Decedent's husband died leaving his portion of community property to a testamentary trust. Under the terms of his will decedent could elect to have her share of the community property pass into the testamentary trust. If she so elected, she would receive for her life the income from the entire corpus of the trust. Furthermore, when decedent died she held participating 10-year life agreements in ISTF, an open-end, diversified management company. Petitioner valued these agreements for estate tax purposes at their liquidation value.
60 T.C. 330">*331 OPINION
Respondent determined a deficiency in the Federal estate tax of petitioner as follows:
| Docket No. | Date of death | Estate tax deficiency |
| 1309-70 | 12/17/65 | $ 20,173.27 |
Respondent also determined a deficiency in the Federal gift tax and a penalty for failure to file as follows:
| Docket No. | Year | Gift tax deficiency | Sec 6651(a) penalty |
| 1307-70 | 1957 | $ 4,643.20 | $ 1,160.80 |
Certain concessions having been made, the issues remaining for decision are:
(1) Whether participating agreements in a mutual fund owned by decedent at her death should be valued for estate tax purposes by adding to the liquidation value, a portion of the sales load attributable to such agreements. Essentially the validity of
(2) Whether the value of decedent's interest in a trust fund created in the will of her husband, and includable in her gross estate by virtue of
(a) A life estate received by decedent in her husband's, portion of the property transferred to the trust, valued as of the day 1973 U.S. Tax Ct. LEXIS 113">*116 of election to take under the will.
(b) A family allowance decedent received from her husband's estate.
(c) Joint property decedent received by virtue of her husband's death.
(d) Life insurance.
60 T.C. 330">*332 (3) Whether decedent is entitled to an estate tax credit under
(4) Whether decedent's total contribution to the testamentary trust established in her husband's will is affected by a proration of the Federal estate tax and the State death tax imposed on her husband's estate.
(5) Whether decedent is responsible for gift tax deficiency based on her transfer of community property to a testamentary trust pursuant to her election under her husband's will.
(6) Whether decedent's failure to file a gift tax return was negligent.
All of the facts have been stipulated and are found accordingly.
Isabelle M. Sparling (sometimes hereinafter referred to as Isabelle or decedent) was born on November 3, 1887, and died testate on December 17, 1965, a resident of Orange County, Calif. The Federal estate tax return of the Estate of Isabelle M. Sparling was filed with the district director of internal revenue, Los 1973 U.S. Tax Ct. LEXIS 113">*117 Angeles, Calif., on March 17, 1967. An amended Federal estate tax return of the Estate of Isabelle M. Sparling was filed with the district director of internal revenue, Los Angeles, Calif., on June 30, 1967.
The will of Isabelle was admitted to probate in the Superior Court of Orange County, Santa Ana, Calif. On February 18, 1966, the Crocker-Citizens National Bank, Pasadena, Calif., the petitioner herein, was duly appointed as executor of the Estate of Isabelle M. Sparling by the Superior Court of Orange County, Calif.
Isabelle's husband, Raymond Walter Sparling (sometimes hereinafter referred to as Raymond) died testate on February 5, 1956. Raymond's will, which was executed on September 5, 1947, was duly probated in the State of California, a community property State. On May 3, 1957, a Federal estate tax return for the Estate of Raymond Walter Sparling was filed with the district director of internal revenue in Los Angeles, Calif.
A testamentary trust was provided for in Raymond's will. The corpus of this trust was to include, upon the election of Isabelle, all of the community estate.
The essence of this will provided that Isabelle was to be the principal income beneficiary of 1973 U.S. Tax Ct. LEXIS 113">*118 the trust during her lifetime, after which the corpus of the trust was to be divided among named beneficiaries.
The pertinent provisions of Raymond's will read as follows:
THIRD: * * * If my wife, prior to the probate of this Will, shall not have elected whether she shall take under this Will or the rights given her by Law, she shall in due course make that election. She shall in any event, however, be entitled to Probate Homestead exempt property and family allowances out of my Estate. * * *
FOURTH: My beloved wife and I have discussed the provisions herein made 60 T.C. 330">*333 for her and said children, and I believe that this instrument expresses our mutual agreement, and my desire to so provide for her and divide my estate so that she shall have the benefit of approximately one-third of the total value thereof (including certain life insurance) during her lifetime * * *
* * * *
SIXTH: I give, devise and bequeath the residue of my Estate, real and personal, wherever situated, hereinafter termed the Trust Estate to my said beloved wife, Isabelle MacLean Sparling, to my said son, Raymond Carter Sparling, my said daughter, Margaret May Sparling Kingman, my said adopted daughter, Jean Norris Sparling 1973 U.S. Tax Ct. LEXIS 113">*119 DeGolia, and my brother, Maurice C. Sparling, IN TRUST, to hold, manage, and distribute as follows: --
* * * *
(a) Pay my said wife, Isabelle MacLean Sparling, an average of one thousand dollars ($ 1,000.00) per month from the net income of my Estate, as long as said net income is sufficient for said purpose.
* * * *
ELEVENTH:
On February 10, 1956, 5 days after Raymond's death, Isabelle elected to take in accordance with Raymond's will. She waived all claims to her share of the community property.
From February 1956 through and including December 1957 Isabelle received a family allowance totaling $ 23,000.
On December 23, 1957, the community property comprising the corpus of the trust created in the will of Raymond was distributed to the trustees named in Raymond's will to hold in trust.
Soon after the distribution to the trust, the trust corpus was converted into cash, and the cash was deposited in accounts in several savings and loan associations.
The total value of the community property forming the corpus of the trust created by the will of Raymond was computed at the time of the trust's creation at $ 253,932.31.
60 T.C. 330">*334 The value of the corpus of said trust as of December 17, 1965, the date of death of Isabelle, as well as on 1973 U.S. Tax Ct. LEXIS 113">*121 the alternate valuation date, was $ 266,166.19, comprised of the following:
| Cash in savings and loan associations | $ 265,000.00 | |
| Cash in checking account | 597.45 | |
| Cash in bank savings account | 1,137.81 | |
| 266,735.26 | ||
| Less: | ||
| Accrued Federal income tax liability | $ 528.96 | |
| Accrued State income tax liability | 40.11 | 569.07 |
| Total | 1 266,166.19 |
The total net value of property owned jointly by Raymond and Isabelle was $ 52,547.72, one-half of which was reported as taxable on the Federal estate tax return of Raymond. None of said property held jointly was made part of the corpus of the trust created in the will of Raymond.
All of said property held jointly by Raymond and Isabelle became the property of Isabelle by right of survivorship upon the death of Raymond and thence was held by her free of trust.
None of the proceeds of life insurance on the life of Raymond in the amount of $ 43,049.56 were made part of the corpus of the trust created in the will of Raymond. Isabelle received $ 30,368.28 of the proceeds 1973 U.S. Tax Ct. LEXIS 113">*122 of the life insurance. The remaining beneficiaries received $ 12,681.28.
All such proceeds distributed to Isabelle after the death of Raymond were distributed to her pursuant to the contracts of insurance and were held by her free of trust.
At his death Raymond owed debts in the amount of $ 4,427.68. His estate incurred funeral expenses and administration expenses of $ 10,868.88. California State death tax in the amount of $ 4,801.40 was paid by Raymond's estate.
Federal estate tax in the amount of $ 32,913.77 was paid by Raymond's estate.
The monthly trust income of the trust created in Raymond's will was less than $ 1,000 a month until 1965 when the total trust income was $ 12,486.51 for the year.
Upon the death of Isabelle, the trust created in the will of Raymond terminated. The corpus of that trust was thereafter distributed in equal parts to (1) Raymond Carter Sparling, son of Raymond; (2) 60 T.C. 330">*335 Margaret May Sparling Kingman, daughter of Raymond; and (3) Jean Norris Sparling DeGolia, daughter of Isabelle and adopted daughter of Raymond.
No Federal gift tax return was filed nor was any Federal gift tax paid with respect to the transfer of any remainder interest in Isabelle's share in 1973 U.S. Tax Ct. LEXIS 113">*123 community property.
At her death Isabelle owned participating agreements in the Insurance Securities Trust Fund (ISTF). 2
ISTF is registered under the Federal Investment Company Act of 1940 as an open-end, diversified management company. The method of investment in ISTF is for the investor 1973 U.S. Tax Ct. LEXIS 113">*124 to purchase "Participating Agreements" in denominations of $ 1,000 or more. A sales load of 8.85 percent of the aggregate amount invested is deducted upon the purchase of a participating agreement according to the single payment plan. Following the deduction of the sales load the remaining portion of the investment is invested by ISTF. ISTF invests the funds acquired through the sale of participating agreements in common stocks of certain insurance companies, banks, and holding companies.
Each participating agreement sold by ISTF has a maturity period of 10 years from the date of sale. Upon the maturity of any participating agreement the owner thereof receives its liquidating value, which is his proportionate equity in the liquidating value of the net trust assets computed as of the maturity date and based upon the market prices of the portfolio securities as of that date. An investor in ISTF has the privilege of surrendering his agreement at any time within the 10-year 60 T.C. 330">*336 maturity period. If he does so, he is entitled to the liquidation value of his agreement computed as of a time within 24 hours following the receipt of his request to surrender. A holder of ISTF funds has no 1973 U.S. Tax Ct. LEXIS 113">*125 market for the sale of such funds other than redemption.
The values of the participating agreements as reported on the estate tax return of the Estate of Isabelle M. Sparling were the "liquidation values" of the participating agreements as of the alternate valuation date. In determining a portion of the deficiency in the Federal estate tax, respondent added to such "liquidation value" the proportion of the "sales load" that the remaining months of the life of the agreement bore to the total life of the agreement (120 months).
There were other numerous adjustments made to Isabelle's estate tax liability. They include a greater inclusion in Isabelle's gross estate under
Respondent also asserted a gift tax deficiency and a penalty which reflected Isabelle's failure to file any gift tax return when she transferred her remainder interest to the testamentary trust established in Raymond's will.
The primary issue in this case is now a settled point of law. See
The Supreme Court has found that the respondent's regulation,
The next question we must face is the extent to which the interaction of
Stated simply, the purpose of the section is to impose an estate tax with respect to property which a decedent transferred during his life but in which he retained the right to economic benefit until his death. [
The function of
Isabelle's election under the will to transfer her community interest to 1973 U.S. Tax Ct. LEXIS 113">*130 the Raymond Sparling trust in exchange for a life interest in that trust brings into play both
Petitioner in the case at bar has offered many theories in support of its contention that the consideration received by the decedent has been undervalued by respondent for purposes of
The situation herein is not unlike that of the decedent in
Under the applicable California law, [decedent] had a vested right to one-half [subject to adjustments] of the relevant community property free of any power 1973 U.S. Tax Ct. LEXIS 113">*131 of testamentary disposition by [the husband].
The Court viewed the conveyance as a transfer of the decedent's property with a retained life estate, within the purview of
The Court then valued the life estate in the husband's share of the community and pursuant to
The first of petitioner's arguments in the present case is directed at respondent's method of valuing the life estate which Isabelle received as consideration. The respondent, in arriving at the value of the consideration, multiplied the total value of the trust corpus at the time of its creation ($ 253,932.31) by the portion of the trust contributed by Raymond (.425738). This product was then multiplied by .27370, the life estate factor at age 70 (Isabelle's age at the time of the final distribution to the trust). See table I, sec. 20.2031-7(f), Estate Tax Regs. Petitioner's claim is that the correct life estate factor should be .29750, the 1973 U.S. Tax Ct. LEXIS 113">*133 factor for a 68-year-old woman since Isabelle was 68 when Raymond died (February 5, 1956) and when she elected to 60 T.C. 330">*339 take under the will (February 10, 1956). Petitioner claims that either of these two dates more clearly reflects the time when the transfer to the trust was accomplished for purposes of
This question of which is the proper time in the above situation to value the life estate for purposes of
To determine the value of the consideration received at the time of transfer it is appropriate to resort to State law to determine the extent of Isabelle's property rights and the effect of the widow's election on the exact date of transfer. "In all instances, the effect of the election is determined by the status of the property under the laws of the state."
The case of
Daisy executed her agreement to have her share of the community property pass under her husband's will in 1945 at approximately the same time that Andrew executed his probated will. However
[Emphasis added.]
We are not bound by the parties' interpretation of the law as agreed upon in the
The date of death or date of election cannot possibly be considered the final date of the transfer of the assets to the trust if Isabelle could have revoked that election anytime prior to the actual date of distribution to the trust. In the case of
the only question here involved is whether or not the court should have found that the wife had finally and conclusively elected not to take under the will, and should have entered a decree to that effect, which would have been final and binding forever upon her and her successors in interest; but we do not think that the court erred in not so finding and decreeing. There is no provision in the will 1973 U.S. Tax Ct. LEXIS 113">*137 as to the time when the widow shall make her election, and there is no provision in the laws of this state that we know of prescribing any time within which such an election must be made. Of course, a final decree of distribution would be conclusive on the subject,
See also
There is no evidence of record to support a conclusion that Isabelle's election was binding at the time it was made.
Petitioner in support of its position relies on the following authorities:
In
Petitioner's reliance on
Petitioner further disputes respondent's valuation of the consideration received for purposes of
THIRD: * * * If my wife, prior to the probate of this Will, shall not have elected whether she shall take under this Will or the rights given her by Law, she shall in due course make that election. She shall in any event, however, be entitled to Probate Homestead exempt property and family allowances out of my Estate. * * *
FOURTH: My beloved wife and I have discussed the provisions herein made for her and said children, and I believe that this instrument expresses our 1973 U.S. Tax Ct. LEXIS 113">*143 mutual agreement, and my desire to so provide for her and divide my estate so that she shall have the benefit of approximately one-third of the total value thereof (including certain life insurance) during her lifetime * * *
Petitioner refers to provision Third of the will and claims that one-half of the family allowance, Raymond's share, or $ 11,500, was consideration for Isabelle's election to take under the will because it was provided for in Raymond's will.
Petitioner refers to provision Fourth of the will and argues as follows: The overall "mutually agreed" upon plan, if Isabelle elected to take under the will, was to provide Isabelle with at least one-third of Raymond's estate. Therefore this one-third must also be consideration for Isabelle's election to take under the will and relinquish her community property. The only way to reach the one-third figure is to consider the following items as consideration received by Isabelle for her election:
| 1 Life estate in Raymond's property | $ 29,589.33 |
| Life insurance | 30,368.28 |
| 21973 U.S. Tax Ct. LEXIS 113">*144 Properties held in joint tenancy | 52,547.72 |
| 112,505.33 |
60 T.C. 330">*343 Since the value of Raymond's total estate as claimed by petitioner, before taxes and family allowance, was $ 314,647.48, 11 the $ 112,505.33 as shown by petitioner's calculations would amount to approximately one-third of the distributed property. Petitioner therefore claims that Raymond's one-half of the life insurance and the joint property is consideration for Isabelle's election.
This novel argument of petitioner is without substance. All of the items -- the family allowance, the life insurance, and the jointly held properties -- would have gone to Isabelle whether she elected to take under the will or insisted upon her community property rights. When Isabelle made her election these properties already belonged to her. It is therefore impossible for purposes of
A consideration, in the legal sense of the word, is some right, interest, benefit, or advantage conferred upon the promisor, to which he is otherwise not lawfully 1973 U.S. Tax Ct. LEXIS 113">*145 entitled, * * * [
First, we consider the family allowance. The rights of the widow to apply for and receive a family allowance are specifically conferred by statute. Raymond's estate was therefore at all times under a duty to provide this item, and the family allowance is not consideration for Isabelle's election.
Under California law a widow is entitled to a reasonable allowance out of her deceased husband's estate for her maintenance during the progress of the settlement of the estate and which allowance, in the discretion of the court may take effect from the date of death. * * * The right to a widow's allowance is purely statutory. [
See also
In the
It should be noted, however, that a family allowance, homestead 1973 U.S. Tax Ct. LEXIS 113">*146 rights, and any other rights in Andrew's estate to which the widow was entitled under California law, which she would have received even in the absence of an election to act in accordance with Andrew's will, were not part of the consideration received by Daisy in exchange for the transfer to the trust of the remainder interest in her share of the community.
Next we consider the joint property received by Isabelle. According to California State law, Raymond's estate never had any right to this joint tenancy.
60 T.C. 330">*344 "Survivorship is one of the incidents of joint tenancy, and
Surely petitioner does not claim that Isabelle received as consideration property which she was already 1973 U.S. Tax Ct. LEXIS 113">*147 entitled to. The same argument applies to the life insurance. This item also belonged to Isabelle regardless of her election. Once Raymond died, Isabelle, as beneficiary under the policy, was entitled to the proceeds. The proceeds never became a part of Raymond's estate and the estate certainly could not transfer these rights as consideration for Isabelle's election.
It is well settled that a beneficiary under an insurance policy takes by virtue of the contract of insurance rather than by the law of succession; that the proceeds do not become a part of the estate of the insured; * * *
The gift becomes complete upon the death of the insured if not revoked. * * * [
See also
Petitioner relies on
The next issue we must deal with is the effect of
(d) Valuation of Property Transferred. -- The value of property transferred to the decedent shall be the value used for the purpose of determining the Federal estate tax liability of the estate of the transferor but -- * * * * 60 T.C. 330">*345 (2) 1973 U.S. Tax Ct. LEXIS 113">*149 where such property is encumbered in any manner, or where the decedent incurs any obligation imposed by the transferor with respect to such property, such encumbrance or obligation shall be taken into account in the same manner as if the amount of a gift to the decedent of such property was being determined; * * *
Relying on this section respondent argues that even though Isabelle received a life estate in Raymond's share of the community property valued at $ 29,589.33, she is not entitled to a credit for estate taxes paid by Raymond's estate on this amount because she was required to relinquish her remainder interest in her share of the community property. Since this remainder interest is valued at $ 105,911.78 12 and its relinquishment was an "obligation" imposed by the transfer, the valuation of the property subject to the credit is reduced to zero. ($ 29,589.33 minus $ 105,911.78). Respondent points to an example in the regulations in support of his contention. 131973 U.S. Tax Ct. LEXIS 113">*150
Petitioner argues for the application of
Our attention has not been called to, nor have we found, any cases which may be said to be dispositive of the issue herein. Therefore, in construing the application of
The purpose of
In order to effectuate this purpose, while at the same time preventing serious abuses of the credit, Congress provided essentially that the credit be computed on the net gain to the second estate. See
In order to determine the appropriate
It follows logically that if the obligation which the transferee incurred did not reduce the amount included in her estate for estate tax purposes, such an obligation should not reduce the value of the property transferred to that estate which is subject to the credit under
Isabelle transferred an interest in her community property for the life estate in Raymond's property. However, because she retained a life estate in the portion she transferred,
Petitioner also objects to the method used by respondent to calculate Isabelle's share of the community property contributed to the testamentary trust established by Raymond's will. We must agree with respondent's calculations. Respondent determined that prior to deducting expenses and claims Raymond and Isabelle each contributed $ 164,972.02 of community property to the trust. From this amount respondent deducted from each party's contributions one-half of the cost of the funeral and administration expenses, debts, and the family allowance. However, the respondent did not apportion at all the State death tax or the Federal estate tax. This was deducted entirely from Raymond's contribution to the trust. The effect of this was to calculate that Isabelle contributed more percentagewise to the trust than Raymond and this 60 T.C. 330">*347 in turn 1973 U.S. Tax Ct. LEXIS 113">*154 caused Isabelle to include a greater amount in her estate by virtue of
Petitioner contends that since a portion of Raymond's gross estate for tax purposes included joint property and life insurance which Isabelle and 1973 U.S. Tax Ct. LEXIS 113">*155 others received, it would be proper according to California State law 161973 U.S. Tax Ct. LEXIS 113">*156 to apportion the taxes related to these items. The effect of such an apportionment would be to increase the after-tax net amount contributed by Raymond to the trust and decrease Isabelle's net contribution, thereby reducing the percentage of the trust attributable to Isabelle and reducing the amount of the trust includable in Isabelle's estate by virtue of
60 T.C. 330">*348 We cannot agree with petitioner. We note that the taxes were attributable to property which Isabelle received outright and which she did not contribute to the trust. All that Isabelle contributed to the trust was her community property and it is well established that Isabelle's share of the community property was not part of Raymond's gross estate and cannot share the Federal estate tax burden. See
In 1973 U.S. Tax Ct. LEXIS 113">*157 docket No. 1307-70 respondent asserted a gift tax deficiency of $ 4,643.20, and a delinquency penalty under section 6651(a) of $ 1,160.80. Both the tax and the penalty are properly asserted.
On the date of the distribution to the trust, December 23, 1957, Isabelle transferred her interest in the community property to the trust. She retained a life interest in her share of the community property and received a life interest in her husband's property. As stated in the previous portion of the opinion dealing with Isabelle's estate tax liability, the life interest in Raymond's property was the only consideration she received for this transfer.
Based on the foregoing transaction it was stipulated that Isabelle on the date of transfer relinquished all power to devise or bequeath the remainder interest in her share of the community property. The value of this remainder interest on December 23, 1957, the date of distribution to the trust, was $ 105,911.78. 17 Isabelle contributed $ 145,823.74 to the trust and the remainder factor for a woman her age is .72630. See sec. 20.2031-7(f), table I, Estate Tax Regs. Respondent in accordance with
60 T.C. 330">*349 In calculating the gift tax due, respondent correctly determined that petitioner was not entitled to claim any annual exclusions as provided in
Respondent was also correct in asserting a penalty under section 6651(a) for Isabelle's failure to file a gift tax return for the year in question. Petitioner presented no evidence to explain this failure and argued on brief that there was reasonable cause in that the case of
Petitioner in its reply brief brought to issue one point which was not part of its petition or its original brief. 21 This point is:
60 T.C. 330">*350 The individual income tax returns of Isabelle M. Sparling for the years 1957 to 1964, inclusive, were also overpaid because the cost of her life estate in Raymond's share was not amortized as held in
This issue has not been properly raised, and we must decline to consider this question. When issues are presented in the reply brief only, there is even stronger reason to disregard them than when they are raised on brief and not found in the petition, and "we have consistently held that since the primary 1973 U.S. Tax Ct. LEXIS 113">*162 purpose of pleadings is the joinder of issue between the parties, issues attempted to be raised by brief will be disregarded."
1. All section references are to the Internal Revenue Code of 1954, unless otherwise indicated.↩
1. The parties have stipulated as to certain bank accounts and accrued tax liabilities in arriving at this figure. The ultimate figure which was contested in the petition is therefore no longer at issue.↩
2. Isabelle's holdings in ISTF were as follows:
| Value as reported | Value as determined | |||
| Agreement No. | Issued | Face value | on alternate | by |
| valuation date | respondent | |||
| E252717 | 2/04/63 | $ 15,000 | $ 11,390.17 | $ 11,674.84 |
| U280806 | 7/03/63 | 10,000 | 8,059.16 | 8,544.72 |
| U301153 | 10/17/63 | 15,000 | 11,328.69 | 12,036.87 |
| U301154 | 10/17/63 | 10,000 | 7,638.60 | 8,116.14 |
| U460747 | 9/07/65 | 15,000 | 12,601.78 | 13,611.17 |
| n1U344261 | 4/15/64 | 6,000 | 4,276.07 | 4,464.15 |
| U344263 | 4/15/64 | 1,000 | 695.97 | 742.63 |
| U367758 | 7/13/64 | 2,500 | 1,706.03 | 1,824.30 |
| U367759 | 7/13/64 | 2,500 | 1,706.03 | 1,824.30 |
| U393527 | 10/21/64 | 2,500 | 1,740.35 | 1,865.00 |
| U393528 | 10/21/64 | 2,500 | 1,735.57 | 1,845.81 |
| U465477 | 10/07/65 | 1,000 | 820.07 | 886.37 |
This participating agreement was reissued prior to the death of Isabelle as three separate agreements as follows:
| Value as reported | Value as determined | |||
| Agreement No. | Issued | Face value | on alternate | by |
| valuation date | respondent | |||
| U344909 | 4/15/64 | $ 2,000 | $ 1,402.41 | $ 1,496.45 |
| U344910 | 4/15/64 | 2,000 | 1,402.41 | 1,496.45 |
| U344911 | 4/15/64 | 2,000 | 1,471.25 | 1,471.25 |
3. See also
4.
(b)
(2) The provisions of this paragraph shall apply with respect to estates of decedents dying after October 10, 1963.
5.
(a) In General. -- If any one of the transfers, trusts, interests, rights, or powers enumerated and described in sections 2035 to 2038, inclusive, and section 2041 is made, created, exercised, or relinquished for a consideration in money or money's worth, but is not a bona fide sale for an adequate and full consideration in money or money's worth, there shall be included in the gross estate only the excess of the fair market value at the time of death of the property otherwise to be included on account of such transaction, over the value of the consideration received therefor by the decedent.↩
6. Indeed, it was stated in [decedent's] estate tax return that: "Our decedent exchanged her community share in return for a life interest in her husband's community."
7. Indeed, it is questionable in the circumstances of that particular case whether the agreement was based on a sound interpretation of California law. See, for example,
8. Neither party has referred to
"Having determined that there is consideration as contemplated by
This language is in direct conflict with the conclusion we have reached. However, the main issue in consideration was the applicability of
9. In the
10. This same reasoning is applicable to distinguish
1. The exact amount of this figure is, of course, dependent on our disposition of the previous issue.↩
2. Included in this is the homestead exempt property which Isabelle is entitled to by statute.
11. This figure, which was found in the petition only, has not been justified by petitioner.↩
12. This figure was determined by computing the remainder interest of a woman at age 70 in the total amount of property contributed by Isabelle to the trust.↩
13.
(b)(3)(iii)
14.
15. Property contributed by Raymond and Isabelle to testamentary trust at time of its creation (per estate tax return of Raymond):
| Type of property | Full value | Raymond's | Isabelle's |
| interest | interest | ||
| Real estate | $ 5,500.00 | $ 2,750.00 | $ 2,750.00 |
| Stocks and bonds | 35,000.00 | 17,500.00 | 17,500.00 |
| Mortgages, notes, and cash | 282,149.22 | 141,074.61 | 141,074.61 |
| Miscellaneous | 7,294.82 | 3,647.41 | 3,647.41 |
| Subtotal | 329,944.04 | 164,972.02 | 164,972.02 |
| Less expenses and claims: | |||
| Type of expense | Full amount | Raymond's | Isabelle's |
| share | share | ||
| Funeral and administration | $ 9,868.88 | $ 4,934.44 | $ 4,934.44 |
| Debts | 4,427.68 | 2,213.84 | 2,213.84 |
| Attorneys fees | 1,000.00 | 500.00 | 500.00 |
| Family allowance | 23,000.00 | 11,500.00 | 11,500.00 |
| State death tax | 4,801.40 | 4,801.40 | 0 |
| Federal estate tax | 32,913.77 | 32,913.77 | 0 |
| Subtotal | 76,011.73 | 56,863.45 | 19,148.28 |
| Net contribution to trust: | |||
| Full | Raymond's | Isabelle's | |
| contribution | contribution | contribution | |
| $ 253,932.31 | $ 108,108.57 | $ 145,823.74 | |
| $ 100.00% | 42.5738% | 57.4262% |
16.
Whenever it appears upon any accounting, or in any appropriate action or proceeding, that an executor, administrator, trustee or other fiduciary has paid an estate tax to the Federal Government under the provisions of any Federal estate tax law, now existing or hereafter enacted, upon or with respect to any property required to be included in the gross estate of a decedent under the provisions of any such law, the amount of the tax so paid, except in a case where a testator otherwise directs in his will, and except in a case where by written instrument executed inter vivos direction is given for apportionment within the fund of taxes assessed upon the specific fund dealt with in such inter vivos instrument, shall be equitably prorated among the persons interested in the estate to whom such property is or may be transferred or to whom any benefits accrues. (Added Stats. 1943, c. 894, p. 2740, § 1.)
17. See fn. 22
18.
(b) Where property is transferred for less than an adequate and full consideration in honey or money's worth, then the amount by which the value of the property exceeded the value of the consideration shall be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year.↩
19. There is an unexplained discrepancy of 1 cent.↩
20.
(b) Exclusions From Gifts. -- In the case of gifts (
21. Two further points in petitioner's reply brief are properly left for determination in the parties' Rule 50 computation. These points are:
"[1] That the Court find as a matter of law that the legal expense of the petitioner as executor/trustee in prosecuting this appeal be allowed as a deduction from the gross estate of Isabelle M. Sparling."
"[2] [When] the date of distribution is used then the husband's share of the community property during administration of the estate shall be allowed as additional consideration to the widow for transferring her community property to the trust. The petitioner herein [relying on the
22. Petitioner on brief also claimed that one-half of the family allowance must be taken as a deduction in determining Raymond's estate tax and a reconsideration of Raymond's estate tax and its effect on Isabelle's return is in order. This issue was not stated in the petition and moreover is based on an incorrect assumption. The family allowance is not a deductible item in computing the estate tax. See
