T.C. Memo. 2012-6



                      UNITED STATES TAX COURT



   ESTATE OF DWIGHT T. FUJISHIMA, DECEASED, EVELYN FUJISHIMA,
              PERSONAL ADMINISTRATOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3930-10.                 Filed January 9, 2012.



     Evelyn Fujishima, pro se.

     D. Anthony Abernathy, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   Respondent determined a deficiency of

$1,956,202 in the estate tax of the Estate of Dwight T. Fujishima

(decedent), who died intestate in Hawaii on January 23, 2005.

After concessions, the issues for decision, all factual, are:

(1) Whether the taxable estate should be increased to include the
                              - 2 -

$10,000 face amount of a Conseco, Inc. Senior Note (Conseco

note); (2) whether the taxable estate should include $1,037,973

as the value of a life insurance policy from West Coast Life

Insurance Co. (West Coast policy) or should be reduced by

excluding $1 million as the value of a life insurance policy from

Allianz Life Insurance Co. (Allianz policy); (3) whether the

estate is entitled to deductions of $87,000 for executor’s

commissions, $50,000 for attorney’s fees, and $130,000 for

charitable contributions; and (4) whether the estate is entitled

to a deduction for $175,000 allegedly owed by decedent to his

mother as of the date of death.    Unless otherwise indicated, all

section references are to the Internal Revenue Code in effect as

of the date of death, and all Rule references are to the Tax

Court Rules of Practice and Procedure.

                        FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.    Evelyn

Fujishima (Ms. Fujishima) is the mother of decedent and the

personal administrator of his estate.    She resided in Hawaii at

the time the petition was filed.

     At the time of decedent’s death, he was the owner of the

Conseco note that had been purchased for $10,000.   On a brokerage

statement for decedent’s investment account for January 2005, the

note was described as “Conseco Inc. (Escrow) Senior Notes cpn
                                - 3 -

10.75% due 06/15/08, dtd 06/29/01”.     The “Current Price” was

shown as “N/A” and was accompanied by a note stating that “This

unpriced security is not reflected in your total portfolio

value.”    The brokerage statement also reported that decedent was

the owner of 273 shares of Conseco, Inc. stock at a price of

$19.05 per share.    The net portfolio value of priced assets in

the brokerage account exceeded $654,000, and the estimated annual

income was $29,810.

     Decedent was also the record owner of three life insurance

policies, the West Coast policy issued October 22, 2003, the

Allianz policy, and a $100,000 policy from Amerus Life Insurance

Co. (Amerus policy) issued on November 7, 1983.     Decedent’s

brother, Edmund Fujishima, was the named beneficiary of the West

Coast and Allianz policies, and Ms. Fujishima, the mother of

decedent and of his brother, was the named beneficiary of the

Amerus policy.

     Decedent was injured in 1992 and repeatedly thereafter and

had difficulty working.    Thus Ms. Fujishima took care of him; he

lived in her house; and she fed him, clothed him, and paid his

bills.    She did so gratuitously and would have done so without

expectation of payment.    The expenses were paid in cash, and no

records were kept showing the amounts expended by Ms. Fujishima

or by decedent.
                               - 4 -

     As administrator of the estate, Ms. Fujishima gathered

information and provided it to her attorney, but she kept no

records of the work performed by her or by her attorney.   Thus

there are no records supporting the amounts claimed for

executor’s commissions or attorney’s fees.

     On the Form 706, United States Estate (and Generation-

Skipping Transfer) Tax Return, filed on April 6, 2007, the

Conseco note was not included as an asset of the estate.   The

values of the Allianz policy and the Amerus policy were included,

but the West Coast policy was shown as “(disputed ownership)”

with no value reported.   Deductions were claimed for executor’s

commissions of $87,000, attorney’s fees of $94,000 (now conceded

by petitioner to be $50,000), administrative expenses of $8,500

(now conceded by petitioner), charitable contribution deductions

of $142,000 (now conceded by petitioner to be $130,000), and

$175,000 owed to Ms. Fujishima.

     In the notice of deficiency, in addition to the items

remaining in dispute, respondent determined that the taxable

estate included the value of certain jointly owned real property;

but respondent has now conceded that the value of the real

property may be excluded.
                               - 5 -

                              OPINION

Procedural Matters

     By notice served January 7, 2011, the case was set for trial

in Honolulu, Hawaii, on May 23, 2011.   On March 7, 2011,

respondent served on petitioner requests for admissions, seeking

admissions as to all of the issues in this case.   Although the

requests for admissions referred to Rule 90, the requests did not

advise petitioner of the consequences of failing to respond as

provided in Rule 90(b).   Petitioner failed to respond to the

requests, and in respondent’s pretrial memorandum and posttrial

brief, respondent contends that the matters set forth in the

requests are deemed admitted (except as to the includability of

the real property, now conceded by respondent).

     At the time of trial, the Court noted the deemed admissions

and allowed 30 days for petitioner to provide additional

documentation of the estate’s claims and to make a motion to be

relieved of the admissions.   (Petitioner was assisted at trial by

the attorney who had prepared the estate tax return but who did

not enter an appearance, apparently because she was not admitted

to practice before this Court.)   A supplemental stipulation was

filed, but no motion to be relieved of the admissions was

received.
                               - 6 -

     Rule 90(f) provides in part that

           withdrawal or modification [of an admission]
           may be permitted when the presentation of the
           merits of the case will be subserved thereby,
           and the party who obtained the admission fails
           to satisfy the Court that the withdrawal or
           modification will prejudice such party in
           prosecuting such party’s case or defense on
           the merits. * * *

Although petitioner did not make a motion to be relieved of the

deemed admissions, respondent’s failure to comply completely with

Rule 90(b) suggests that the admissions should not conclusively

bind petitioner, and we will disregard them for purposes of this

opinion.   We describe below the evidence at trial.   Because of

the absence of persuasive evidence in support of petitioner’s

claims, respondent is not prejudiced by disregarding the deemed

admissions.

     Because petitioner has not substantiated the claimed

deductions and has not maintained required records, the burden of

proof has not shifted to respondent.    See sec. 7491(a)(2).

Petitioner thus must prove that the determinations in the

statutory notice are erroneous.   See Rule 142(a).

The Conseco Note

     Petitioner contends that the Conseco note had no value as of

the date of death and relies on the January 2005 brokerage

statement that does not include a value for the Conseco note.

Petitioner also contends that the issuer “went broke” and thus

the note had no value.   Respondent contends that petitioner has
                                - 7 -

not established that the note had a value less than the face

amount.

     We conclude that the brokerage statement is an indication

that the value of the note was not available or not readily

ascertainable but that it is unlikely that the note was worthless

when the Conseco stock was valued at $19.05 per share.    Without

any evidence justifying reduction of the value to less than the

face amount, we sustain respondent’s determination that the note

is includable in the taxable estate at $10,000.

Life Insurance Policies

     Petitioner contends that the West Coast and Allianz

policies, although shown in the issuing companies’ records as

owned by decedent, were in fact owned by Ms. Fujishima.    Ms.

Fujishima testified that she paid the premiums, and she produced

copies of three canceled checks dated in 2003 and 2004 payable to

West Coast Life Insurance Co.   She claims that the record of the

company showing decedent as the owner was a mistake by the agent,

but she could not produce any documents concerning the policy or

the testimony of the agent.   Her pretrial memorandum states:

“There is some question as to whether she ever received the

actual policies, so she in her review would have noted the

error.”

     Respondent contends that the inclusion of the Allianz policy

and the Amerus policy on the estate tax return undermines
                                 - 8 -

petitioner’s argument that Ms. Fujishima intended to be the owner

of the West Coast and Allianz policies and that it would be

illogical to treat the policies inconsistently.    Respondent also

relies on inclusion of the Allianz policy on the estate tax

return as an admission.   See Estate of Hall v. Commissioner, 

, 337-338 (1989) (values reported on an estate tax return

are an admission so that lower values cannot be substituted

without cogent proof); McShain v. Commissioner, 

, 1010

(1979).

     Without any corroboration of Ms. Fujishima’s conclusory and

subjective testimony as to her intent, we conclude that the

record ownership of the West Coast policy is the most persuasive

evidence and that the admission as to the Allianz policy by

reporting it as an asset of the estate on the estate tax return

has not been overcome.    We cannot conclude that Ms. Fujishima was

the owner of the policies.   It is more likely that she paid for

them on behalf of decedent and her other son, just as she paid

other expenses for decedent during his lifetime.    We hold the

values of the West Coast and Allianz policies should be included

in the taxable estate.

Unsubstantiated Deductions

     Petitioner presented no detail to support the amounts

claimed as deductions for executor’s commissions or attorney’s

fees on the estate tax return.    She conceded that she had no
                               - 9 -

records to support the deductions.     She estimates in her

posttrial brief, without support in the evidence, that she spent

700 hours gathering and organizing decedent’s records and

requesting missing documents, to be compensated at the rate of

$100 per hour, and requests an additional $17,000 for her

assistance in preparation of the estate tax return.     She also

includes in her posttrial brief, unsupported by any evidence,

claims with respect to the hours and rates of the estate’s

attorney.

     Amounts deductible as administration expenses are limited to

those actually and necessarily incurred.     Sec. 2053(a)(2); see

sec. 20.2053-3(a) and (b)(1), Estate Tax Regs.     We are not

persuaded that the amounts claimed by petitioner for executor’s

commissions or for attorney’s fees are reasonable or that they

have, to date, been actually and necessarily incurred.     We have

insufficient evidence to estimate the reasonable amount.      The

amounts claimed on the return cannot be allowed.     The expenses

actually incurred by the estate may be considered in the final

computation of estate tax liability, however.     See Rule 156.

     Petitioner claims $130,000 (reduced from $142,000) as

charitable contribution deductions of the estate.     Section 2055

provides a charitable contribution deduction for amounts

transferred by a decedent for qualified charitable and religious

uses.   The transfers, however, must have been made during the
                                - 10 -

decedent’s lifetime or by will.     Sec. 20.2055-1(a), Estate Tax

Regs.     Decedent did not have a will, and petitioner claims only

that the charitable contribution deductions were consistent with

conversations between Ms. Fujishima and decedent.     Respondent

also argues that the claimed amounts have not been substantiated

by adequate records.

     Deductions are not permitted where the amounts passing to a

charity turn on the actions of a personal representative.        Estate

of Engelman v. Commissioner, 

, 70-71 (2003).     The

amounts disputed in this case were determined by Ms. Fujishima

after decedent’s death, and, in any event, the amounts are not

adequately substantiated.     They are not allowable deductions.

Alleged Debt to Ms. Fujishima

        The taxable value of an estate may be determined after

deducting claims against the estate if the claims “when founded

on a promise or agreement” were “contracted bona fide and for an

adequate and full consideration in money or money’s worth.”       Sec.

2053(a)(3), (c)(1)(A).

        Ms. Fujishima claims $165,000 plus $10,000 interest as the

amount owed by her son to her for her care of him during his

lifetime.     Attached to the supplemental stipulation (not produced

through the time of trial) is a purported promissory note dated

June 30, 2000, for $165,000 plus interest at the rate of
                               - 11 -

6 percent.   Respondent challenges the authenticity of the note

and its sufficiency to prove a debt obligation.

     Ms. Fujishima testified that the debt resulted from her

caring for her son after his injury in 1992 and subsequent

disabilities but acknowledges that she would have cared for him

even if he had not agreed to pay her back.     She did not keep any

records showing the amounts that she provided to or for

decedent.    When asked how he was going to pay her, she stated:

“I’m trying to get it from his estate”, which suggests that the

debt was not valid and enforceable during his lifetime.     She

testified that he repaid “probably $5, $10, $20, * * * very

minimal”.    Decedent’s brokerage account statement as of the date

of death suggests that the debt could have been paid during his

lifetime if it were recognized as valid by decedent and his

mother.   We are not persuaded that the debt was real, and it

cannot be allowed as a deduction.

     To reflect the foregoing,


                                        Decision will be entered

                                 under Rule 155.