Lead Opinion
OPINION.
The question arises under section 812 (c) of the Internal Revenue Code.
Respondent allowed petitioners a credit for property previously taxed in the amount of $20,617.22. Petitioners now claim that the deduction should be in the amount of $41,349.56, which is greater than the amount of the deduction which was taken on the estate tax return. The parties are in substantial agreement on the figures used in their respective computations.
Respondent cites Rodenbough v. United States, 25 Fed. (2d) 13, as the chief authority to sustain his determination. His position appears to be that the property in question can not be traced to the cash legacy of $50,000, the “property previously taxed,” because the inherited fund was commingled by the decedent in one bank account with other funds, and the evidence presented by the petitioners does not identify the securities in question and a cash balance in the bank account as “having been acquired in exchange” for the cash legacy from the prior decedent. Respondent contends that the evidence shows a mere intent of the decedent to use the inheritance for the purchase of the seсurities in question, and such evidence is said to be insufficient under section 812 (c). Under the circumstances, respondent contends that thе Rodenbough case is decisive of the question. He has followed the procedure which the court suggested in that case, with thе result that he has allowed a deduction of. $20,617.22, his holding being that securities and cash of that value only can be traced to the inhеrited funds.
The burden of proving identity of property under section 812 (c) is upon the taxpayer. Commingling of funds does not necessarily prеclude identification. Arthur W. Bingham, Executor, 15 B. T. A. 1001, 1010. The court recognized this when it remanded the Roden-bough case to give opportunity to the taxpayer to produce evidence to identify the “acquired” securities. See United States v. Rodenbough, reportеd in 15 American Federal Tax Reports 551, but unreported in the Federal Reporter System. It is true that funds were commingled here, as in the Rodenbough case, but the evidence here, in our opinion, distinguishes this case from the Rodenbough case, that evidence being other than as respondent describes. In this case there is evidence to distinguish the source of the moneys used to purchase thе securities in question and the cash balance in the bank account. Here, proof of the source of the moneys used dоes not rest solely upon an analysis of decedent’s bank statements showing deposits and withdrawals. The decedent had made а practice of consulting his attorney for many years about his problems. After he received the cash legacy of $50,000, he told his attorney that he would invest the inherited funds in securities, and he made lists of possible investments and discussed them with the attorney. He said to his attorney that “he was trying to invest this legacy of $50,000.” The decedent purchased securities at a total cost of $31,357.82, of which amount $23,209.69 was invested during the first three months of 1939 and the balance during the first part of 1940. The evidence shows that the decedent was a cautious person, who made decisions only after much thought. We do not think it is decisive that the decedent, who handled his own affairs, made his investmеnts over the period as set forth above. The fact is that the decedent clearly expressed to his chief advisor a рlan to invest the $50,000 legacy, and the evidence shows that he carried out his plan, although he did not invest the entire amount. We think petitioners have shown that the decedent, in withdrawing the funds he used to purchase the securities in question, had in mind the inheritance as the source of the funds. He stated frequently that the fund received as a.legacy was to be invested, and his expressions serve to distinguish the sоurce from which the decedent purchased the securities in question. It is held that petitioners have identified those securities аs having been acquired with proceeds from the legacy. Wiggin v. Hassett, 56 Fed. Supp. 263.
With respect to the cash balance in deсedent’s bank account in the amount of $16,817.15, the facts show that it is of necessity a balance of the inherited fund, taking all the facts into consideration, and also as a result of the above holding.
Under the holding above made, petitioners are entitled to a deduction under section 812 (c) in the amount of $16,817.15, plus the value of the securities at the date of death. That amount will be less than the $41,349.56 claimed, which includes $171.79 income accrued on the securities at the date of death. In his determination of the deficienсy respondent excluded certain amounts representing such accrued income. Petitioners did not contest that part оf the determination, and there is no issue relating to items of that character.
Decision will Toe entered render Rule 50.
Notes
SEC. 812. NET ESTATE. [As amended by section 407 of the Revenue Act of 1942.]
For the purpose of the tax the value of the not estate shall be determined, in the case of a citizen or resident of the United States by deducting from the value of the gross estate—
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(c) Property Previously Taxed. — An amount equal to the value of any prоperty (1) forming a part of the gross estate situated in the United States of any person who died within five years prior to the death оf the decedent, or (2) transferred to the decedent by gift within five years prior to his death, where such property can be identifiеd as having been received by the decedent from the donor by gift, or from such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received. * * *