*2443 1. Valuation of a contract for the sale of real estate, included in in decedent's gross estate determined.
2. On the evidence, held, that executors' commissions and attorney's fees as allowed by the surrogate court are proper deductions from gross estate.
3. New York State transfer tax allowed as a credit under section 301 of the Revenue Act of 1924.
*1115 The respondent, as set forth in his deficiency letter dated June 17, 1926, determined a deficiency in estate tax in the amount of $151.36, and this proceeding for a redetermination thereof, is brought by the petitioners as executors of the estate.
The petition alleges that the respondent erred in determining the value of the decedent's gross estate:
(1) By increasing the value of the real estate from $17,500 to $20,000;
(2) By increasing the value of a contract for the sale of real estate and personal property from $16,000 to $18,488.20; and
*1116 (3) In refusing to allow as deductions from gross estate, the following expenses of administration:
(a) Executors' commissions*2444 in the amount of $2,193.
(b) Attorney's fees in the amount of $2,500.
(c) Miscellaneous expenses in the amount of $350.
(d) New York State transfer tax in the amount of $958.17.
The petitioners have abandoned the issue as to the value of the real estate, and both parties have agreed that the miscellaneous expenses should be allowed in the amount of $127.28 instead of $350.
FINDINGS OF FACT.
James E. Norton died testate on October 9, 1924. The decedent's will was admitted to probate by the Surrogate Court of Washington County, New York, on October 18, 1924, and the petitioners qualified as executors under the will.
The petitioners, as executors, filed an estate-tax return in which they valued a contract for the sale of a farm and personal property thereon, made on deferred payments at $16,000, as of the date of dececent's death. The respondent has determined that the fair market value of the contract was $18,488.20.
On December 22, 1923, the decedent entered into the contract with Fred Morse, for the sale of a farm comprising about 240 acres and the personal property thereon, in consideration of the payment of $20,000. The contract provided that $1,000 was*2445 to be paid in cash at the time of the execution of the contract, the remainder, together with interest, was payable in semiannual installments of $250 each. It was further provided that when one-half of the purchase price had been paid, the vendor was to execute and deliver a deed to the premises and take back a first mortgage as security for the remainder. At the time of the decedent's death no payments were in arrears on the contract.
The farm was operated as a grain and dairy farm. The personal property consisted of about 30 cows, 4 horses, and the necessary farming equipment. Located on the farm were three small slate quarries, from which slate of an inferior grade was obtained without the use of machinery. These quarries were leased on a royalty basis and the returns were small. However, if the quarries were operated at their capacity, the royalties could not exceed $1,000 a year. The farm was assessed for local tax purposes at $7,500. The fair market value of the farm on the date of the decedent's death was $10,000. The record does not disclose the value of the personal property to be conveyed under the contract. The purchaser, Morse, had no financial resources other*2446 than his rights in the contract for the purchase of the farm.
*1117 The fair market value of the contract for the sale of real estate and personal property to Morse was $18,488.20 at the date of decedent's death.
The executors filed their account for judicial settlement with the surrogate court on December 5, 1925. This account shows, among expenses and disbursements of administration, the payment of counsel fees to J. B. McCormick, of $515. On December 14, 1925, the surrogate approved the accounts of the executors, and before ordering distribution, made the following orders:
That the said executors retain the sum of Two Thousand One Hundred and Nineteen Dollars ($2119) as and for their lawful commissions, to which they are entitled on this accounting, and the same be equally divided between the said executors.
That they retain the further sum of Two Thousand Dollars ($2000), which sum is hereby allowed to them as and for their reasonable costs, counsel fees and expenses and disbursements of counsel on this accounting and pay the same to J. B. McCormick, their attorney herein, in addition to all other sums paid and allowed him for services in said estate.
The*2447 executors' commissions have been paid. The $515 reported as attorney's fees in the preliminary report has been paid, but the $2,000 payment authorized by the court has not been paid to McCormick.
The executors of the estate of James E. Norton, deceased, paid the State of New York a transfer tax on the estate of James E. Norton, deceased, in the net amount of $935.92. The respondent determined that the tax so paid was of the kind for which a credit (not to exceed 25 per cent of the tax imposed by section 301 of the Revenue Act of 1924) was provided for by section 301(b) of the Revenue Act of 1924, and, in accordance with the latter section, allowed the petitioners a credit of $187.06, which represented one-fourth of the Federal estate-tax liability determined by the respondent, of $748.25.
OPINION.
GREEN: Among the assets of the decedent's estate was the contract for the sale of the real estate and personal property to Morse. The total consideration named therein was $20,000. By the terms of the contract, $1,000 was paid in cash and the remainder was to be paid in equal semiannual installments of $250 each. The petitioners, in their estate-tax return, placed on this contract*2448 a value of $16,000. The respondent determined the contract to have a value of $18,488.20. No witness testified as to the value of the contract itself. The petitioner's evidence establishes that the real estate thus sold had, at the time of the sale, a value of $10,000. There is no evidence in the record as to the value of the personal property, but an examination of the contract convinces us that this personal property did have a *1118 substantial value. Indeed, upon no other ground could the sale price of $20,000, the value of $18,488.20, as determined by the respondent, and the petitioner's contention of a value of $16,000, be justified. Without evidence of the value of this personal property, it is impossible to determine the total value of the property sold under the contract, and we, accordingly, affirm the finding of the Commissioner in this respect.
The surrogate court has allowed executors' commissions in the amount of $2,119 and attorney's fees in the amount of $2,515, both of which are proper deductions under the provisions of section 303(a)(1) of the Revenue Act of 1924.
The petitioners contend that the full amount of the transfer tax paid to the State*2449 of New York should be allowed as a deduction from gross estate, in that it was a compulsory administration expense, which they were bound to pay under the laws of the State of New York, and was actually and necessarily incurred in the administration of the estate and was necessary before the executors could transfer the property to the beneficiaries. The deduction contended for is specifically denied in section 303(a)(1) of the Revenue Act of 1924. The amount of any estate, inheritance, legacy or succession taxes actually paid to any State, is, however, allowed as a credit against the tax imposed by section 301 of the Revenue Act of 1924, but not to exceed 25 per centum of the tax so imposed. The respondent in his determination allowed the petitioners a credit of $187.06. Since the amount imposed by section 301, supra, will be changed by this opinion, the amount of the credit should be recomputed so as not to exceed one-fourth of the corrected tax liability.
By stipulation set forth in the deposition, it was conceded that the following items of miscellaneous administration expenses are deductible:
| Granville Sentinel | $15.60 |
| John L. Mason, insurance | 106.43 |
| Frank Patterson | 5.25 |
| Total | 127.28 |
*2450 It is further stipulated that the following rental items should be included in gross estate:
| Barnard Brothers | $ 31.00 |
| S. C. Mason | 40.00 |
| Taylor's restaurant | 15.00 |
| Treehouse | 50.00 |
| M. E. Rudd | 18.00 |
| Total | 154.00 |
*1119 It is further stipulated that the following miscellaneous items may be added to Schedule D-2:
| War Savings stamp | $ 5.00 |
| Money due from George H. Norton | 23.41 |
| Total | 28.41 |
Judgment will be entered under Rule 50.