, in our opinion, that Congress in subsection (d)(1), dealing with revocable transfers, intended it to apply to property held as joint tenants or as tenants by the entirety. It certainly seems clear to us that subsection (e), dealing with joint interests, was the one which Congress intended should cover such property.
No instance has been brought to our attention, except the present proceeding, where the Commissioner has contended that, in determining what part of property held jointly with the right of survivorship is includible in the gross estate of a decedent, the applicable subsection of the statute is other than subsection (e) of code section 811 or its counterparts in other revenue acts. In the respondent's brief it is argued at length that it is possible in certain circumstances for the same property to be taxable under more than one subsection. That is assumed without discussion, but we think it is beside the point. The question here is not whether the provisions of certain subsections may sometimes overlap, but whether, where the statute segregates jointly held property from all other property and makes it the subject of separate and distinct provisions which include an express exception, that exception can be nullified by the imposition of a tax under one of the other provisions of the statute. We do not think the exception can be thus nullified. In Liebmann v. Hassett, 148 Fed.(2d) 247, where it was held that subsections (a), (c), and (g) of section 302 of the Revenue Act of 1926 should be applied in determining whether certain insurance was includible in the decedent's gross estate, notwithstanding the fact that subsection (g) dealt specifically with insurance, there was no attempt to tax the first $40,000 of insurance receivable by beneficiaries other than the executor, as that amount was considered specifically exempt from inclusion in the gross estate under subsection (g).
The respondent's regulations have given the same effect to the exception contained in subsection (e). The material provisions of section 81.22 and 81.23 of Regulations 105 are in the margin.
Nowhere else in Regulations 105 is there any indication that the property specifically excepted from inclusion in the gross estate under subsection (e) might be included under some other subsection. By way of contrast,section 81.25 of Regulations 105, relating to life insurance, contains the following:
SEC. 81.22 Property held jointly or by the entirety.— The foregoing provisions of the Internal Revenue Code extend to joint ownerships wherein the right of survivorship exists, regardless of when such ownerships were created. They specifically reach property held jointly by the decedent and any other person * * * provided the decedent contributed toward the acquisition of the property so held * * *SEC. 81.23 Taxable portion.— The entire property is prima facie a part of the decedent's gross estate. But it is not the intent of the statute that there should be so included a greater part or proportion thereof than is represented by an outlay of funds, which, in the first instance, were decedent's own, or more than a fractional part equal to that of the other joint owner should neither have parted with any consideration in its acquirement. Facts, which in a given case bring it within any one of the exceptions enumerated in the statute, may be submitted by the executor.Whether the entire property, or only a part, or none of it, enters into the make-up of the gross estate depends upon the following considerations: (1) So much of the property (whether the whole, or a part thereof) as originally belonged to the other joint owner, and which at no time in the past had been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth, forms no part of the decedent's gross estate. * * *The following are given as illustrative: * * * (e) if the decedent furnished no part of the purchase price, no part of the property should be included * * *
Life insurance not includible in the gross estate under the provisions of subsection (g) of section 811 * * * may, depending upon the facts of the particular case, be includible under some other subsection of section 811 * * *.
The absence of any such provisions in the regulations relating to joint tenancies seems to show the difference between the provisions of the law applicable to the two subjects as understood, interpreted, and applied by the respondent.
We hold, therefore, that, in determining what part, if any, of the $90,483.67 is includible in the decedent's gross estate, we must first determine whether the transfer on December 17, 1941, from the agency account to the joint account was made in contemplation of death. If it was, then, for the reasons above given, the entire $90,483.67 is includible; and if the transfer was not made in contemplation of death, then no part of the $90,483.67 may be included in the decedent's gross estate, due to the exception in section 811(e).
Was the transfer in question made in contemplation of death? The parties are in wide disagreement over who has the burden of proof. The respondent contends that as to $54,558.10 of the $90,483.67 he has merely asserted a different reason for the inclusion of that amount in the gross estate and that the burden is still on petitioner to show otherwise, citing principally Standard Oil Co., 43 B.T.A. 973, 998, and Beaumont v. Helvering, 73 Fed. (2d) 110. As to the balance of the $90,483.67, the respondent contends that in view of the last sentence of section 811(c) of the code the burden is likewise on petitioner to show that the transfer was not made in contemplation of death. Petitioner contends that the burden of proof on this issue is on the respondent.
This issue was affirmatively raised by the respondent by an amendment to his answer and, since it involves purely a question of fact, the burden of proving such fact is on the respondent. Rule 32, Rules of Practice before the Tax Court; Security-First National Bank of Los Angeles, Executor, 36 B.T.A. 633, 637; Constance McCormick, Executrix, 38 B.T.A. 308; Commissioner v. Hofheimer, 149 Fed.(2d) 733. The respondent however, by showing that a material transfer was made by the decedent in the nature of a final disposition within two years prior to her death without consideration, met for the time being the requirement of Rule 32, and the ‘burden of proceeding‘ passed to petitioner. Petitioner then could prevail only by proving ‘by a fair preponderance of the evidence‘ that the transfer was not made in contemplation of death; otherwise, section 811(c) of the code requires that it ‘be deemed‘ to have been. Commissioner v. Hofheimer, supra.
We think petitioner has shown by a fair preponderance of the evidence that the transfer was not made in contemplation of death, and we have so found as an ultimate fact in our findings. The leading case on the meaning of the words ‘in contemplation of death‘ is United States v. Wells, 283 U.S. 102. Under this decision it is the ‘dominant motive of the donor in the light of his bodily and mental condition‘ that controls. The question is one of ultimate fact, arrived at after carefully scrutinizing all the circumstances. Estate of William F. Hofford, 4 T.C. 542, 552. These circumstances or evidentiary facts are set out in our findings. We think they show that the decedent's dominant motive in changing her individual agency account into a joint agency account was ‘To carry out our original intention, which was to hold this property jointly.‘ She so stated in her letter to the State Street Trust Co. on December 17, 1941. This statement would seem to indicate that there had never been any intention to differentiate in the matter of real ownership between property in the individual agency account and the other admittedly jointly owned property. In other words, both parties undoubtedly regarded the property in the individual agency account as joint property and they were not wholly aware that technicalities of title were of any importance.
The respondent contends that the decedent's motive for making the transfer was associated with thoughts of death rather than life. He refers to her nervousness, to her high blood pressure of several years standing, and to the one or two strokes which she had had, and he argues from this that we must conclude that she made the transfer principally on account of her health, with the thought of saving estate taxes. This we think would be contrary to the evidence. Mrs. Koussevitsky did not initiate the transfer. The whole matter received initial attention when, in November of 1941, Koussevitsky had just added $20,000 to his wife's agency account. He had gone to the bank solely for the purpose of discussing how such funds could be best invested. The letter of November 18, 1941, followed. In this letter Eastman (the bank's representative) refers to ‘another question‘ which had come to his mind, which was whether Koussevitsky was aware that in adding these amounts to his wife's account he was possibly creating a gift tax liability and that on top of that ‘if Mrs. Koussevitsky should predecease you, there would be an inheritance tax upon the property coming to you.‘ The respondent emphasizes this reference to inheritance tax and argues that the possibility of saving such taxes induced the transfer. But the record shows that no one ever discussed estate or inheritance taxes with the decedent. The evidence is to the effect that she never saw the letter written by Eastman to Koussevitsky. The matter was not mentioned between the decedent and her husband. We do not know how much Koussevitsky was impressed by that phrase in the bank's letter of November 18, 1941, which said:
* * * As to the inheritance tax aspect of the matter, if Mrs. Koussevitsky should predecease you, there would be an inheritance tax upon the property coming to you. * * *
We do not undertake to say. But the evidence does show, as we have already said, that this letter was not brought to the attention of Mrs. Koussevitsky and that she and her husband did not discuss the subject of estate taxes when it was decided that the agency account should be made into a joint account with rights of survivorship.
We think, therefore, we must conclude from the evidence that estate taxes played no part in the conversion of the agency account into the joint account. We are also satisfied that the thought of death was not in the decedent's mind in December 1941, when she executed the transfer. The evidentiary facts set out in our findings support this conclusion. We are also satisfied that the real motive for making the change was that stated by Mrs. Koussevitsky herself in the instrument, which was to carry out our ‘original intention‘ to hold this property jointly. That was a motive associated with life rather than with death. We hold that the transfer was not made in contemplation of death.
We will now consider item 4. This involves $3,548.98 which was in a joint account at the Cambridge Savings Bank. The parties have stipulated that $2,000 of this amount was contributed by Koussevitsky and should not, therefore, be included in the decedent's gross estate. That leaves $1,400 of principal and $148.98 of interest, which the respondent contends (except for the part of the interest allocable to the $2,000) should be included in the decedent's gross estate under section 811(e) of the code on the ground that the evidence fails to prove that Koussevitsky also contributed the $1,400. The evidence shows, however, that Mrs. Koussevitsky had no property of her own except that which originally came from her husband. That would seem to be sufficient to exclude also the $1,400 and all the interest from her gross estate. But the evidence also shows that on the days (in one case it was two days earlier) Mrs. Koussevitsky made the deposits in the joint savings account in question she withdrew a sufficient amount from their joint checking account which, when added to the four stipulated amounts of $500 each, was sufficient to make the several deposits here in question.
As to this issue we hold that the evidence shows that the remaining $1,400 in question was also contributed by Koussevitsky, and that no part of item 4 is includible in the decedent's gross estate.
Decision will be entered under Rule 50.