*2277 Executors' commissions, attorney's fees, and other expenses of maintaining and preserving an estate over a long period of years held not to be ordinary expenses of administration and not proper deductions in computing the net estate subject to the Federal estate tax.
*1020 This proceeding is for the redetermination of a deficiency in estate tax asserted by the respondent in the amount of $428.22. The deficiency arises from the disallowance of certain amounts claimed as deductions in the estate-tax return as allowances for attorney's fees, executors' commissions, and miscellaneous administrative expenses.
FINDINGS OF FACT.
William G. Peckham, a resident of New Jersey, died testate on April 13, 1924. By his last will and testament legacies amounting to $122,500 were given to several persons; the widow was given the right to occupy the residence for a period of five years or to elect within three months of the decedent's death to accept $8,000 in lieu thereof; testamentary guardians were appointed for the decedent's minor grandchildren, *2278 and certain gifts made in the decedent's lifetime were recognized and confirmed. Said last will and testament further provided that:
Third: I appoint Sarah A. Story, Ruth P. Haskell, and Marion W. Peckham as executrices of this my will and testament. No bond shall be required of said executrices. I direct that each of said executrices shall receive $1,000 per year for the first five years of their services and $2,000 each per year for the sixth year of their services and said sums shall be in lieu of all other *1021 compensation. If Ruth P. Haskell dies or declines to act as executrix I appoint William H. Haskell, executor in her place and stead. If either of the other executrices dies or declines, I appoint Laura P. Waring executrix in the place of the one so dying or declining to act.
I direct my said executrices to sell everything when prices are high, but to wait six years to secure a full price. I give to my said executrices or any two of them, power to sell, assign, and convey or to lease; and to satisfy mortgages, judgments, and liens and to settle or compromise with any or all persons in their discretion, and to invest in first mortgages or United States*2279 bonds, but not to loan to relatives or connections.
Fourth: I direct my said executrices to pay said legacies and bequests with all convenient dispatch.
I give, devise and bequeath all the rest, residue, and remainder of my property, real and personal, wheresoever situate to my children to survive me, and my wife Marion W. Peckham share and share alike. When the time comes in the sixth year, I direct my executrices to make up parcels of the residue and remainder of all my property and to assign and convey the same, one parcel to each of the five persons above or to such of them as shall survive me. The shares to be made up according to the judgment of my executrices and drawn by lot.
By a codicil to the will the appointment of Sarah A. Story, Ruth P. Haskell, and Marion W. Peckham as executrices was revoked and Harris D. Rush, Marion Wheelock Peckham, and Mary Peddle Peckham were nominated and appointed in their place and stead. The three persons last named and appointed duly qualified as executor and executrices of the last will and testament and are now and have been since that time acting as such executor and executrices. For convenience they will hereinafter be*2280 called executors.
Said executors duly filed with the Orphan's Court in and for Union County, New Jersey, their first intermediate accounting for the estate of the said William G. Peckham. On July 29, 1927, said account was duly approved by the said Orphan's Court in and for Union County, New Jersey. At that time said executors had paid to themselves as compensation the amount of $3,000 each and had also paid as attorney's fees for services rendered to said estate the amount of $8,500. Court costs and other expenses of administration at that time amounted to $2,307.95. Said amounts were included in their intermediate account. Since the approval of said intermediate account on July 29, 1927, the following expenditures have been made by the estate:
| Accountant's fees | $975.00 |
| Broker's commission on sale of real estate (1926) | 2,500.00 |
| Broker's commission on sale of real estate (1929) | 300.00 |
| Fee of surveyor for platting out parcels of real estate to be divided among residuary legatees | 183.00 |
| Attorney's fee | 1,000.00 |
| Executors' commissions | 6,000.00 |
| 10,958.00 |
*1022 Said executors filed an estate-tax return for the estate of William G. Peckham and*2281 reported a gross estate of $373,885.95 and claimed deductions in the amount of $92,078.62. Included in the deductions were $21,000 for executors' commissions, representing the entire amount to be paid them under the decedent's will for the full six-year period for which the estate was to be kept open; $12,000 for attorney's fees and $5,000 for miscellaneous expenses. The respondent on March 29, 1928, mailed a deficiency notice to the said executors determining a deficiency in estate tax in the amount of $428.82. In computing the deficiency he reduced the gross estate to $366,399.14; reduced the deduction for executors' commissions from $21,000 to $9,000, which was the amount of said commissions that had been paid on July 29, 1927, the date the first intermediate account of the estate was approved by the court; reduced the deduction for attorney's fees from $12,000 to $8,500, which was the amount of attorney's fees that had been paid at the date of the approval of said account, and reduced the deduction for miscellaneous expenses from $5,000 to $2,307.95, which was the amount of legal expenses, cost of appraisals and administrative expenses, including costs and fees that had been*2282 paid to the court in which the estate was being administered.
OPINION.
MARQUETTE: The petitioner claims that in computing the net estate of the decedent subject to the Federal estate tax, there should be allowed as deductions the full amount of executors' commissions, attorney's fees and other expenses that have been paid or will be paid upon the settlement of the final account of the executors. The respondent has allowed the amount of said commissions, fees and expenses paid to and including July 29, 1927, which was more than three years after the decedent's death, but has disallowed the remainder claimed by the petitioner. The petitioner relies on section 403(a)(1) of the Revenue Act of 1921, which provides:
SEC. 403. That for the purpose of the tax the value of the net estate shall be determined -
(a) In the case of a resident, by deducting from the value of the gross estate -
(1) Such amounts for funeral expenses, administration expenses, * * * and such amounts reasonably required and actually expended for the support during the settlement of the estate of those dependent upon the decedent, as are allowed by the laws of the jurisdiction, whether within or without*2283 the United States, under which the estate is being administered, * * *
The same provision is found in the Revenue Acts of 1918 and 1924.
The decedent, by his last will and testament, directed that distribution of his estate should not be made until six years from his death, *1023 and since the decedent's death the estate has been maintained and preserved and is still in the hands of the executors. The respondent takes the position that in computing the net estate there should be allowed as deductions only such fees and expenses as would be incurred and paid if the estate were administered within the time usually required for that purpose.
We are of opinion that the position of the respondent is well taken. This Board has heretofore held in several cases arising under the Revenue Acts of 1918, 1921, and 1924 that in computing the net estate subject to the estate tax, only such administration expenses, including executors' fees and commissions, are allowable as deductions as would be incurred in settling up and dividing the estate within the period ordinarily required for that purpose, and that expenses incurred in preserving and maintaining the estate far beyond the*2284 ordinary administration period should be deducted in computing the income of the estate. ; ; ; and .
This is not the case of a will or an estate which is to be administered or distributed within the time usually required for such purpose. On the contrary, the decedent's will expressly directed that the estate be kept intact for at least six years. The executors herein, in addition to performing the usual duties of executors, also perform duties and services which are essentially those of trustees. The respondent has allowed as deductions in computing the net estate expenses incurred and paid up to July 29, 1927, which was more than three years after the decedent's death, and more than the period that would be required for the ordinary administration of the estate; and in view of the decisions cited we are of opinion that the additional fees, commissions, and expenses in controversy are not proper deductions in computing the net estate of*2285 the decedent, and that the respondent did not err in disallowing them.
Judgment will be entered for the respondent.