1934 BTA LEXIS 1129">*1129 A husband and wife held several pieces of real estate at the time of the husband's death, either as joint tenants or as tenants by the entirety, in some of which the wife had acquired a joint legal interest from her husband and in some of which she had acquired a legal interest jointly with him at the same time that he had acquired his interest. Held that in computing the value of the gross estate of the husband no part of the value of the property may be excepted, under the provisions of section 302(e), Revenue Act of 1926, as the evidence does not show that the wife furnished some certain proportionate part of the consideration with which a piece of property had been purchased, or that she had acquired an interest in certain property from her husband by paying him full and adequate consideration in money or money's worth for what she had received.
31 B.T.A. 245">*245 The Commissioner determined a deficiency in estate tax in the amount of $28,189.09.
The issues are (1) whether the Commissioner erred in including in the gross estate the entire value at1934 BTA LEXIS 1129">*1130 the time of the decedent's death of three parcels of real estate; (2) the fair market value at that time 31 B.T.A. 245">*246 of two of the parcels; and (3) the fair market value at that time of certain shares of stock owned by the decedent.
FINDINGS OF FACT.
Charles W. Richardson died on August 25, 1929. In 1889 he married Amy S. Richardson, who is his widow and the executrix and sole beneficiary of his estate.
The decedent was engaged in the practice of medicine from the time of his marriage in 1889 up to the time of his death. He devoted his time to the care of his patients. His wife, in addition to performing service as a nurse, took complete charge of his office, cleaned instruments, answered telephone calls, kept books, and performed the duties of secretary. In 1925 the decedent employed a secretary, who took charge of the office and accounts, but his wife continued to exercise general supervision of the office and answered night telephone calls.
From time to time the decedent purchased and sold real estate in the District of Columbia. The purchases first made were small and were made on deferred payments. He realized substantial profits from these transactions, and1934 BTA LEXIS 1129">*1131 from time to time reinvested the proceeds in other property. One of the first transactions was the acquisition of property at Eighteenth Street and Columbia Road, which he sold in 1919 for $48,793.64.
At the time of her marriage the decedent's wife received from her family about $600 or $700, which she gave to the decedent for use in the purchase of property. After he had become successful, the decedent gave his wife $100 per week for household expenses, from which she regularly saved $200 a month, which she gave to the decedent.
The decedent's wife was a daughter of John H. Small, who died in 1909. The decedent held as trustee for the children of John H. Small, including the decedent's wife, an undivided one-third interest in four parcels of real estate situated in the District of Columbia, namely, the Small farm on Rhode Island Avenue, part of lots 14 and 15 at the corner of Fourteenth and G Streets, and premises at 1216 and 1227 New York Avenue. When this real estate was sold the decedent as trustee received one third of the net proceeds and distributed that money to the beneficiaries. His wife gave her distributive share to the decedent for investment in property. The1934 BTA LEXIS 1129">*1132 property at Fourteenth and G Streets was sold at a time not disclosed by the record for $255,000, and the decedent received from the proceeds as trustee cash and purchase money notes in the aggregate amount of $62,664.80. The time of sale and the selling price, of the remaining parcels, and the amount and nature of the proceeds received by the decedent as trustee were as follows:
| One third of proceeds | ||||
| received by the decedent | ||||
| Year | Selling | Purchase | ||
| Property | of sale | price | Cash | money notes |
| 1227 New York Avenue | 1910 | $15,000 | $4,822.65 | |
| Small farm | 1925 | 160,000 | 47,638.57 | |
| 1216 New York Avenue | 1926 | 27,000 | 1,351.56 | $7,333.33 |
31 B.T.A. 245">*247 On August 25, 1929, the decedent and his wife owned real estate situated in the District of Columbia at 1337 Connecticut Avenue and at 2901 Grant Road, and a parcel of real estate situated in Duxbury, Plymouth County, Massachusetts.
The Connecticut Avenue property, having a total area of 4,764 square feet, was situated in a business district. It was improved by a building used by the decedent as an office and city residence. Part of this property was conveyed to the decedent and his1934 BTA LEXIS 1129">*1133 wife, as joint tenants and not as tenants in common, by a deed dated April 20, 1901, for a total recited consideration of $18,900. They executed a deed of trust on said property, dated April 24, 1901, to secure an indebtedness of $14,175, and, pursuant to the deed of trust executed and delivered three promissory notes, as joint and several makers, in the sum of $4,725 each, due in one, two, and three years, respectively, secured by the property. A 4 1/2-inch strip of the adjoining lot was conveyed to the decedent by a deed dated May 7, 1903. The notes were paid and the deed of trust was released to the decedent and his wife on February 24, 1904.
The Grant Road property consisted of a tract of land containing 21.14 acres, improved by a three-story stone residence, and certain outbuildings. The buildings were constructed in 1911 by the decedent and his wife and were occupied by them as a suburban home. The grounds surrounding the residence were improved by roads, lawns, shrubbery, and gardens. The buildings were situated on tract 59/2, containing 3.749 acres, which was acquired by the decedent and his wife as joint tenants by deed of March 30, 1896, for a recited consideration1934 BTA LEXIS 1129">*1134 of $8,000, subject to a deed of trust for $3,000, assumed by them as purchasers. Thereafter, eight adjoining parcels of land were acquired as follows:
| Acquired by | |||
| Description | Acreage | deed of - | Consideration |
| Lot 803 | 3.013 | April 13, 1897 | $3,300.00 |
| Lot 802 | .835 | May 3, 1899 | 1,668.00 |
| Tract 59/31 | .953 | July 12, 1911 | 3,901.89 |
| Lot 804 | .157 | ||
| Lot 808 | 3.449 | July 28, 1916 | 16,882.45 |
| Lot 809 | 3.154 | ||
| Lot 806 | 5.339 | July 10, 1917 | 8,000.00 |
| Lot 801 | .491 | Jan. 27, 1926 | 4,160.01 |
31 B.T.A. 245">*248 Parcel 59/31 and lots 803, 804, 808, and 809 were conveyed to the decedent at the time of acquisition. On October 31, 1922, the decedent and his wife conveyed lots 803, 804, 808, and 809 to Grace Berry, who, on the same day, reconveyed them to the decedent and his wife as joint tenants. Lots 802 and 806 were conveyed to the decedent and his wife as joint tenants, and lot 801 was conveyed to them as tenants by the entirety.
The real estate situated in Duxbury was conveyed to the decedent and his wife, as joint tenants, by a deed dated January 6, 1923.
The decedent maintained a bank account in his own name. His wife maintained no bank account. She contracted1934 BTA LEXIS 1129">*1135 all bills and made out checks in payment of them, which were signed by the decedent. The $47,638.57 received from the sale of the Small farm was distributed among the beneficiaries in July 1925, and the decedent's wife received $7,669.46, which was deposited in the decedent's bank account. On August 7, 1925, a check was drawn against his account in the amount of $5,023.33, in payment of notes given for the purchase price of the property at Duxbury, and at the same time some expenditures were made for improvements and repairs on the Grant Road and the Duxbury properties.
The Grant Road and Duxbury properties were reported in the estate tax return in a schedule covering jointly owned property, at the assessed values of $135,286 and $24,000, respectively, with a notation that they were not subject to the Federal estate tax. In determining the deficiency the Commissioner valued the Connecticut Avenue property at $166,740; the Grant Road property at $275,000; and the Duxbury property at $24,000, and he included the entire value of each in the gross estate. The fair market value of the properties on August 25, 1929, was as follows: Connecticut Avenue, $166,740; Grant Road, $196,000; 1934 BTA LEXIS 1129">*1136 Duxbury, $24,000.
On August 25, 1929, the decedent owned, among other property, 500 shares of the capital stock of the Union Trust Co. of the District of Columbia. The 500 shares owned by the decedent were included in the estate tax return at a fair market value of $160,000, or $320 per share, and the Commissioner valued them at that amount in determining the deficiency. The fair market value of these shares on August 25, 1929, was $160,000.
OPINION.
MURDOCK: The evidence does not show that the Commissioner erred in valuing the property at 1337 Connecticut Avenue and the 500 shares of stock of the Union Trust Co. On the contrary there is evidence supporting his valuations. No question was raised as to the value of the Duxbury property. The value placed by the 31 B.T.A. 245">*249 Commissioner upon the residential property at Grant Road was too high and a lower value, based upon the evidence in the record, has been found. This property had an area of 21.14 acres, whereas the witnesses at times had in mind only 17.691 acres. Due allowance has been made for this difference.
The only remaining question is to determine what part of the value of each of the three pieces of real1934 BTA LEXIS 1129">*1137 estate should be included in determining the value of the gross estate of the decedent. Section 302 of the Revenue Act of 1926 is in part as follows:
SEC. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated -
(a) To the extent of the interest therein of the decedent at the time of his death;
* * *
(e) To the extent of the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, * * * 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 of1934 BTA LEXIS 1129">*1138 such property as is proportionate to the consideration furnished by such other person * * *.
* * *
(h) Except as otherwise specifically provided therein subdivisions (b), (c), (d), (e), (f), and (g) of this section shall apply to the transfers, trusts, estates, interests, rights, powers, and relinquishment of powers, as severally enumerated and described therein, whether made, created, arising, existing, exercised, or relinquished before or after the enactment of this Act.
All of the property in question, with the exception of a certain part of the Grant Road property, was held by the decedent and his wife at the time of his death either as joint tenants or as tenants by the entirety. Code of District of Columbia, sec. 1031; ; ; . The wife never owned any of the property separately from her husband. Cf. ; affd., ; certiorari denied, 1934 BTA LEXIS 1129">*1139 ; Estate of . However, she acquired a joint legal interest in some of the property from her husband and she acquired a legal interest in some of the property jointly with him at the same time that he acquired his interest. Therefore if any of the property is to be excluded in computing the value of the gross estate of the decedent it must appear either that the wife furnished some certain proportionate part of the consideration 31 B.T.A. 245">*250 with which a piece of property was purchased or that she acquired an interest in certain property from the decedent by paying him full and adequate consideration in money or money's worth for what she received. ; ; ; affd., ; ; ; Regulations 70, art. 23. Cf. 1934 BTA LEXIS 1129">*1140 ; affd., ; . Neither appears with sufficient clarity to justify a finding which would benefit the petitioner.
The record fails to show that any money belonging to the wife ever was used to purchase any of the properties in question. She testified that she gave the decedent $600 or $700 when they were married which was put into property. They were married in 1889, they purchased many properties, and it is impossible to trace or even begin to trace this first contribution which she made. Certainly it can not be traced into any of the properties in question. Next she testified in regard to an interest in a trust established by her father from which she received money. However, the record does not show the date when any distribution was made from this trust or the amount of any distribution received by her, except that she received $7,669.46 in 1925. All of the property in question with the exception of lot 801 was purchased prior to this distribution. There is no showing of how lot 801 was purchased, whose money was used, or how much was paid. The only evidence of a payment on account1934 BTA LEXIS 1129">*1141 of the purchase price of any of the property having been made after the above mentioned distribution relates to a payment of $5,023.33 on the mortgage on the Duxbury property. The $7,669.46 belonging to the wife was deposited in the husband's bank account on July 30, 1925, increasing the balance in that account from $11,827.97 to $19,795.65. A check was drawn on August 1, for a purpose not shown, which reduced the balance to $6,681.82. Thereafter a few small deposits were made and on August 7 a check for $5,023.33 was drawn in payment of notes given in 1923 to purchase the Duxbury property. The cost of that property has not been shown. How much of the wife's money went to pay the notes, how much of it was used to pay the check dated August 1, and how much of it was left in the account? Even if these questions could be answered satisfactorily, still the proportion of the consideration represented by the wife's payment could not be determined because the cost of the property has not been shown. Hence the portion of the value to be excluded could not be determined.
31 B.T.A. 245">*251 The wife also testified that she saved $200 per month out of an allowance of $100 per week given her1934 BTA LEXIS 1129">*1142 by her husband for household expenses. We need not decide whether or not this represented a gift from the husband or whether or not there was full and adequate consideration in money or money's worth to meet the requirements of the statute. None of this money has been traced into any of the properties in question and of course no certain amount has been traced into any particular property, as would be necessary if a change were to be made in the determination of the Commissioner.
The wife said that she managed all of the decedent's business affairs, yet she has not mentioned one instance of the contribution of any of her own separate money toward the purchase of a particular piece of property nor has she stated the amount of any contribution by her toward the purchase of any particular property. Counsel for the petitioner alleged in the petition that there existed between the decedent and his wife "a community of interests and property" to which the wife made contributions of her services. He argues that under this agreement the wife was entitled to all of the jointly owned property upon the death of the husband. Apparently counsel relies upon proof of this alleged agreement1934 BTA LEXIS 1129">*1143 in lieu of evidence tracing definite amounts of the wife's money into particular properties. The value of the services rendered by the wife has not been shown. There is no community property low in the District of Columbia, where this couple lived, to correspond with that of Texas and other community property states. If there were, no agreement would be necessary. The testimony of the wife does not adequately support the view of counsel for the petitioner. She testified that with respect to properties purchased with the funds of both "the arrangement was, if I should die, it was all his; if he should die, it was all mine" and their wills were made to carry out that arrangement. They held most of the property in question either as joint tenants or as tenants by the entirety and consequently all so held would go to the survivor. The wife was the sole beneficiary under the husband's will. Thus the arrangement testified to by the wife is really immaterial in the decision of the case for it does not change the facts as otherwise established. The evidence does not show any further arrangement or agreement between the husband and wife in regard to any of the properties here involved. 1934 BTA LEXIS 1129">*1144 Thus it is unnecessary to consider the possible effect of any such agreement as was alleged to exist.
The value of the property standing in the name of the decedent alone must be included in determining the value of the decedent's gross estate. Likewise the entire value of the property standing 31 B.T.A. 245">*252 in the name of the decedent and his wife either as joint tenants or as tenants by the entirety must be included in determining the value of the decedent's gross estate, since her separate contribution, if any, toward the purchase of those properties has not been shown, and consequently the proportionate part of the value to be excluded can not be determined. ; ; affd., ; affirmed per curiam,, on authority of , and ; 1934 BTA LEXIS 1129">*1145 ; ; ; ; .
Reviewed by the Board.
Decision will be entered under Rule 50.
VAN FOSSAN, dissenting: I find myself unable to subscribe to the holding of the majority of the Board. I believe the evidence in this case fully spells out a contract between the decedent and his wife which existed throughout all of their married life and was basic in all property accumulations. If such a contract existed, it should be given effect. I cannot subscribe to the narrow view that the exact money contribution of the wife must be traced through each change in property, however obvious it may be that there is merit in the petitioner's primary contention. I believe the powers and the duty of the Board are broader than the prevailing opinion would indicate.
As above suggested, the basic issue involved in the case at bar is whether or not a business1934 BTA LEXIS 1129">*1146 contract existed between the decedent, Richardson, and his wife. The evidence shows clearly that such a contract was entered into in 1899 and continued until August 15, 1929, the date of the decedent's death.
All available funds arising from the joint efforts of the parties were invested in real and personal property. To such proceeds were added the petitioner's distributive share of her father's estate. In the management of those assets, a strictly business activity, the wife took a major and dominant part. Under the terms of the original agreement the decedent and his wife were to share equally in the results of their endeavors and the consequent profits therefrom
In the District of Columbia a husband and wife may enter into contracts with each other, ; ; ; and in event of such a relationship the court will enforce the same as to the respective rights of the parties.
31 B.T.A. 245">*253 Since the existence of the contract has been established, it is immaterial in whose name the property was held or the enterprise1934 BTA LEXIS 1129">*1147 was conducted. ; ; . As a matter of fact, however, substantially all of the realty in question was held jointly.
The proof establishes that the three properties in controversy, the Connecticut Avenue, the Grant Road, and the Duxbury, were acquired and held pursuant to the contract between the parties. In my opinion but one half of the value of each property should be included in the taxable estate.