DIVIDENDS-Continued. 3. Gain or Loss. When final liquidating dividend is received, a closed transaction results, and difference between cost of stock and amount received in liquidation is deductible as a loss. Russel Wheel & Foundry Co... 4. Id. Where stockholder, upon liquidation, receives pro rata share of bonds comprising assets of corporation, he realizes taxable income. measured by difference between cost of stock and market value of bonds at date of liquidation. George Theis, Jr.- 5. Id. Corporation was organized and money invested in it was obtained upon credit of another corporation whose stockholders received stock in first corporation in proportion to their holdings in second. Second corporation was liquidated and its surplus was amalgamated with that of first. Held, stockholders received taxable income from liquidation. Goudie C. R.. 6. Market Value; Assets Distributed; Salability. Inability to sell, as a going concern, a business transferred to sole stockholder upon liquidation, held not to establish absence of market value of assets received in liquidation where other evidence indicated that assets had a fair market value at date of distribution. Wilson E. Schmick.. 7. Id. Sales of Stock. While price paid by majority stockholder to owners of 1/15 of stock immediately before liquidation is entitled to little weight, when standing alone, in determining value of entire stock and, hence, maximum market value of assets at date of liquidation, it will be accorded considerable weight where sale was made at arm's length and vendors had knowledge of corporation's financial condition and value of their stock, and value indicated by sale was corroborated by other evidence. Id. 8. Id. Book Value. Principle that book values are not to be accepted as criterion in determining fair market value of assets received in liquidation must be limited in its application to instances wherein evidence demonstrates that book values do not reflect fair market values at basic date. Id. 9. Id. Good Will. Value of good will charged on books as a mere balancing entry when acquired for stock and subsequent arbitrary additions to good will account, which were later charged off books as worthless, held to have been erroneously added to net book value of assets received in liquidation. Id. 10. Id. Real Estate. Book value of real estate, based on depreciated cost and included in determination of net book value of assets received in liquidation, held to exceed fair market value at date of distribution, upon testimony of expert as to market value and evidence of sale for less than book value several years after liquidation. Id. 11. Id. Stock. Value of stock in 1913 determined upon consideration of dividends paid, sales in 1913, opinion testimony, and financial history of corporation. O. B. Barker. 12. Id. Shares of stock, constituting part of assets of corporation in. which taxpayer was a stockholder and transferred to him upon dissolution, valued as of date of dissolution on basis of balance sheets and earnings. J. E. Chandler.... 13. Rates. Amounts received by stockholder upon dissolution which exceed cost or 1913 value of stock, are subject to both normal and surtax rates under sec. 201 (c), Act 1918. Id. 14. Taxes. Payment by Stockholders, subsequent to year of receipt of liquidating dividend, of taxes assessed against corporation, should be offset against latest distribution received by stockholder in liquidation. Barker-- DOCUMENTS. See CONTRACTS; EVIDENCE, III; LEASES. * Page 1168 1030 901 1141 1180 146 O. B. 1180 DONATIONS. See CONTRIBUTIONS; EXPENSES, V; GIFTS; INVESTED DRAWINGS. See DEPRECIATION, V, 11, 12; GAIN OR Loss, II, 35; EARNED SURPLUS. See INVESTED CAPITAL, XII, (2). 104881-27-93 EARNINGS. See COMPENSATION; DEPRECIATION, III, 21, 23-25, 28, 29; V, 7, 8; DIVIDENDS; EState Tax, I, 4, 9; EXPENSES, IV, 31, 32; GAIN OR LOSs, II, 4, 7, 46, 47, 49, 50; GOOD WILL, 2-4; INVESTED CAPITAL, VI, 4, 34–38, 44; ÍX, 3-5, 15, 16; XI, 20–22; XIÍ (2). EGYPT. See EXEMPTIONS, 2, 3; OFFICERS. ELECTION. See BAD DEBTS, V; INTEREST, III, 2; INVESTED CApital, ELECTIONS. See EXPENSES, IV, 3–5. ELEVATORS. EMPLOYEES. See DEPRECIATION, IV, 41. See AFFILIATIONS, II, 6-8; III, 14; CAPITAL EXPENDITURES, II, 39; COMPENSATION; ESTATE TAX, I, 1; EXPENSES, IV; INVESTED CAPITAL, XII, 12; PERSONAL SERVICE CORPORATIONS, 6-8, 10, 17. EMPLOYERS' LIABILITY. See EXPENSES, II, 13. ENGINEERS. See PERSONAL SERVICE CORPORATIONS, 9. ENTERTAINMENT. See EXPENSES, VIII. EQUIPMENT. See CAPITAL EXPENDITURES, II, 16, 25, 31; Depre- ERROR. See ACCOUNTING, I, 5; AFFILIATIONS, IV, 2; PENALTIES, 7; ESCROW. See COMPENSATION, 1, 18-20; DIVIDENDS, II, 2. ESTATE TAX: I. Gross Estate: (1) Interest Subject to Claims and Distribution, p. 1424. (3) Transfers; Contemplation of or Effective at Death, p. 1425. (5) Powers of Appointment, p. 1426. II. Deductions from Gross Estate: (1) Claims, Expenses, Losses, etc., p. 1426. (2) Bequests, Legacies, Devises, or Gifts, p. 1426. Appeal. See PARTIES, 1. I. GROSS ESTATE. (1) Interest Subject to Claims and Distribution. 1. Title; Sole Proprietor; Interest of Employees. Claim that third persons had financial interest in decedent's business denied upon findings that decedent conducted business and made returns as sole proprietor, that such persons were salaried employees of decedent, and that decedent disposed of entire business by will. Sidney P. Dine... 2. Id. Conveyance in Trust. Where half interest of wife in community property descended to children, who conveyed it to husband without consideration to facilitate administration of wife's estate, held that husband held legal title as trustee for children, and value of property so held, including proceeds from sales, excluded from gross estate of husband. George W. Burkitt Estate__ (2) Valuation of Assets. 3. Real Estate; Evidence. Finding made as to value of real estate owned by decedent at death. Estate of Abby Ann Philipp.. 4. Id. Income and Salability. Land held by estate of decedent may have substantial value notwithstanding it produced no income and market for its sale had not developed. George P. Fisher....... 5. Id. Appraisal. Value determined upon entire evidence, appraisals by witnesses for both parties being made on substantially same basis and their testimony being in conflict only respecting desirability of property, effect of sales of property nearby, condition of local market, and value of fractional interest. Emilie Baer.. Page 166 1158 697 679 881 ESTATE TAX-Continued. 6. Id. Appraisal based on estimates of value by members of local real estate board, who had general knowledge of real estate conditions but made no personal inspection of property, held insufficient to establish lower value than that reported in return by executor, who had sources of information not available to appraisers. E. R. Bernstein _ _ _ 7. Id. Valuation by one of appraisers of separate tract adjoining tract owned by him accepted. Id. 8. Id. State Succession Tax; Expert Testimony. Value determined upon basis of appraisal for State succession tax, value fixed therein being corroborated by opinions of experts. Estate of Charles Dilion --- 9. Stock; Assets and Earnings. There being no evidence of market value and there having been a few isolated sales, value of stock determined upon consideration of value of assets behind stock and analysis of earnings, balance sheets, and general conditions of corporation. Julius G. Day....... Mrs. T. C. Thompson Estate of Warren H. Simmons.... Anthracite Trust Co.-. 10. Id. Sales. Isolated sales are not conclusive. Julius G. Day...11. Id. Average price realized on sales during year of death held a proper measure of value of stock. George P. Fisher__ 12. Id. Prices realized upon sales made after death considered. Anthracite Trust Co. (3) Transfers; Contemplation of or Effective at Death. 13. Constitutionality. Provision of sec. 402 (c), Act 1918, making that section applicable to transfers or trusts made or created prior to passage of act, are not unconstitutional. Hannah M. Spofford... 14. Definition. Contemplation of death, as used in sec. 402 (c), is an apprehension of death within reasonably near future, arising from existing bodily condition, and not general expectation of death entertained by Id. everyone. 15. Id. It must be the motive prompting the transfer of property. Id. 16. Id. An act may be performed in contemplation of death at some time in future and yet not be in contemplation of death within meaning of statute; intent of Congress was to include in gross estate value of property transferred in contemplation of death within reasonable time in near future, as distinguished from general expectation of death entertained by everyone. Philip T. Starck_ _ f 17. Id. Question of Fact. Where transfers are not made within 2 years prior to death and statutory presumption that they were made in contemplation of death does not apply, question whether they were made in contemplation of death is one of fact. Hannah M. Spofford__ 18. Id. Board will look to expressions of decedent and outward visible acts and circumstances surrounding transfer. Philip T. Starck_-- 19. Evidence; Bonds. Proof that bonds were transferred prior to death and that their value was included in return of decedent's estate for State inheritance tax purposes, unaccompanied by evidence showing whether transfer was made absolutely and in praesenti, held insufficient to support finding that transfer was not made to take effect at or after death. Hannah M. Spofford 20. Id. Bonds and Real Estate. Transfers made 3 years prior to death, while decedent was in good health and capable of managing her own affairs and was afflicted with no bodily infirmity that might result in death within reasonably near future, held not to have been made in contemplation of death. Id. 21. Id. Real Estate. Transfer in lifetime of decedent, by execution and delivery of deeds absolute in form, held not a transfer intended to take effect at death. Id. 22. Id. Deed absolute in form, made and delivered more than 10 years before death of grantor but not recorded until after his death, held not to have been intended to take effect in possession or enjoyment at or after death. Henry Riffel.. 23. Id. Transfer with reservation of an annuity, made less than a year prior to death, held, upon findings as to physical condition of decedent, to have been made in contemplation of death. John A. Ward.. Page 1280 1139 942 902 1360 486 942 679 486 1016 514 1016 514 1016 436 879 ESTATE TAX-Continued. 24. Id. Stock. Transfer made more than 5 years prior to death, held not to have been a gift to take effect at or after death. Estate of Henrietta Putnam 25. Id. Transfer to children, made more than 3 years prior to death and while decedent was in good health and active in business affairs, intended as a reward for services and to provide for financial independence of children, held not to have been made in contemplation of death. Philip T. Starck 26. Id. Bona Fide Sale for Notes. Transfer of stock made more than one year prior to death, in exchange for notes having face value equal to par value of stock, to which notes stock certificates were attached as security, held a bona fide sale for fair consideration. Estate of Samuel P. Schwing-27. Id. Cancellation of Notes. Where decedent a few days before his death surrendered such notes to makers with instructions to destroy them, unpaid balance on notes held a gift made in contemplation of death. Id. (4) Joint Tenancy. 28. Sec. 402 (d), Act 1918; Retroactivity. Provisions of sec. 402 (d) "are not retroactive, and, where property was conveyed to decedent and another in joint tenancy prior to its enactment, only half of value of such property, at time of decedent's death, may be included in gross estate. Hannah M. Spofford ---- 29. Id. Evidence. Finding made that undivided half interest in real estate was conveyed to decedent and his wife as tenants in common, and wife's interest excluded from gross estate. Sidney P. Dine.. (5) Powers of Appointment." 30. Exercise of Power. Power of appointment, conferred upon decedent by will of her husband, held not to have been exercised, and property subject to power excluded from gross estate of decedent." Estate of Isabella C. Hoffman-- 31. Id. Power of appointment conferred by will held to have been validly exercised in favor of donee's son and to have vested in appointee an interest in estate of donor to take effect in possession in futuro, the value of which constituted part of gross estate of appointee. Joseph P. McMullen II. DEDUCTIONS FROM GROSS ESTATE. (1) Claims, Expenses, Losses, etc. Page 823 514 697 1016 166 1361 589 Salina Bell.... 1172 1. Attorneys' Fees found to have been paid by estate. 2. Commissions; Executors. Where estate was in process of administration and considerable administrative work and fixing of fees remained to be done, commission of executor, comparatively small in amount, held deductible though not paid. Henry Riffel....... 3. Creditor's Liability. Liability incurred on behalf of decedent as one of several assignees for benefit of creditors to satisfy claim of objecting creditor held a claim against estate. Osmond K. Fraenkel _ _ 4. Physicians' Fees. Deduction disallowed where amount of payment was not proven and evidence merely showed that check was mailed to and received by physician. Estate of Samuel P. Schwing.... 5. State Taxes. State, county, and municipal taxes on real and personal property which, under State law, are general lien upon property of decedent attaching before date of his death, are not administration expenses, but are claims against estate, within sec. 403 (a) (1), Act 1921, notwithstanding amount thereof may not have been determined at date lien attached. Charles B. Shelton... 6. Id. Georgia Law. Time at which liens for State, county, and municipal taxes attach under laws of Georgia determined. Id. 7. Id. State Inheritance Taxes, by express provisions of sec. 403 (a) (1), Act 1921, are not deductible from gross estate. E. R. Bernstein..... (2) Bequests, Legacies, Devises, or Gifts. 8. Invalidity; State Law. Where a bequest to charity is rendered null and void by lex domicilii because made within 30 days prior to testator's death the charity does not receive anything from testator's estate and bequest is not deductible. Estate of Valentine Janson.. Lancaster Trust Co.. 436 1207 697 809 1280 296 298 ESTATE TAX-Continued. 9. Id. Fact that heirs and next of kin conveyed to charities mentioned in will the property attempted to be bequeathed to them does not entitle estate to deduction. Id. 10. Annuity or Bequest. Bequest to a charity of specific sum payable in annual installments held not an annuity, and entire amount of bequest held deductible. Estate of Minnie L. Jackson... 11. Reduction; Pennsylvania Inheritance Tax. Amount of charitable bequests may not be reduced by amount of inheritance taxes imposed by law of Pennsylvania. Id. 12. Evidence; Nature of Transfer. Payments in settlement of lawsuits, received by administrator of husband who died within 5 years prior to death of wife and paid by administrator to wife, held not deductible from wife's estate, it not being shown whether payments constituted a gift, bequest, devise, or inheritance, received by wife from estate of husband, and there being no evidence as to character of suits. Guaranty Trust Co.. 13. Exchange; Identification. Value of property identified as having been received in exchange for property taxed to prior decedent held deductible from gross estate under sec. 403 (a) (2), Act 1921. Estate of Isabella C. Hoffman- 14. Id. There is no limitation to one exchange if property remains segregated and distinguishable. Id. ESTATES AND TRUSTS. See AFFILIATIONS, III, 3, 4, 7, 16; DEPRE- I. GENERALLY. Trusts; Creation. Will devising entire estate to widow for life or during widowhood, with remainder to children, and imposing upon executors duty of holding and managing entire property during life estate or until remarriage of widow, held to have created a trust within sec. 219, Act 1918. Titusville Trust Co.. II. INCOME. 1. Estate in Process of Administration or Trust. Fact that will creates trust is of itself no ground for taxing income of estate as income from property held in trust. Titusville Trust Co... 2. Id. Where a trust is created by will and duties are imposed upon executors, who may also be trustees, in connection with administration or settlement, income of estate is taxable under sec. 219, Act 1918, as income received by estate in process of administration or settlement until executors have performed duties of administration and settlement and turned property over to themselves or others as trustees. Id. 3. Distribution to Beneficiaries. Upon findings that estate was in process of administration and that money, in amounts not disclosed by record, was paid by executors to residuary legatee during taxable year, inclusion in income of residuary legatee of income from property held by estate approved. Marinda Leith.. 4. Id. Life Tenants. Income distributed annually to beneficiary of life interest is not in nature of a devise or bequest which is to be excluded from gross income, but is taxable income of beneficiary. Helene R. McConnell... 5. Id. Proceeds of Sale. Profit upon sale of property of estate of taxpayer's deceased husband held not to have been realized by her in her individual capacity, upon finding that profit was included in her account as administratrix as receipts by estate and that records of probate court showed sale was made for benefit of estate. Lena Speizer- - 6. Fiduciaries. Finding made that moneys received by taxpayer were received by her as a loan to corporation and as treasurer of charitable organization, and were not her personal income. Jane B. Coates--- |