13 T.C. 131">*132 The Commissioner has determined a deficiency in the estate tax of the estate of Eleanor Hughes Beggs, deceased, in the amount of $ 2,551.46. The deficiency results from several adjustments made by the Commissioner in the estate tax return filed by the executor of the estate. Only one of these adjustments is contested, namely, the addition to decedent's gross estate of $ 10,000 which represented a claim against the estate of her husband, Joseph P. Beggs. This adjustment was explained in the deficiency notice, as follows:

It is determined that the amount of $ 10,000.00 belonging to the decedent, and included among the undistributed assets of the estate of her husband, Joseph P. Beggs, of which decedent was the executrix and life tenant, is includible in the decedent's gross estate under the provisions of section 811 (a) and (c) of the Internal Revenue Code, as amended.

Petitioner, by an appropriate assignment of error, contests this adjustment.

The case was submitted upon a stipulation of facts, exhibits, and oral testimony. The facts stipulated are so found. Other facts are found from the evidence.

FINDINGS OF1949 U.S. Tax Ct. LEXIS 120">*123 FACT.

Petitioner is the executor of the estate of Eleanor Hughes Beggs, deceased, (hereinafter called decedent) who was a resident of Allegheny County, Pennsylvania, and died testate on February 24, 1945. The estate tax return was filed with the collector for the twenty-third district of Pennsylvania, on April 30, 1946.

In 1933 decedent made two loans to her husband, Joseph P. Beggs, each in the amount of $ 5,000. On June 25, 1933, Joseph P. Beggs died testate, naming decedent as executrix of his estate. Under the will of Joseph P. Beggs, decedent was entitled during her life to all the income from his residuary estate and upon her death the estate was to be distributed to their daughter, Eleanor Beggs Scott.

On July 6, 1933, letters testamentary on the estate of Joseph P. Beggs were granted to decedent by the Orphans' Court of Allegheny County, Commonwealth of Pennsylvania. Thereafter decedent 13 T.C. 131">*133 promptly qualified as executrix of her said husband's estate and continued to act as such until her death on February 24, 1945.

When Joseph P. Beggs died on June 25, 1933, the loan of $ 10,000 had not been repaid and this loan was listed in the estate tax return filed by decedent, 1949 U.S. Tax Ct. LEXIS 120">*124 as executrix of her husband's estate, as a $ 10,000 debt owing to decedent. The estate tax was paid on the estate of Joseph P. Beggs on the basis of the deduction of the $ 10,000 debt. In filing an inheritance tax return with the Inheritance Tax Department of the Commonwealth of Pennsylvania for the estate of Joseph P. Beggs, deceased, Eleanor H. Beggs, in an affidavit attached to the return, described the $ 10,000 due her by her deceased husband, as follows:

On February 2, 1933, I loaned to my husband, J. P. Beggs, the sum of $ 5,000.00 and on March 2, 1933, I loaned him the additional sum of $ 5,000.00, the money to be used for the purpose of applying on a loan standing in his name in the Farmers Deposit National Bank, and the funds were so applied. As evidence of these loans, I have in my possession a cancelled check dated February 2, 1933, drawn on the Union Trust Company of Pittsburgh to the order of J. P. Beggs in the amount of $ 5,000.00, signed Eleanor H. Beggs and duly endorsed by him, and a check dated March 2, 1933, drawn on the Union Trust Company of Pittsburgh to the order of J. P. Beggs in the amount of $ 5,000.00, signed by Eleanor H. Beggs and endorsed by him; both1949 U.S. Tax Ct. LEXIS 120">*125 checks bearing the endorsement of the Farmers Deposit National Bank for clearing through the Pittsburgh Clearing House on February 3, 1933 and March 3, 1933, and accordingly represented a debt due by the Estate of Joseph P. Beggs to me.

Though there were always sufficient assets in the estate of Joseph P. Beggs, the $ 10,000 was never repaid to Eleanor H. Beggs. So far as the evidence shows, she never made any effort to collect it.

On December 31, 1936, decedent turned over all the assets of her husband's estate to the Union Trust Co. of Pittsburgh (now the Mellon National Bank & Trust Co.) in an agency account, and under her instructions the trust company continued to make investments and reinvestments of these assets. The income from these securities, after deduction of expenses, was paid from time to time by the custodian to Eleanor H. Beggs. Upon her death the trust company was granted letters testamentary on her estate and qualified as executor of her will. Under the decedent's will all of the residue of her estate was given to the bank, as trustee, to accumulate the income therefrom until each of her four grandchildren should attain the age of 21 years, and thereafter 1949 U.S. Tax Ct. LEXIS 120">*126 to pay each grandchild an equal share of the income until each should attain the age of 30 years, when each should receive an equal share of the principal. Soon after decedent's death the trust company was also appointed administrator with the will annexed of the estate of Joseph P. Beggs, and, as such, filed the first and final account in his estate.

13 T.C. 131">*134 In the proceedings before the Orphans' Court of Allegheny County wherein the account of the estate of Joseph P. Beggs, deceased, came on for audit, the court held that decedent did not exercise her right to have distribution made to her as life tenant. Instead, using the language of the court, "she was content to receive the income and have all the residue of the personal property pass to her daughter as the will directs." At the hearing before the auditing judge, counsel for the decedent's daughter, the remainderman under the will of Joseph P. Beggs, appeared and claimed, among other things, that any debt owing to the decedent on account of the two canceled checks to her husband was barred by the statute of limitations. The court thereupon ordered all the assets of the estate of Joseph P. Beggs to be distributed to the daughter. 1949 U.S. Tax Ct. LEXIS 120">*127 The opinion and decree of the orphans' court in the audit proceeding did not direct that the $ 10,000 claim be paid to decedent's estate but, on the contrary, directed that all the assets in the estate of Joseph P. Beggs be distributed to his daughter. The daughter executed and delivered a receipt therefor dated July 30, 1945.

In an estate tax return filed by the estate of Eleanor Hughes Beggs on April 30, 1946, in schedule F, listing "Other Miscellaneous Property," there was listed as item 2:

Indebtedness of Joseph P. Beggs in the amount of $ 10,000. evidenced by 2 canceled checks of Eleanor H. Beggs for $ 5,000. each, dated 2/2/33 and 3/2/33. Declared to be uncollectable by the Orphans Court of Allegheny County, Pennsylvania at the audit of the account on the estate of Joseph P. Beggs, deceased. Value at date of death $ 0.00.

The Commissioner, in his determination of the deficiency, determined that the $ 10,000 claim which decedent had against the estate of Joseph P. Beggs but did not attempt to enforce during her lifetime is includible in decedent's gross estate at full face value.

OPINION.

The question for us to decide is whether the $ 10,000 which decedent loaned to her husband1949 U.S. Tax Ct. LEXIS 120">*128 in 1933, as described in our findings of fact, is includible in decedent's gross estate under section 811 (a) and/or (c) of the Internal Revenue Code, as respondent has determined. If it is includible under either 811 (a) or 811 (c), respondent, of course, should prevail.

We shall first consider whether the $ 10,000 is includible in decedent's gross estate under section 811 (a) of the code, which is printed in the margin. ¹

13 T.C. 131">*135 Respondent argues that the $ 10,000 claim against the estate of Joseph P. Beggs was still in existence at the time of decedent's death and, hence, as an asset of decedent, was includible in her gross1949 U.S. Tax Ct. LEXIS 120">*129 estate under 811 (a). In our findings of fact we found that the $ 10,000 was never repaid, but petitioner contends that the Orphans' Court of Allegheny County, in the proceedings wherein the account of the estate of Joseph P. Beggs, deceased, came on for audit, declared that the $ 10,000 debt was barred by the statute of limitations. If petitioner is correct in this contention, we would be bound by the decision of that state court. This would mean that decedent, at the time of her death, had no legally enforceable claim against the estate of Joseph P. Beggs and, hence, there could not be included in her estate the $ 10,000 under section 811 (a). Respondent argues, however, that, since the decree and the opinion of the orphans' court are bare of any mention of the $ 10,000 being barred by the statute of limitations, although the statute had been pleaded by the daughter, the court did not decide the question and it is now for us to determine whether there was a $ 10,000 claim existing at the time of decedent's death against the estate of her husband.

While the opinion and decree of the orphans' court do not mention the $ 10,000 claim, the decree of that court ordering distribution1949 U.S. Tax Ct. LEXIS 120">*130 of the entire estate of Joseph P. Beggs to his daughter, the remainderman, can reasonably be interpreted to be a holding that the decedent's claim was barred by the statute of limitations, as pleaded by the daughter in the proceeding before the orphans' court.

The Pennsylvania statute, 12 Purdons, section 831, provides for a six-year period of limitations, and even if the Orphans' Court of Allegheny County did not affirmatively hold that the debt was barred, as respondent contends, we would be compelled to hold so, unless some theory be advanced to toll the statute of limitations. The statute of limitations runs against the executor of an estate who is also a creditor. In re Kuhlman's Estate -- Appeal of Rehfuss, 178 Pa. 43">178 Pa. 43; 35 A. 918; motion for reargument refused, 180 Pa. 109">180 Pa. 109; 36 A. 566. It was proper for the remainderman (the daughter) in the estate of Joseph P. Beggs to plead the statute of limitations against decedent as the executrix and creditor of the estate. Hochs Appeal, 21 Pa. 280">21 Pa. 280. Be this as it may, respondent argues that1949 U.S. Tax Ct. LEXIS 120">*131 the statute of limitations was tolled by reason of the payment of interest on the debt. The cases Backrach v. Jewish Foster Home, 185 F. 847, and In re Clad's Estate, 63 A. 542, support the proposition that payments of interest toll the statute of limitations. What respondent argues is that, since decedent received all the income from the securities belonging to the estate of Joseph P. Beggs, she received interest on the $ 10,000 throughout the years until her death. It is true that, throughout the period from the 13 T.C. 131">*136 time decedent qualified as executrix of her husband's estate in 1933 to the date of her death in 1945, she received the net income from the residue of her husband's estate. But this net income was received because she was entitled to it under the terms of her husband's will, and there is nothing to show or indicate that any part of such payments was paid to decedent as interest on the $ 10,000 debt here in question, or was so applied by her. The manner in which decedent Eleanor H. Beggs dealt with the estate of her deceased husband and received the income therefrom over the period of years1949 U.S. Tax Ct. LEXIS 120">*132 is summed up in the opinion of the orphans' court, as follows:

Joseph P. Beggs died testate on the twenty-fifth day of June, 1933. Letters testamentary on his estate were granted to Mary Eleanor Hughes Beggs on July 6, 1933. She advertised her letters promptly, and filed an inventory on the third day of November, 1933. She did not remarry nor did she file any election to take against her husband's will. She died February 24, 1945 without having filed any account of the administration of the estate. She took into her custody all of the assets, and kept them invested as executrix, no part of which was ever transferred into her name, so that the possession of the estate never was parted with by her as executrix. She kept her books as executrix throughout the whole long period 1933 to 1944.

Some changes were made by her in investments from time to time, but always the new investment was substituted for the old. During the period of her administration, the estate enhanced in value. The only part of it she used for herself was the income.

From this statement of the facts, it is difficult to see how there could be any application of section 23 of the Fiduciaries Act. Undoubtedly, 1949 U.S. Tax Ct. LEXIS 120">*133 the widow, as executrix, had a right under the law to file her account and have distribution made to her as life tenant, and, thereafter be accountable for the value at which it was decreed to her. If she had done this, all that could be recovered by her daughter would be the value of the estate which was decreed to her as life tenant. Evidently, she had no intention of exercising any right given to her by the section of the Fiduciaries Act above-cited. She was content to receive the income, and have all the residue of the personal property pass to her daughter as the will directs.

Therefore, while it is clear that decedent throughout the years received the net income of her husband's estate, she received it as the income beneficiary under her husband's will, and we see no reason to hold that any of this income was received as interest on the $ 10,000 loan and tolled the statute of limitations.

Respondent argues that there was collusion and consent in the orphans' court by which the entire residuary estate of Joseph P. Beggs was distributed to his daughter without the payment of this $ 10,000 claim -- this we can not find. All the evidence indicates to the contrary. We hold, 1949 U.S. Tax Ct. LEXIS 120">*134 therefore, that the debt of $ 10,000 owing to decedent at the death of Joseph P. Beggs, her husband, was at the time of decedent's death barred by the statute of limitations, and the evidence convinces us that it had no value. Therefore, nothing can be included in decedent's 13 T.C. 131">*137 gross estate by reason of the claim therefor under section 811 (a) of the code. Cf. Estate of William Walker, 4 T.C. 390. In the latter case we held that notes executed to decedent by two of his children, which were partly secured by collateral but subject to defenses of statute of limitations and coverture, had no value in excess of the value of the collateral. In the instant case the $ 10,000 claim was entirely unsecured and, therefore, there is no collateral to value. In the Walker case, we said:

We think petitioner has furnished sufficient proof to make a prima facie case for the absence of any value in the notes in excess of the collateral. If there were other factors, the burden of going forward to prove them was thereby shifted to respondent. On this issue, we regard respondent's action as erroneous.

In the instant case we think the petitioner has made1949 U.S. Tax Ct. LEXIS 120">*135 out a prima facie case that the claim of $ 10,000 had no value at the date of the death of decedent, and respondent has not come forward with any evidence to the contrary.

Respondent next contends that the $ 10,000 claim of decedent against the estate of her husband is includible in decedent's gross estate under section 811 (c) of the code, printed in the margin. ² Apparently it is respondent's contention that it was within decedent's power at any time prior to her death to have collected the $ 10,000 claim against her husband's estate, of which she was the executrix, and that if she had done so the estate of her deceased husband which passed at her death to his daughter under the husband's will would have been diminished to the extent of $ 10,000. Therefore, he argues, this amounts in effect to a transfer by decedent to her daughter of $ 10,000 to take effect in possession or enjoyment at or after decedent's death, as those terms are used in section 811 (c). It is true, of course, that if decedent had collected the $ 10,000 claim against her husband's estate, the estate would have been diminished to that extent and the daughter, who was the remainderman under her father's1949 U.S. Tax Ct. LEXIS 120">*136 will, would have received that much less in the distribution of her father's estate. But this, we think, would not be a transfer by decedent to her daughter 13 T.C. 131">*138 under 811 (c). It is clear that the entire $ 121,009.35 which Eleanor B. Scott, the daughter, received as a distribution by virtue of the decree of the orphans' court was received under the will of her father, Joseph P. Beggs, and none of it was received by reason of any transfer from her mother.

1949 U.S. Tax Ct. LEXIS 120">*137 Decedent died owning the $ 10,000 claim and it passed along with her other property in trust for decedent's grandchildren. If it had had any value it would undoubtedly have been includible in her gross estate under section 811 (a). But it had no value, as we have already determined. In reality there was no transfer of any property of any sort by the decedent other than that made to her grandchildren by her will. It has been held that a refusal to accept a bequest with the result that the property passed to someone else is not a transfer to that someone else within the meaning of section 402 (c), Revenue Act of 1921. Brown v. Routzahn, 63 Fed. (2d) 914; certiorari denied, 290 U.S. 641">290 U.S. 641.

Under the facts which we have in the instant case, we think we must hold that the decedent transferred neither the claim, nor the amount of $ 10,000, nor any interest in her husband's estate to her daughter, and there is no basis for including the $ 10,000 in decedent's gross estate under the provisions of section 811 (c).

Decision will be entered under Rule 50.