3 B.T.A. 1158

Appeal of GEORGE W. BURKITT ESTATE.

Docket No. 2038.

Submitted November 1, 1925.

Decided April 3, 1926.

James J. O'1 By me, Esq., for the taxpayer.

J. G. Swayze, Esq., for the Commissioner.

Before Graupner and Phillips.

*1161OPINION.

Phillips:

Mary E. Burkitt predeceased her husband, George W. Burkitt, Sr., the decedent whose estate is the appellant in this matter, by about a year. Her estate consisted almost wholly of her community interest in the property accumulated by her and her husband, which comprised 54 parcels of real estate, in which they owned the entire title, and 25 parcels, in which they had a joint interest with others, several items of stocks and bonds, and over 500 notes owing from some 123 persons, many of these notes being payable in installments. Under the laws of Texas the wife’s community interest in the property passed to her two children. In order to facilitate the management and sale of the real estate and collection of the notes, the husband procured deeds from the two children conveying to him their entire interest in the wife’s estate.

About a year after such conveyances were executed George W. Burkitt, Sr., died. His executor was advised by a deputy collector of internal revenue, and later by an internal revenue agent, that the proper manner of making the Federal estate-tax return was to include in the gross estate all the property to which decedent had the legal title, including that of his wife conveyed to .him by his two children, and to claim such property as a deduction, under section 403 (a) (2) of the Revenue Act of 1921, as property which formed a part of the gross estate of a person who died within five years of the death of the decedent. This was done, and the Commissioner, assuming that the property was received by the decedent directly from the wife, allowed as a' deduction a portion of the value of the property which had formed the wife’s estate. The *1162executor of the decedent’s estate filed this appeal, claiming that a greater deduction should have been allowed.

The Commissioner filed an answer alleging that he was in error in allowing any deduction from the gross estate for property taxed as part of the estate of Mary E. Burkitt, and asking that the deficiency be increased accordingly. The taxpayer filed a reply alleging that no part of the property received by decedent from his children should have been included in the gross estate.

Two questions are presented, viz: (1) Did the property of the wife, received by the decedent from his two children, become his property so as to be a part of his gross estate; and (2) if so, how much of such property has been included in the gross estate of the decedent ?

We think there can be no doubt that, in the circumstances shown by the evidence, the beneficial interest in the property of Mary E. Burkitt remained in her children, and that the legal title was vested in the decedent only as a convenient method of managing the property. There were many parcels of real estate on which rents were being collected and timber removed and sold. There were over 500 notes, many of which were payable in installments. Contracts for the sale of property on the installment basis were outstanding. The son was at a sanitarium. Administration on the personal property might easily have been obtained and carried out, but in the sale of the real estate and in the sale of standing timber and conveyances under outstanding contracts of sale the signatures and acknowledgments of the father, son, daughter, and her husband would always have been required. The father was justified when he said in his letter to his son that “to administer on the property would entail an unnecessary expense and a long-drawn-out series of red-tape proceedings.”

The letter from the father to the son, inclosing the deed for execution, was the only communication between them with reference to the conveyance which was executed. It asks that the deed be executed, not because the father claims or wishes to claim or to receive any interest in the mother’s estate but because it “is meant to avoid unnecessary expense in handling your mother’s interest in the property.” There was no consideration given. The father was worth at least $350,000 and the son, except for his interest in his mother’s estate, about $6,000. Substantially, the same representations were made to the daughter as the reason for the execution of a similar deed by her of her interest in her mother’s property. In subsequent conversations the decedent spoke of his half of the property and his children’s half. Under such circumstances we believe that the legal title to the property passed to the decedent for the purpose mentioned by him, viz, to administer it, creating a trust, and *1163that he was at all times subject to account to the children. The decedent died within a year after these conveyances were made and while only a very small part of the whole estate had been collected. These collections were invested by the decedent in the construction of a hotel, a project which he and his wife had started prior to her death. It is our conclusion that the property which has been identified as having been conveyed to the decedent by his children and the proceeds of such part of that property as was sold by him form no part of the gross estate of the decedent.

The record is not entirely clear as to what is the amount by which the gross estate of the decedent has been increased due to the inclusion of such property. The Commissioner’s deficiency letter does not state the amount and the pleadings do not help materially. It is clear, however, that property which has been identified as having come to the decedent from the children and which formed a part of the estate of the wife has been included in the gross estate of decedent at a value of over $295,000, and that there has also been included in the gross estate over $51,359.03 collected during his lifetime and invested in the hotel property. The gross estate should be reduced by these amounts, with any necessary corrections to arrive at the correct amounts, and the deficiency, if any, computed accordingly.

Order of redetermination will be entered on W days’ notice, under Rule 50.

Appeal of Burkitt Estate
3 B.T.A. 1158

Case Details

Name
Appeal of Burkitt Estate
Decision Date
Apr 3, 1926
Citations

3 B.T.A. 1158

Jurisdiction
United States

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