ESTATE OF WAYNE-CHI YOUNG, DECEASED, TSAI-HSIU HSU YANG, EXECUTRIX, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20139-94
UNITED STATES TAX COURT
Filed May 11, 1998.
110 T.C. No. 24
Decedent and his wife Yang owned real property in California, a community property State. Decedent‘s Federal Estate Tax Return reported 50 percent of the date of death value of the property as decedent‘s interest therein under
Held: The State trial court‘s decree does not bind this Court for Federal estate tax purposes. Further, P has failed to overcome the presumption of joint tenancy with right of survivorship created by the deeds under California law.
Held, further: To deal with the inherent characteristics of joint tenancy with right of survivorship,
Held, further: P is liable for the addition to tax for late filing under
Lance M. Weagant and Randall D. Fowler, for petitioner.
Dwight M. Montgomery, for respondent.
OPINION
WRIGHT, Judge: Respondent determined a deficiency of $154,545 in petitioner‘s Federal estate tax and an addition to tax under
- (1) Whether decedent‘s property interest in the Young Property was an interest in joint tenancy or in community property. We hold that decedent held the property in joint tenancy.
-
(2) Whether a fractional interest discount or a lack of marketability discount is applicable to the Young Property. We hold that a discount is inapplicable. - (3) Whether petitioner is liable for an addition to tax for late filing under
section 6651(a) . We hold that petitioner is liable.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated by this reference. Tsai-Hsiu Hsu Yang (Yang), also known as Tsai-Hsiu Hsu Young, is executrix of the estate (petitioner) of Wayne-Chi Young, deceased (decedent). Yang was decedent‘s wife (collectively the Youngs). At all material times, Yang and decedent were residents of the State of California, a community property State. At all times relevant to this case, neither decedent nor Yang was a citizen of the United States, but they were residents of the United States.
Decedent died on June 28, 1989. At the time of decedent‘s death, the executrix Yang knew that the assets of the estate exceeded $1,200,000. On March 21, 1990, petitioner filed Form 4768, Application for Extension of Time To File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes, requesting an extension of time to file the return and to pay the estate tax to March 28, 1991. On April 11, 1990, respondent approved petitioner‘s application for extension of time to file and pay. Before March 28, 1991, petitioner filed a second Form 4768, requesting an additional extension to file the return and to pay the estate tax to March 28, 1992. On April 4, 1991, respondent denied petitioner‘s application for extension of time to file, but approved the application for extension to pay. On September 6, 1991, petitioner filed the estate‘s Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Wang, a certified public accountant, helped in petitioner‘s filing of the return.
At the time of decedent‘s death, decedent and Yang owned the following five real properties (collectively the Young Property), each of which they had acquired by deed as husband and wife, as joint tenants: (1) The Bixby Knolls Motel, located at 4045 Long Beach Boulevard in Long Beach,
On decedent‘s estate tax return, petitioner excluded one-half of the value of the Young Property, claiming decedent‘s property interest in the Young Property was in the nature of community property. Petitioner also claimed a fractional interest discount of 15 percent on the Young Property, citing Propstra v. United States, 680 F.2d 1248 (9th Cir. 1982). Respondent determined that petitioner was not entitled to the fractional interest discount. The following table shows the value of each Young property less the proportion of value excluded from the gross estate as stated by petitioner and as determined by respondent.
| PROPERTY | Petitioner‘s Calculations | Respondent‘s Determination |
|---|---|---|
| Value of Property | Value of Property | |
| (1) Bixby Knolls Hotel | $565,000 | $508,500 |
| (2) Condo-Monterey Park | 193,000 | 193,000 |
| (3) Oak Tree Inn | 3,300,000 | 3,300,000 |
| (4) Condo-El Monte | 160,000 | 160,000 |
| (5) House in Hacienda Heights | 555,000 | 570,000 |
| Less: | 1/2 Community Interest | 1/2 Interest |
| Less: | Propstra Discount of 15% | None |
Petitioner filed a spousal property petition in the Superior Court of California, County of Los Angeles, alleging that the Young Property was community property. After a hearing,
OPINION
Issue 1: Joint Tenancy or Community Property
It has been established that what constitutes an interest in property held by a person within a State is a matter of State law. Fernandez v. Wiener, 326 U.S. 340, 355-357 (1945); Poe v. Seaborn, 282 U.S. 101 (1930). In Commissioner v. Estate of Bosch, 387 U.S. 456 (1967), the Supreme Court held that State law as announced by the highest court of the State is to be followed. “If there [is] no decision by that court then federal authorities must apply what they find to be the state law after giving ‘proper regard’ to relevant rulings of other courts of the State. In this respect, it may be said to be, in effect, sitting as a state court.” Id. at 465 (citing Bernhard v. Polygraphic Co. of Am., Inc., 350 U.S. 198 (1956)). On the other hand, once property rights are determined under State law, Federal law is utilized to decide the tax consequences. Aquilino v. United States, 363 U.S. 509, 512-513 (1960); Morgan v. Commissioner, 309 U.S. 78 (1940).
In this case with the Young Property being situated in California, California property law determines the nature of decedent‘s interest in the Young Property. Under California law, a husband and wife may hold property as joint tenants,2 tenants in common, or as community property.3
Under California law, property acquired by spouses during wedlock is statutorily presumed to be community property.
In this case, each deed of the Young Property stated that decedent and Yang took title as husband and wife, as joint tenants. According to California law, this creates a rebuttable presumption that the Young property was joint tenancy as stated in the deeds. To rebut this presumption, petitioner relies on the Superior Court of California‘s determination that the Young Property was community property and on the
Superior Court Decree:
Following decedent‘s death, petitioner filed a spousal property petition in the Superior Court of California, County of Los Angeles. In the spousal order, the court found that the Young Property was “community property or quasi-community property belonging one-half (1/2) to each spouse and passing one hundred percent (100%) to TSAI-HSIU HSU YOUNG, the surviving spouse.” Petitioner argues that the Spousal Property Order entered by the Superior Court of the State of California precludes respondent from arguing that the Young Property was joint tenancy under California law.
In determining the binding or persuasive effect of State court decrees on Federal courts, interpreting the application of State law, the Supreme Court has acknowledged that where State law governs the ownership of property (as here), the State‘s highest court is the best authority on its own law. Commissioner v. Estate of Bosch, 387 U.S. 456, 465 (1967) (citing Erie R. Co. v. Tompkins, 304 U.S. 64 (1938)). A Federal court in a Federal estate tax controversy is not conclusively bound by a State trial court‘s adjudication. Id. The ruling of an intermediate appellate State court is not to be disregarded by a Federal court unless it is considered that the State‘s highest court would decide otherwise. Id. If there is no decision by the State‘s highest court, the Federal court must do the best it can to discern what such State‘s highest court would decide. Id.; Estate of Rowan v. Commissioner, 54 T.C. 633, 636-639 (1970).
While a hearing occurred in regard to the petition, only the final order was submitted into evidence in regard to the California Superior Court‘s basis for its determination. Without other evidence, we cannot rule out that respondent, if present at the California Court, would have prevailed in opposing petitioner‘s petition that the property was community property. See Estate of Rowan v. Commissioner, supra at 638. The evidence before us does not show that the proceeding in the Superior Court was a bona fide, adversarial litigation. Therefore, we conclude that we are not bound by the Superior Court of California‘s determination.
Evidence is admissible to show that a husband and wife, who took property as joint tenants, actually intended it to be community property. Sears v. Rule, 163 P.2d 443, 449 (Cal. 1945); Tomaier v. Tomaier, 146 P.2d 905, 906 (Cal. 1944). Separate property may be converted to community property by oral agreement, proven by the acts and conduct of the parties in dealing with the property; however, the evidence must be sufficient to support a finding, adverse to record title. Bernatas v. Honnert (In re Bernatas’ Estate), 328 P.2d 539, 541 (Cal. Dist. Ct. App. 1958). A mistaken belief about the nature of the property, or intent communicated to the other spouse about converting the property from one form to another, without more, will not rebut the presumption raised by the form of deed by which such property was acquired by husband and wife. Edwards v. Dietrich, 257 P.2d 750, 754 (Cal. Dist. Ct. App. 1953).
Petitioner primarily relies upon Yang‘s testimony. In her written statement, Yang stated that she and decedent always viewed the marital accumulations as “community property.” According to Yang, the Youngs thought the property was community property.
At trial, Yang stated that her understanding was that the ownership of the property was such that “each one gets half.” Upon divorce, “each one gets half.” If Yang predeceased decedent, then “he will become the executrix[or] or I could will to him or to the children.” In regard to managing the Oak Tree Inn, Yang and decedent would hire a manager.
The Youngs were informed by real estate brokers that title should be taken as joint tenancy in order to avoid probate. However, at trial, Yang testified that she believed she relied on the broker‘s advice, but in regard to the Bixby Knolls Hotel, Yang could not remember whether the real estate broker told the Youngs to hold title in joint tenancy. Yang testified that they did not consult an attorney regarding title to the Young Property. In regard to title, she “[figured] it‘s -- belong to both of us.”
Petitioner asserts that Yang‘s testimony at trial is consistent with her written statements regarding the mutual understanding and further asserts that no contrary evidence was presented by respondent. First, we note it is petitioner‘s
Transmutation Into Community Property:
In California, the law is settled that a husband and wife may agree with respect to the character of the property which they hold and may transmute their property from one status to another by agreement. Estate of Brockway v. Commissioner, 18 T.C. 488, 496 (1952) (citing In re Watkins Estate, 16 Cal. 2d 793, 797, 108 P.2d 417 (1940)), affd. 219 F.2d 400 (9th. Cir. 1954); Tompkins v. Bishop, 211 P.2d 14 (Cal. Dist. Ct. App. 1949). See
We reject petitioner‘s argument that the language in decedent‘s will transmuted the property from joint tenancy into community property. Petitioner points to the fact that decedent‘s will makes no mention of joint tenancy property, but refers to community property. Decedent‘s will was executed on July 18, 1985. As of that date, only one of the five properties making up the Young Property was owned by decedent and his wife. Further, the language in the will does not meet the standard of an “express declaration” to change characterization or ownership of property. The will merely provides that all of decedent‘s properties, both real and personal, be devised to Yang. This provision and the provision referring to decedent‘s one-half interest in the community property have no impact on decedent‘s interest held in joint tenancy property. We find decedent‘s failure to mention “joint tenancy”6 in his will to be of little significance because under the law, joint tenancy cannot be devised.
In regard to the Bixby Knolls Motel, which was purchased on May 19, 1983, there was no evidence presented to establish that decedent and Yang transmuted the Bixby Knolls Motel into community property by an agreement, oral or written, prior to January 1, 1985. There was no evidence presented to support a finding that decedent and/or Yang
Therefore, we find that the Youngs did not effectively transmute the Young Property from joint tenancy into community property.
Conclusion:
From the record, we conclude that the evidence presented by petitioner has not overcome the presumption of joint tenancy. Therefore, decedent and Yang held the Young Property as joint tenants with the right of survivorship.
Issue 2: Discount Issue
Having determined that the Young Property was held in joint tenancy under State law, we now turn to the Federal estate tax aspects of the case. In determining an estate‘s tax liability, the gross estate must be defined.
Value is “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” United States v. Cartwright, 411 U.S. 546, 551 (1973); Estate of Hall v. Commissioner, 92 T.C. 312, 335 (1989); Estate of Heckscher v. Commissioner, 63 T.C. 485, 490 (1975);
Real estate valuation is a question of fact to be resolved on the basis of the entire record. Ahmanson Found. v. United States, 674 F.2d 761, 769 (9th Cir. 1981); Estate of Fawcett v. Commissioner, 64 T.C. 889, 898 (1975). After determining the gross value of the property, there may be adjustments upward or downward for such factors affecting value as minority discounts, discounts for lack of marketability, control premiums, and fractional interest discounts.7 See Estate of Andrews v. Commissioner, 79 T.C. 938 (1982) (discussing a minority discount); Estate of Piper v. Commissioner, 72 T.C. 1062, 1084-1086 (1979) (discussing a discount for lack of marketability for stock); Estate of O‘Keeffe v. Commissioner, T.C. Memo. 1992-210 (discussing blockage discounts for works of art); Estate of Salsbury v. Commissioner, T.C. Memo. 1975-333 (discussing control premiums). Petitioner bears the burden to show that respondent was incorrect in disallowing the fractional interest discount for the Young Property. Rule 142(a).
Notwithstanding
Having determined that the Young Property was held in joint tenancy,
During trial and respondent‘s opening brief, respondent relied on the application of
Normally,
does not enable us to determine the contributions of the spouses as contemplated under
Both parties have agreed on the value of each entire parcel included in the Young Property: (1) Bixby Knolls Hotel $508,500; (2) Condo - Monterey Park $193,000; (3) Oak Tree Inn $2,750,000; (4) Condo - El Monte $160,000; and (5) House - Hacienda Heights $555,000. The dispute between the parties that we must resolve is whether, and to what extent, a fractional interest discount or a lack of marketability discount, which has been allowed in regard to tenancy in common and community property, should be applied to decedent‘s property held in joint tenancy with right of survivorship.
Petitioner argues that
In cases dealing with
In arguing for the application of fractional interest discounts and/or lack of marketability discounts in the context of
In Propstra, the Ninth Circuit upheld a 15-percent discount in the value of the decedent‘s undivided one-half interest in real property held as community property. Id. at 1253. The court noted that the Federal estate tax is an excise tax, levied on the privilege of transferring property at death. Id. at 1250 (citing Estate of Bright v. United States, 658 F.2d 999, 1001 (5th Cir. 1981)). The amount to be taxed is valued by the property actually transferred, rather than what is owned by the decedent before death, or the interest held by the legatee after death. Id. The Government argued that under a unity of ownership theory, a fractional interest discount was inapplicable because “one can reasonably assume that the interest held by the estate will ultimately be sold with the other undivided interest and that interest‘s proportionate share of the market value of the whole will thereby be realized.” Id. at 1251. After considering the language of
In Propstra, the court allowed a fractional interest discount for community property. Contrary to petitioner‘s arguments, we find the situation presented in Propstra is not analogous to the current situation involving joint tenancy.
First, Propstra dealt with
On the other hand, joint tenancy is a distinct property interest from tenancy in common and community property.9 The right of survivorship is the chief characteristic that distinguishes a joint tenancy from other interests in property. United States v. Jacobs, 306 U.S. 363, 370 (1939); Zeigler v. Bonnell, 126 P.2d 118, 120 (Cal. Dist. Ct. App. 1942). While a joint tenancy may be severed by mutual agreement or by a conveyance by one of the joint tenants during the lives of the joint tenants, the decedent cannot devise property held by the decedent and another in joint tenancy. Estate of Sullivan v. Commissioner, 175 F.2d 657 (9th Cir. 1949), revg. 10 T.C. 961 (1948). Joint tenancy has been characterized as a specialized form of a life estate, with what amounts to a contingent remainder in the fee, the contingency being dependent upon which joint tenant survives. Id. The surviving joint tenant does not secure that right from the deceased joint tenant, but from the devise or conveyance by which the joint tenancy was first created. At the time of decedent‘s death, decedent‘s interest in the property is extinguished, with the joint tenancy automatically passing to the surviving joint tenant by the operation of law, avoiding the need for probate.
In order to include property held by a decedent in joint tenancy in the decedent‘s gross estate, Congress enacted section 202(c) in the Revenue Act of 1916, ch. 463, 39
Federal estate tax was part of the Revenue Act of 1916, ch. 463, 39 Stat. 756; the act‘s main purpose was to raise revenue. Since its origin in 1916, the provision including joint tenancy in the gross estate, now incorporated in
The question * * * is, not whether there has been, in the strict sense of that word, a “transfer” of the property by the death of the decedent, or a receipt of it by right of succession, but whether the death has brought into being or ripened for the survivor, property rights of such character as to make appropriate the imposition of a tax upon that result (which Congress may call a transfer tax, a death duty or anything else it sees fit), to be measured, in whole or in part, by the value of such rights.
* * * * * * *
At * * * [the joint tenant‘s] death, however, and because of it, * * * [the survivor], for the first time, became entitled to exclusive possession, use and enjoyment; she ceased to hold the property subject to qualifications imposed by the law * * *. Thus the death of one of the parties to the tenancy became the “generating source” of important and definite accession to the property rights of the other.
Tyler v. United States, 281 U.S. 497, 503-504 (1930). The possession by the decedent of the right of survivorship justifies the inclusion in the decedent‘s gross estate due to its “generating source.”
Congress has the power to levy a tax upon the occasion of a joint tenant‘s acquiring the status of survivor at the death of the other joint tenant. United States v. Jacobs, 306 U.S. 363, 367 (1939).
[The] termination of a joint tenancy marked by a change in the nature of ownership of property was designated by Congress as an appropriate occasion for the imposition of a tax. * * * It is immaterial that Congress chose to measure the amount of the tax by a percentage of the total value of the property, rather than by a part, or by a set sum for each such change. The wisdom both of the tax and of its measurement was for Congress to determine.
In arguing that
We think petitioner‘s focus is incomplete. In addition to the cited language,
In light of this definition of value, (i.e., the willing buyer and the willing seller), we go to
| Entire value of Property (on the date of death or alternate valuation date) | TIMES | Survivor‘s consideration Entire Consideration Paid | = Amount Excluded |
Estate of Goldsborough v. Commissioner, 70 T.C. 1077, 1082 (1978), affd. without published opinion 673 F.2d 1310 (4th Cir. 1982).
Under the scheme of
As a result of this artificial inclusion, we conclude that
Similarly, a lack of marketability discount arises from an inherent difficulty in the sale of the asset. It has been applied in determining the value of works of art and the value of restricted securities. See, e.g., Estate of O‘Keeffe v. Commissioner, T.C. Memo. 1992-210. In regard to the Young Property, there is no inherent difficulty in its sale. We conclude that a lack of marketability discount is not applicable to the Young Property.
Petitioner argues that respondent‘s position is based on the unity of ownership theory; i.e., the theory that because the surviving joint tenant succeeds to the interest of the deceased joint tenant, there can be nothing to apply a fractional interest discount against. We note that the unity of ownership theory has been rejected by the courts, as in Propstra v. United States, supra, but we do not characterize respondent‘s position as relying on the unity of ownership theory. Instead, we are looking at the
We conclude that a fractional interest discount and a lack of marketability discount are inapplicable to the Young Property.
Issue 3: Section 6651(a)
Decedent died on June 28, 1989. Petitioner was granted an extension to file the estate tax return until March 28, 1991; however, petitioner did not file the return until September 6, 1991. As a result of filing the estate tax return more than 5 months late, petitioner is subject to a 25-percent addition
In order to avoid the penalty, petitioner‘s argument is based on Yang‘s claim that she relied on the accountant Wang‘s advice. According to Yang, Wang stated that the estate tax return might be required, depending on the value of the Oak Tree Inn. With litigation pending in regard to the Oak Tree Inn, Wang in 1990 suggested that an extension to file be submitted, which was ultimately granted, extending the filing date until March 28, 1991. Later, in the summer of 1990, Wang told Yang that no Estate Tax Return would be due. Then according to Yang, “[b]ased upon Mr. Wang‘s advice that the Estate Tax Return would probably not be required, I did not ask him again about the matter. I felt that I could rely on Mr. Wang‘s advice because of his education, apparent competency, and our longstanding and mutually productive relationship.”
Petitioner contends that respondent did not present any evidence to contradict that she reasonably relied upon her accountant‘s advice. However, as we have noted, the burden of proof is on petitioner to establish (1) that the failure did not result from willful neglect and (2) that the failure was due to reasonable cause. In light of this burden, we note that petitioner did not call the accountant to testify to corroborate Yang‘s testimony. See Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947). In light of Yang‘s uncorroborated testimony, we consider the following facts to evaluate whether petitioner has met the burden of proving that Yang reasonably relied upon the accountant‘s advice.
The executrix Yang admitted that she knew that decedent‘s assets totaled more than $1,200,000 at his death. This clearly meets the filing threshold as required by law. Petitioner contends that the executrix relied upon the accountant‘s statement that “the Estate Tax Return would probably not be required.”
To support its position, petitioner relies on United States v. Boyle, supra at 250. In Boyle, the executor argued that the failure to file the return was due to reasonable cause, reliance on his attorney. Id. at 244. The Supreme Court noted that engaging an attorney to assist in the probate proceedings is plainly an exercise of the ordinary business care and prudence
When an accountant or attorney advises a taxpayer on a matter of tax law, such as whether a liability exists, it is reasonable for the taxpayer to rely on that advice. Most taxpayers are not competent to discern error in the substantive advice of an accountant or attorney. * * *
By contrast, one does not have to be a tax expert to know that tax returns have fixed filing dates and that taxes must be paid when they are due. In short, tax returns imply deadlines. Reliance by a lay person on a lawyer is of course common; but that reliance cannot function as a substitute for compliance with an unambiguous statute. * * *
Id. at 251. The Court held that reliance on an agent was not reasonable cause for failing to perform a nondelegable duty of filing the return. Id. at 252.
When a taxpayer shows that he reasonably relied on the “advice” of an accountant or attorney, even when such advice turned out to be mistaken, courts have frequently held that such reliance constitutes reasonable cause if the executor did not merely assign the nondelegable duty to file to the attorney or accountant. Estate of La Meres v. Commissioner, 98 T.C. 294, 314 (1992). To support its position of reliance on Wang‘s erroneous advice, petitioner cites the following cases: Estate of La Meres v. Commissioner, supra; Housden v. Commissioner, T.C. Memo. 1992-91; and Estate of DiPalma v. Commissioner, 71 T.C. 324 (1978).
In all three cases, the Court found that the taxpayer‘s good faith reliance on the attorney‘s erroneous advice constituted reasonable cause. These cases were distinguishable from Boyle and other cases in which the taxpayer simply delegated all responsibility for filing to an agent. Estate of La Meres, supra at 319. In Estate of DiPalma, the attorney for the estate led the executrix to believe that pending litigation justified delaying the filing of the estate tax return. Petitioner compares this to the present situation, where Wang advised petitioner that no estate tax return would be due because of the Oak Tree Inn litigation.
The inquiry is whether petitioner relied in good faith on the accountant‘s advice with respect to the filing requirement. The principal difficulty which we have with petitioner‘s arguments is that the objective evidence does not necessarily lead us to the conclusion that Yang was unaware
Further, while in Yang‘s affidavit she stated that she relied on Wang‘s advice “because of his education, apparent competency, and our longstanding and mutually productive relationship,” her testimony at trial was less persuasive. During trial, Yang testified that Wang had performed tax services for the Youngs, but she was unaware of Wang‘s educational background, such as where he attended school and whether he had a master‘s degree in taxation. While Yang was aware that Wang was a certified public accountant, her testimony was unclear whether she based her reliance on that fact. See Sanders v. Commissioner, 21 T.C. 1012, 1019 (1954), affd. 225 F.2d 629 (10th Cir. 1955).
Accordingly, we hold on this record that petitioner has not carried its burden of proof that the delinquent filing of the estate tax return was due to reasonable cause and not to willful neglect. Therefore, petitioner is liable for the addition to tax under
Decision will be entered under Rule 155.
Notes
[a] joint interest owned by two or more persons in equal shares, by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy, or by transfer from a sole owner to himself or herself and others, or from tenants in common or joint tenants to themselves or some of them, or to themselves or any of them and others, or from a husband and wife, when holding title as community property or otherwise to themselves or to themselves and others or to one of them and to another or others, when expressly declared in the transfer to be a joint tenancy, or when granted or devised to executors or trustees as joint tenants.
SEC. 202(c). To the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have belonged to the decedent.
For the purpose of this title stock in a domestic corporation owned and held by a nonresident decedent shall be deemed property within the United States, and any property of which the decedent has made a transfer or with respect to which he has created a trust, within the meaning of subdivision (b) of this section, shall be deemed to be situated in the United States, if so situated either at the time of the transfer or the creation of the trust, or at the time of the decedent‘s death.
(continued...) (...continued)SEC. 2040(a). General Rule.--The value of the gross estate shall include the value of all property to the extent of the interest therein held as joint tenants with right of survivorship by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money‘s worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less
than an adequate and full consideration in money or money‘s worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further, That where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so acquired by the decedent and any other person as joint tenants with right of survivorship and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joints tenants with right of survivorship.
(continued...) (...continued)SEC. 402(d). To the extent of the interest therein held jointly or as tenants in the entirety by the decedent and any other person, or deposited in banks or other institutions in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than a fair consideration in money or money‘s worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than a fair consideration in money or money‘s worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided, further, That where any
property has been acquired by gift, bequest, devise, or inheritance, as a tenancy in the entirety by the decedent and spouse, or where so acquired by the decedent and any other person as joint tenants and their interests are not otherwise specified or fixed by law, then to the extent of one-half of the value thereof; * * * [Emphasis added to show the added language by the Revenue Act of 1921]
The purpose of the added language was to “remove uncertainties in the existing law relating to the interests held jointly or as tenants in the entirety.” S. Rept. 275, 67th Cong., 1st Sess. (1921), 1939-1 C.B. (Part 2) 181, 198.
In 1924, the provision was renumbered sec. 302(e), and it was “reworded to secure greater clarity.” S. Rept. 398, 68th Cong., 1st Sess. (1924), 1939-1 C.B. (Part 2) 266, 290. In the 1939 Code, the provision became sec. 811(e)(1). Then in 1954, the provision became
Under