9 T.C. 689">*689 The Commissioner determined a deficiency in estate tax in the amount of $ 1,538.69; and added to the tax a 25 per cent penalty in the amount of $ 3,367.55. The main question is whether a 25 per cent delinquency penalty has been added properly to the estate tax.

FINDINGS OF FACT.

Abraham Werbelovsky died testate on February 17, 1940. At the time of his death he resided in Kings County, City and State of New York. Letters testamentary1947 U.S. Tax Ct. LEXIS 64">*65 were granted on March 23, 1940, by the Surrogate's Court, Kings County, New York, to Samuel and Rose Small and Everett Stein, named in the decedent's will as executors. Petitioners are the duly qualified and acting executors of the estate.

The executors have claimed deduction for executors' commissions in the amount of $ 10,802.40. Respondent disallowed the deduction pending their final determination and payment out of funds of the estate. Proceedings are now pending in the Surrogate's Court of Kings County, to settle the account of the executors. Claim for executors' commissions was made in the accounting of the executors. The commissions have not yet been allowed by the surrogate, nor paid out of funds of the estate.

The estate tax return for the estate of the decedent was due on May 17, 1941. The estate tax return was not filed until January 15, 1943, which was 2 years, 10 months, and 29 days after the date of decedent's death. The preliminary notice of estate tax, Form 704, was not filed within two months after the date of decedent's death, but was filed on January 15, 1943, together with the estate tax return. Neither the petitioners nor the attorney for the estate ever1947 U.S. Tax Ct. LEXIS 64">*66 requested the Commissioner to grant the estate an extension of time within which to file the estate tax return. When the preliminary notice of estate tax was filed, the attorney attached thereto an affidavit in which he stated that failure to file the notice was due to his oversight and was unintentional.

Shortly after the executors were appointed they directed a bookkeeper named Phillips, who had been employed by the decedent, to 9 T.C. 689">*690 make up a list of the assets of the estate. The assets of the estate consisted of a small amount of cash, notes receivable amounting to $ 2,397, miscellaneous claims against others, and equipment and personal property amounting to $ 63,809, and securities in various corporations, the value of which was reported to be $ 112,223 in the estate tax return which was filed. All of the assets of the estate, the debts of the decedent, and the usual expenses of the estate were known within fifteen months after the date of the decedent's death.

There was no question about ownership by the decedent of the several items of property which became the assets of the estate. However, there was pending at the date of the decedent's death a lawsuit which he had1947 U.S. Tax Ct. LEXIS 64">*67 instituted against the Interboro Theatres, Inc., and Popular Theatres in a derivative stockholders' suit in 1937. This suit was brought by minority stockholders to determine whether profits of the corporations were being made available to stockholders through dividends. Also, after the decedent's death the stockholders of J. H. Werbelovsky Sons, Inc., of which the decedent was president and owner of 50 per cent of the stock, resisted an attempt on the part of the executors of the decedent's estate to serve on the board of directors of the company and participate in the management of the business. This led to some litigation.

The suit against Interboro Theatres, Inc., and Popular Theatres was dismissed by the New York County Supreme Court early in 1941. Although notice of appeal was filed, the litigation was settled in June 1941. The majority stockholders agreed to purchase the stock of the dissatisfied stockholders, and under this settlement the estate of the decedent received $ 49,906.46 for the stock in the two theatre corporations. That amount was reported in the estate tax return as the value of the stocks owned by the decedent as of the date of death. In the controversy1947 U.S. Tax Ct. LEXIS 64">*68 with the surviving stockholders of J. H. Werbelovsky Sons, Inc., there was eventual settlement in May or June of 1942, under which the surviving stockholders agreed to purchase the stock of decedent at $ 15,500. That amount was reported as the value of the stock at decedent's death in the estate tax return when it was eventually filed.

The decedent owned all of the stock of two real estate corporations named Abwer Realty Corporation and R. & M. Properties, Inc. He also had claims against Abwer Realty Corporation for sums due to him in the amount of $ 47,735, and claims against R. & M. Properties, Inc., for sums due him in the amount of $ 8,091. The value of the stock of these two corporations could be determined from the value of the assets. The executors had appraisals made by a licensed real estate broker of the real estate owned by the two corporations, but the appraisals were not made until sometime in 1942. The executors did 9 T.C. 689">*691 not consult the attorney for the estate about getting these appraisals made. These appraisements did not require all of the 2 years and 10 months intervening between the decedent's death and the filing of the estate tax return on January 15, 1947 U.S. Tax Ct. LEXIS 64">*69 1943. In the estate tax return, the values of the stocks as of the date of death were reported to be as follows: 1,600 shares Abwer Realty Corporation, $ 35,945.76; 10 shares R. & M. Properties, Inc., $ 10,070.71; aggregate value $ 46,016.47. The total of the values of the stock of the two realty corporations and of the indebtedness of these corporations to the decedent was $ 101,843.27.

The decedent owned 100 shares of Security Title & Guaranty Co. stock and common and preferred stock of a New Hampshire corporation, French & Heald Co. There was no problem about ascertaining the respective values for estate tax return purposes of these stocks, and the values would have been determined by the executors within 15 months after the date of death. They were reported in the estate tax return as having an aggregate value of $ 800.

It was possible for the executors and the attorneys for the estate to ascertain, with reasonable diligence and care within 15 months after the decedent's death, that the assets of the estate had an aggregate value of more than $ 40,000, and that, therefore, the estate would be required to file an estate tax return.

When petitioners retained the firm of Jaffa1947 U.S. Tax Ct. LEXIS 64">*70 & Silverman to act as attorneys for the estate, there was no specific agreement relating to making and filing the estate tax return. The executors and the attorneys were concerned chiefly about continuation of the pending suit against Interboro Theatres which the decedent had instituted. There was a general and implied understanding that the attorneys would look after all matters pertaining to the estate. David Silverman was the member of the firm who looked after the problems and litigation of the estate. Although he does not specialize in the practice of tax law, he knew when he was working on the estate matters that there was a limitation on the time within which the filing of the estate tax return was required, as well as the filing of the preliminary notice, and he knew that the Commissioner had regulations relating to the filing of estate tax returns.

The executors and Silverman knew that the Commissioner had collectors located in Brooklyn and New York, but neither ever asked the Commissioner for extension of time for filing the estate tax return or asked the collector's office for any assistance or advice about any delay in the filing.

There was no reason why appraisals1947 U.S. Tax Ct. LEXIS 64">*71 of the assets of the real estate corporations and the ascertainment of values of all of the assets of the estate, excepting the stocks of the theatre corporations and Werbelovsky Sons, could not have been obtained within fifteen months after 9 T.C. 689">*692 the date of decedent's death. And, with respect to the ascertainment of the value of theatre corporations stocks, the litigation was settled in June 1941, which was about one month after the date the estate tax return was due, without any extension of time, so that June 1941 was the outside limit for every practical purpose for ascertaining all information about every asset of the estate except the Werbelovsky Sons' stock. The valuation of other estate property was not dependent upon settlements of any pending controversies. The executors finally had appraisals made of the assets of the two real estate corporations in 1942. It was not a difficult matter for the executors to ascertain values of real property. Samuel Small, one of the executors, had been engaged in the real estate business in Brooklyn for many years. Also, as a business man, he had filed income tax returns for many years; he had an accountant; and he knew that income1947 U.S. Tax Ct. LEXIS 64">*72 tax returns are due at a prescribed time.

The estate's attorney never advised the executors that no estate tax return would have to be filed.

Although the executors gave Silverman a list of all of the assets of the estate soon after their appointment, they did not give him any estimates or determinations of value of any single item of property. There was no reasonable cause for their failure to do so with respect to all items except the 3 stocks of the 3 corporations to which certain controversies related. Of the 3 executors, at least one was a man of business experience, and he knew that estates are subject to inheritance and estate taxes. They were never advised that the aggregate values of the estate's assets were less than $ 40,000, and there were no reasons for them to so assume. Regardless of whatever kind of settlement or disposition was made of the controversies involving the 3 corporations, the values of other assets in the estate were bound to exceed $ 40,000. Whatever difficulties may have attended arriving at a valuation of the 3 stocks, those difficulties did not impede the ascertainment of values of other properties.

The executors signed the preliminary notice of1947 U.S. Tax Ct. LEXIS 64">*73 estate tax in November 1942. They signed the estate tax return on November 17, 1942, and gave Silverman a check for the estate tax in the amount reported in the return. When the executors signed the return, they knew that it was overdue and that there might be a penalty for late filing. The return and the preliminary notice were not filed with the collector until January 15, 1943. There was no reasonable cause for the additional delay in filing the return after it was executed by the executors.

The delay in filing the estate tax return was not due to reasonable cause.

The penalty of 25 per cent, added by the respondent to the estate tax, is $ 3,367.55, based upon determination of estate tax liability in the amount of $ 13,470.20.

9 T.C. 689">*693 OPINION.

The only question to be decided is whether the petitioners' estate is liable for a penalty because of the late filing of the estate tax return, without reasonable cause for the delay, within the intendment of section 3612 (d) (1) of the Internal Revenue Code. The total amount of the penalty is $ 3,367.55, of which $ 2,826.77 has been paid, leaving a deficiency of $ 540.78 in penalty. Petitioners contend that the entire amount of the1947 U.S. Tax Ct. LEXIS 64">*74 penalty should be abated, and from this it is understood that petitioners claim overpayment of penalty.

There is a deficiency in the estate tax itself in the amount of $ 1,538.69, which results from disallowance of deduction of $ 10,802.40 for executors' commissions. At the trial it was understood that allowance of deduction for executors' commissions could be disposed of by agreement of the parties and given effect under a Rule 50 recomputation. Therefore, no consideration is given to the issue presented in the pleadings that the respondent erred in disallowing the claimed deduction. Petitioner offered no evidence under this issue because of the above understanding. It is assumed that this item will be disposed of by the parties under a Rule 50 recomputation, but, in the event that agreement is not reached, petitioners may move within 30 days from the date hereof for further hearing for the purpose of offering evidence in the matter of the allowance for executors' commissions or to have the record opened to receive a stipulation of facts.

The substance of petitioners' argument is that the delay in filing the estate tax return was due to reasonable cause. The respondent contends1947 U.S. Tax Ct. LEXIS 64">*75 that the record fails to show that there was reasonable cause for the delay.

Consideration has been given to the respective arguments of the parties, and the cases presented by each party in support of his contention have been analyzed. In the light of these cases, the evidence has been carefully examined to determine whether the facts show that there was reasonable cause for delaying to file the estate tax return for a period of 2 years and 10 months after the decedent's death, which was 1 year and 7 months after the return was due. Enumeration of the various cases cited is not considered to be necessary.

The penalty which attaches to the failure to file the estate tax return within the time prescribed by the Commissioner in pursuance of law is limited to 25 per cent of the tax; and whether the penalty is the 25 per cent maximum, or less, depends upon the number of 30-day periods, or fractions thereof, that there is failure to file the required return. See Regulations 105, sec. 81.89. The issue presented does not relate to the failure to file the 60-day notice within 9 T.C. 689">*694 proper time. The question is whether the failure to file the return within 15 months after the date1947 U.S. Tax Ct. LEXIS 64">*76 of death was due to a reasonable cause and not to willful neglect.

The statute provides that the executor shall make estate tax returns (I. R. C., sec. 821 (a)), and that the time for filing shall be governed by regulations of the Commissioner (I. R. C., sec. 821 (b)). Section 821 (a) provides that the executor shall make a return under oath, setting forth, inter alia, the value of the gross estate of the decedent at the time of his death, "or such part of such information as may at the time be ascertainable and such supplemental data as may be necessary to establish the correct tax." Section 820 requires the executor to give notice to the collector within two months after the decedent's death. These requirements have been in successive revenue acts provided for estate tax since the Revenue Act of 1919. Regulations governing the making and filing of estate tax returns have been in effect for many years. The estate tax law is not a recently enacted law.

The duty to file a return depends upon the value of the gross estate at the time of death. A return is required where the value of the gross estate exceeds $ 40,000. The return is due 15 months after the date of death. 1947 U.S. Tax Ct. LEXIS 64">*77 Regulations 105, sec. 81.63.

The Commissioner, in his regulations, has recognized the problems which often are inherent in preparing estate tax returns. Regulations 105, applicable here, provide as follows:

Sec. 81.64. Persons liable for return. -- The Internal Revenue Code provides that the duly qualified executor or administrator shall file the return. * ** If, in any case, the executor is unable to make a complete return as to any part of the gross estate, he is required to give all the information he has as to such property, including a full description, and the name of every person holding a legal or beneficial interest in the property. * * *

Sec. 81.70. Extension of time by Commissioner. -- In case it is impossible for the executor to file a reasonably complete return within 15 months from the date of death, the Commissioner may, upon written application submitted on or prior to the due date showing good and sufficient cause, grant an extension of time not to exceed 3 months from the due date. Before the expiration of the extension period granted a return as complete as possible must be filed. * * * Such return cannot thereafter be amended, although1947 U.S. Tax Ct. LEXIS 64">*78 supplemental information may subsequently be filed that may result in a finally determined tax different from the amount shown as the tax by the executor upon his return. * * * [Italics supplied.]

See also Regulations 80 (1937 Ed.), secs. 64 and 69.

It is clear that the return which the executor is required to file within the 15-month period prescribed is only "a reasonably complete return"; and that there must be good and sufficient cause for not filing such reasonably complete return within 15 months; and 9 T.C. 689">*695 that the extension of time permissible to enable an executor to file a return "as complete as possible" is limited to 3 months.

The petitioners have taken the position that reasonable cause for the failure to file the estate tax return within the prescribed time is found in an alleged inability to ascertain the value of the gross estate. This contention is without merit, as the facts show. It is unnecessary to repeat the facts. The disputes involving the stock of 2 theatre corporations and of the Werbelovsky Sons' stock did not any way impede appraisement of all other assets which constituted the major part of the estate, and had a total value of $ 113,634.05. 1947 U.S. Tax Ct. LEXIS 64">*79 For example, petitioners have not shown any reason for their delay in appraising the assets of the 2 real estate companies for purposes of determining the values of the stocks of those companies and, if necessary, the value of 2 debts of the companies to the decedent. In the absence of evidence to the contrary, it has been found as a fact that the values of the assets, exclusive of stocks of 3 companies, could have been determined within the period of 15 months. The weakness of the contention is further demonstrated by the fact that the dispute involving the theatre corporations was settled in June 1941, as a result of which there was agreement that the estate would receive $ 49,906. The requirements of the Commissioner's regulations under the statute go only as far as to make it obligatory to file a reasonably complete return within the 15-month period, and the regulations permit of a 3-month extension of time for the filing of the return upon showing of good cause. The petitioners have not shown reasonable cause in fact nor in law as a general proposition.

The refuge of the petitioners is in their employment of an attorney for the estate, and the view of the executors, as expressed1947 U.S. Tax Ct. LEXIS 64">*80 by one of them at the trial, seems to be that, since an attorney was retained by estate, the executors were freed from the burden of acting carefully and with reasonable promptness in filing the estate tax return. However, this is not a case where the executors were advised by an attorney that no estate tax return would have to be filed, or that appraisement of all assets was unnecessary. Cf. Adelaide McColgan, Administratrix, 10 B. T. A. 958; Fairfax Mutual Wood Products Co., 5 T.C. 1279. The attorney testified that he never advised the executors that no return would have to be filed, and he did not deny that it would have been possible to get timely appraisals of all property not connected with any litigation and disputes.

The record does not show that there was any clear understanding with the estate's attorney about his employment in so far as it covered Federal estate tax matters, including the preparation and filing of the return. The attorney testified regarding the preparation of the estate tax return as follows:

9 T.C. 689">*696 As a matter of fact, the accountant retained by the estate was not able to get together1947 U.S. Tax Ct. LEXIS 64">*81 a report from which the estate tax return could be filed, until possibly September or October, 1942.

Elsewhere, the attorney testified that it was possible to get appraisals of the assets of the real estate corporations (the values of the stock of which and the indebtedness of those corporations to the decedent aggregated $ 101,843.27 out of a gross estate of $ 179,040.51) before 1942, but that the appraisements of the assets of the real estate corporations were not made until sometime in 1942; that he did not employ the appraisers, but that the executors did; that he had no recollection that the executors secured his advice about having the appraisements made; and that he did not know the reason for delaying the appraisement of the two real estate companies in which the decedent had owned all of the stock.

The impression gained from the record is that the attorney for the estate was not asked to be responsible for getting appraisements of all of the assets of the estate, and that he was not furnished with all of the information necessary for making out the return, but that certain preparations were to be made by the accountant for the estate, who was to be given appraisements by1947 U.S. Tax Ct. LEXIS 64">*82 the executors. Under such circumstances, petitioners can not validly claim that the delay in filing the return was entirely a matter of their reliance upon advice and judgment of counsel, as in the case of C. R. Lindback Foundation, 4 T.C. 652, 667; affd., 150 Fed. (2d) 986. Furthermore, the preparation of the inventory of an estate and the appraisement of the value of such assets are among the duties of executors which they are to carry out within a reasonable time after first receiving the assets. Corpus Juris Secundum, vol. 33, par. 129, p. 1085; Forbes v. McHugh, 25 N.E. 622.

It must be concluded that the petitioners were negligent in carrying out their responsibility in having such assets appraised as would have enabled them to file a reasonably complete return within 15 months, and that the failure to file the return within the prescribed time was due to their delay in providing the attorney with information which was necessary in the making of the return. It appears that the attorney was not diligent and did not exercise the care which his professional undertakings required, but1947 U.S. Tax Ct. LEXIS 64">*83 he was only the agent of the executors, upon whom the obligation to file the return was placed by law. See Berlin v. Commissioner, 59 Fed. (2d) 996; Eagle Piece Dye Works, 10 B. T. A. 1360, 1368.

The petitioners and the estate's attorney have not been able to explain any reasonable cause for failure to file the return even after June 1941, when the theatres' litigation was settled, and after November 17, 1942, when the return was executed. As was said in Estate of Charles Curie, 4 T.C. 1175, 1186, "Moreover, the whole question is colored by the protracted delay in filing the return. * * * All of 9 T.C. 689">*697 these circumstances combine to show clearly a lack of reasonable cause for failure to file, if not willful neglect to file."

The respondent's determination that the penalty should be added to the tax is sustained.

Decision will be entered under Rule 50.