Jones v. Whittington

HUXMAN, Before MURRAH and PICKETT, Judges. Circuit HUXMAN, Judge. appointment Circuit after assets of entire possession, the estate were in exclusive question in this case involves the being and control were of the executor and appellee, income tax Florence discharge his -by administered him the of in Whittington, year C. the She for 1941. duties the executor of the estate. year filed her income tax return for that paid the income due tax thereon. worthless, These German bonds became Thereafter, 30, 1944, filed a she June 8, 1941, on December we when declared overpayment claim for refund on account of against war Germany1 and thereafter 1941, $3,- of taxes for in amount of the no value. The executor filed an tax income The 283.42. claim was disallowed this return on behalf of the for 1941 to- deceased suit was instituted in the Dis- United States fiduciary of date her death and filed a trict Court for the Western District of return, estate,, income tax as executor of the Oklahoma, F.Supp. 967, to recover that portion for remaining year of the amount. findings The trial court made of appointment. after his He did not claim and, fact and conclusions of law based capital in fiduciary return a loss deduc- thereon, judgment prayed entered for her as tion, because of of the loss value in these- appeal for and this followed. appellee bonds. original Neither did in her loss, capital 1941-income tax claim controversy The arose out of follow- When, deduction, of because bonds. these ing Emily Culbertson, facts. a resident of subsequent fiduciary to 1941 the executor’s Texas, 12, April 1941, pos- died testate on audited, return was as. the collector allowed estate, sessed of a considerable in which capital loss deduction the of loss value were included German bonds of various and, bonds these since such loss more than municipalities corporations par equalled the tax paid amount of $122,075 value aggregate ap- and of an return, the amount such tax re- was praised value at time her death of funded. $19,382.50. Culbertson, Emily The will of material, so far as devised all her Under laws, Federal tax income possessed which she died seized and to income, capital gain, including must -re children, Culbertson, her three John J. ported year in which it is received Emily Potter, Culbertson and Florence -capital and likewise a loss must taken Whittington, Culbertson share and share year in which it occurs.2 This provisions, alike. contained usual 1941, loss occurred in after the executor providing appointment for the an ex- appointed was engaged was ad ecutor, debts, pay carry him directed only ques ministration of the estate. The will, provisions out ad- loss,, tion is report must according minister the estate thereunder which during occurred that law. fiduciary- administration of the in his heirs, return, tax income or whether not closed Apparently the estate was report it in their tax individual income appear that there until 1944. It would also returns, they notwithstanding had not assets, or division distribution ño property, received the had no dominion or 1944, thereof, and, until any part until in it, and right control over did not have the time, estate, including these the entire income, any, if receive realized there bonds, of the ex- possession remained from. The trial court concluded that the- stipulation of facts recites that The ecutor. determined, answer to the must be agreed legatees division of (cid:127)by provisions of Texas law and the of' in 1944 and that on or about bonds German conclusions, reaching will. its 30, 1944, appellee April received her share largely McDonald, relied Blinn 92’ bonds, being the same bonds 604, 931, Patton,, Tex. Smith S.W. for refund which her claim taxes Tex.Com.App., dispute predicated. S.W. It without Meadows v. 1941 was Russell, Tex.Civ.App., part remaining of 1941 during the SW.2d seq. et 2. 26 § U.S.C.A. § 26 U.S.C.A. except individual, Heiner, Cir., and as in the case of an Arrott v. 92 F.2d * * * (c) of income Wilson, In the case Anderson v. persons deceased received estates of 77 L.Ed. 1004. of administration by the relied on Texas cases * * * there settlement of the estate helpful court are in none because be allowed additional deduction shall as an question of income them was involved the computing the estate net income of duty of an an estate or ** of the income amount regard to executor or administrator ** year, taxable its conceded income tax returns. It is properly paid during such is or credited personal under law title to both Texas heir, beneficiary, year any legatee, to or upon death property and real descends but the amount as so allowed a dedttction heirs, legatees immediately in the vests computing shall be in the net in- included and decided devisees. All that was involved legatee, heir, beneficiary”. come or court, cases, upon by in the Texas relied every provides 26 142 (a) U.S.C.A. § of an a creditor was the fiduciary make oath “shall upon his undis might levy heir execution * * * stating specifically the items in interest tributed and undivided gross thereof income and the deductions The of administration. period * * and credits allowed *.” Subsection treated Arrott and Anderson cases be (c) provides “Any required fiduciary subsequent portions opinion. in of the subject make return shall be to all the exception without has been held provisions apply law to individ- which that, property with re while the status of uals.” spect of an ownership or the nature to its regulations The promulgated under the claiming an interest therein of one estate tax provisions. laws are consistent with its law, by Federal tax is determined state provides Thus Section 19.161-1 likewise liability respect determined with thereto is imposed upon that “Taxes by individuals purposes by Federal law and that for chapter applicable shall to the in- may give such the Federal Government * * * tax, come of estates The rate of it un property different than has status provisions the statutory respecting gross Having der law.3 determined the state income, exceptions, and with certain ownership state by status or deductions and credits allowed to individ- law, law to we then look to the Federal ” * * * apply also- uals to estates Sub- determine manner in which it is to be provides (b) section fiduciary (the that the responsible filing is in taxed and who executor or in administrator the case of payment of taxes tax returns and come estates) required to “is make file a re- any particular respect thereto at time. pay turn the tax on the net income (a) ap- so (3), 161 far as it 26 U.S.C.A. § * * *” Section provides 19.162-1 that in process of plies adminis- to estates ascertaining the tax estate imposed by' tration, provides the taxes “there income, is deductible from the gross apply chapter individuals shall' subject exceptions, the same deductions n “income by received estates of deceased which are allowed individual tax- period during the of administration persons payers.” part Subsection (2) provides in (b) of the estate”. Subsection settlement * * that “There is taxable to the estate computed “The tax shall be provides that * * * all income estate or for its trust income the estate upon the net taxable is not to be distributed fiduciary”. 26 paid by U. .and shall be currently legatees or other beneficiaries provides that “The net income 162 S.C.A. § * * * * cases, In all such computed pay- tax shall be fiduciary able manner and basis the same same in 926, 1337; Lyeth Commissioner, 78, Hoey, Morgan L.Ed. U.S. S.Ct. v. v. 188, 535; 119; Har Burnet 305 U.S. McCoy 84 L.Ed. S.Ct. L.Ed. mel, L.Ed. v. Commissioner of Internal 287 U.S. 53 S.Ct. Rev enue, Cir., Mellon, 199; 192 F.2d Heiner provisions statutory taxpayers Neither the collectors Throughout nor all pursued have the mandate runs a consistent with re regulations as the course well spect question. duty during the to this executor The tax collectors that it tax re- have some cases period to make a contended es of administration that the report capital tate gains must account and take the estate which turn for capital and, others, and take all deductions for received losses gross income deductions, legatee that the of individ- heir proper as in the case must do So so. taxpayers estate also uals, some net income cases have con so ascertained, tended duty is then that it which it was the may of the executor report capital gains duty pay the tax. executor to deduct and, others, losses was the this that for make clear statutes right duty legatee or heir. But an estate purposes income of income tax every case in precise question which the is dis period of administration during the has both arisen the tax court and the lower ownership associated from the federal courts have exception, held without becomes from which it derived. This that, during administration, manifest from consideration Section a the executor or report administrator must just (c) makes (c), outlined. Subsection capital gain capital and deduct losses. And legatee may it heir or must clear a or this was the ruling involving executor’s report only actually income as he has such Texas, returns in states as where title or from the estate with which received property directly descends and vests im has credited. is also from been This clear mediately in the heir death. which regulations, 19.162-1 Section provides to the that “there taxable estate is right If the capital take a loss deduc * * * * is all income which not occurring tion during period of admin legatees currently or to be distributed belongs istration in heir whom the * * other beneficiaries property title is vested under state law, perforce then he must also in income, pur Net for income tax his individual income tax return income may be defined poses, in substance as therefrom, realized because income and gross difference between or total income go deductions hand in hand. Such a hold statutory permissible and deductions ing would in states nullify like Texas may Capital which be taken therefrom.4 statutory Federal mandate that executors reported. gain income and A and administrators must file estate income capital permissible loss suffered is a deduc returns, income, reporting all taking tion and must be taken in in which proper all deductions and paying the tax require it To the executor occurs. to re due, as in the case individuals, because capital gain require turn income and not the title property to all of the estate and in capital him to take a loss deduction would possession their as executors or adminis distorted, unjust result in a unrealistic and trators, personal real, whether or vests in tax return. Such return would not com heirs, legatees and devisees. ply statutory regulatory with man report date that an executor the net income Notwithstanding placing the Texas law coming of the estate possession into his as the title to all property immediately in those executor and net income of the entitled it, to receive the Federal Govern- computed power the same manner and ment has to treat the estate as a separate on the same basis as in the entity, case in of an period during the of ad- dividual. ministration, income tax purposes, ir- 474; County 4. 26 U.S.C.A. § 21. 2d Nat. Bank and Trust Helvering, App.D.C. Co. v. D.C., Casey, See Baltzell v. 5. 1 F.2d 1048; (This F.2d 141 A.L.R. is the by the reviewed Circuit Court Balt only involving loss); Es Mitchell, Cir., 428; zell 3 F.2d Kul Zellerbach, 89; tate of 9 T.C. Estate Commissioner, Cir., 739; dell v. 69 F.2d Cohen, T.C. 784. Commissioner, Cir., Barbour 89 F. equal parts. of these respective estate into Two six legal where the title children. placed were for two think is in trust might be6 this we separately parts The four remaining law. were the effect Federal income tax provided devised to sons. four The l'aw, Texas Under residuary general that the settlement of the administration, the decedent’s estate January be made until estate should not the hands of the executor or administrator the executors that time During or constitutes estate. The executor a trust control of the management the full stake-holder, administrator is more than a estate, power real with to sell' the estate. mere agent as a donee of naked “ * * * provided The will while I do power heirs, legatees devisees. direct, positively strongly urge I most possession He has control of exclusive my and advise not to sell said executors He charged the entire estate. ac * * * dispose positive tive and duties. He an active Building (blank) the Arrott is erected for trustee of a trust estate. In Morrell v. years after The my decease es- Hamlett, Tex.Civ.App., 531, 534, 24 S.W.2d fully tate had and all been administered defining the nature an estate of an prior legacies paid were to 1910 sub- administrator, executor or the Texas Court stantially residuary property was dis- “Upon said: the issuance of letters testa prior except tributed the Arrott mentary upon any such the executor Power the Arrott Build- Building Office right pos or administrator shall have the ing. These at a were sold loss 1925 and session the estate existed at the the case exception death the with testator the the executors must take the whether loss exception (the relating aforesaid to the the owners of one of the interests be- four homestead), pos and that shall recover queathed to the four claim in sons could trust, session of such and hold estate in to income pro- individual tax the his disposed be of in with accordance law.” portionate suffered. loss The answer de- again, possession And “The nature of their pended upon whether the worked an will pursuance authority taken in con equitable conversion or whether the execu- by by ferred said article the is defined tors, acting who time at that were as trus- trust, terms and declared to to thereof be tees, were the mere donees of a naked disposed of in accordance with law. The power property. the selling The court fiduciary character an hold executor’s Pennsylvania concluded under that law a ing generally recognized.” sale, power mere positive without direc- We conclude the Fed under sell, tion to equitable did not work an con- eral tax laws the income estate of a dece version and the acting were executors dent, during statutory period the admin merely agents residuary as the of a legatee istration, to be treated as a trust belonged and that the loss him. to separate having existence, charged a with Wilson, supra, Anderson v. Wilson of making duties its own tax return under died in 1910. His will directed the execu- administrator, the hand of the executor or tors sell personalty to and convert into reporting received, income taking all and entire estate and residuary divide to the deductions, capital gains including allowable proceeds, pointed as directed. The will out peri the occurring during and losses residuary largely estate that-the consisted od of administration. real and shares in cor- estate business Neither v. Arrott Heiner Anderson nor porations, “which should not be sold ex- Wilson, supra, are in conflict with these favorable cepting under conditions.” views. In the Arrott case the testator died the executors command “to laid December 1902. His will divided his separate existence, making poses a its supra Wilson, [289 U.S. In Anderson v. band of fiduci own return Supreme 420], Court daiming ary receiving says: its ovm speaking “ as tas entities trusts appropriate ** deductions.” to deal has seen fit law pur tax for income this abstraction with portion PICKETT, Judge (dissenting). remaining Circuit manage such hold and judg- their my residuary until in Judge Hux- by The conclusions reached be advanta- ment time to time it can from opinion appear logical man in his disposed of, exceed- not geously sold result about ordinarily bring reached will * * executors ing, however in the satisfactory and uniform a result organize a further authorized to were taxation to of the income estates where corporation residuary es- convey to it the to handling incurred actually losses are in the judgment it can be ad- their tate “until in Considering estate. affairs an disposed of”. The vantageously presented now, facts in the case before us capital loss resulted building from however, me, question it seems to years after was not twelve sold until Wilson, by Anderson v. closed testator, the tax liabil- the death S3 S.Ct. There the 77 L.Ed 1004. 1922. The ity question for the was last will and testament of the testator left Supreme concluded that will Court to certain of his to- executors equitable and that conversion worked an disposed by they them at time as to ownership and title was to advantageous should determine was executors, trustees, notwithstand- distribute to proceeds certain devisees. not the title ing convey did by Among assets received execu- Supreme them. The Court was careful tors was some real estate which was sold kept point ruling will be out “Our by question presented them at loss. The before us.” within the limits by was the loss should be taken nor Anderson Neither Arrott v. Heiner by taxpayer. the executors or devisee duty of Wilson, supra, involved the an Mr. stated the Cardozo issues be: Justice respect to executor or administrator with government contends, “The and so statutory income returns held, below courts have that title to pointed As out of administration. realty given executors case, of tax in each apply trust valid sell and the rents arose, respect an act profits representa- in the interval. The upon by ex- enjoined him law as executor taxpayer the tives that the ex- of contend estate, powers the but under ecutor of the title, only power ecutors had no but a ordinary and of the will in addition trust, subject and of the execution question executor. The regular duties of an power, taxpayer the owner. If was with the exercise a in each dealt case so, that be the loss was and no one his acting power the executor was as while else’s.” The court held that under New was, out, pointed trustee and as law, property York the title to was trustee trust acting a a was as taxpayer the executors and that the power merely exercising a naked was the not terms of will was entitled to receive donee. only an the but interest in the fund by Consequently created the the tax- sale. pow- case conferred in this Had payer, being property, not the owner of the to' executor, in addition ers no suffered loss. executor, powers duties and and of an usual statutory period after be exercised law, It is conceded that under the Texas expired requiring probation him and for question title to the bonds in here inwas property and divide sell the thereafter to the beneficiaries named the will loss occurred proceeds and had subject the testator death of administra- powers, exercising those additional while Under tion. Texas law and the terms the factual situation would have we will, the beneficiaries were entitled Anderson cases and a different Arrott and kind pro- and not the receive bonds presented, question but such is would taxpayer from their sale. The ceeds did us. before They his in kind. receive share were dis- depreciated him with a tributed to value accordingly judgment reversed occuring while he was owner. As I is remanded with directions the cause decision, Anderson appellant. understand judgment for enter predicated solely upon Sachs, Minneapolis, of who (Bryant Louis Minn. Iowa, Ibrief), ordinary owned Bryant, City, and the or & on the Mason duty extraordinary appellant. the executor under for

the terms of the will was not a factor. Iowa, R. F. Boyle, Lake, E. R. Clear Clough, For Clough, (R. these would affirm the Iowa E. City, reasons I Mason judgment. Schuler, City, Iowa, Clear Louis Mason Iowa, Lake, brief), appellee. for on WOODROUGH, SANBORN,

Before RIDDICK, Judges. Circuit RIDDICK, Judge. Circuit Kennedy, appellee, August 1948 the Iowa, FIRST purchaser, ACCEPTANCE CORP. v. resident of KENNEDY. Corpora- Conditioning Air United States tion, Minneapolis, engaged in business in No. 14379. seller, Minnesota, as into a contract entered Appeals United Court States Kennedy’s onion conditioning for air Eighth Circuit. his in Iowa. storage farm warehouse 6, 1952. March Sales The contract entitled “Conditional seller obligated Contract” to manufac- purchaser ture and deliver to the certain equipment air conditioning known Refrig-o-Miser, seller’s trade name as a plans specifications furnish Refrig-o-Miser necessary and the ducts air warehouse, super- and vents and to equip- complete vise the installation of all $8,300, ment the consideration $2,800 paid by pur- cash was acceptance on the chaser order $5,500 pay- the balance became due and delivery 1,May able on 1949. After the equipment and installation called by the the United contract States Air Con- Corporation assigned ditioning right, all its title, ap- and interest the contract to the pellant, Acceptance Corporation, First also Minneapolis, engaged Minne- business Kennedy pay sota. On refusal of purchase price stipulated balance due, when contract it became Acceptance 'Corporation First brought this action in the United States Court District in Iowa. The con- defense was that procured by tract had been fraud of agent of appeal the seller. from This judgment jury entered on a verdict in Kennedy. favor of evidence, At the conclusion of all the appellant moved the court a di- trial ground, verdict among others, rected no there was substantial evidence to show that the conditional sales contract was

Case Details

Case Name: Jones v. Whittington

Court Name: Court of Appeals for the Tenth Circuit

Date Published: Feb 20, 1952

Citation: 194 F.2d 812

Docket Number: 4376_1

Court Abbreviation: 10th Cir.