*1411 1. The transfer of stock to the wife of the petitioner's decedent was made in contemplation of death.
2. Taxes on property held by the executors of an estate, which are accrued and paid after the estate came into being, are not deductible from the corpus as administrative expenses.
*1183 The respondent has determined a deficiency in estate tax in the amount of $11,167.61. Two issues are pleaded: (1) Whether a certain transfer of stocks was made in contemplation of death, and (2) whether the petitioners are entitled to deduct from the taxable corpus of the estate the amount of certain taxes paid to the State of Colorado during the period of administration.
*1184 FINDINGS OF FACT.
David R. C. Brown, a resident of Colorado, died testate on June 29, 1930. The petitioners are the duly appointed, qualified, and acting executors of the estate of the decedent and as such maintain an office in Denver.
In his lifetime the decedent was interested in many business enterprises, which included banking, mining, farming, sheep and cattle feeding, *1412 power companies, and dealings in stocks and other securities. He was unusually successful and left an estate, exclusive of the gift here in question, which was valued for estate tax purposes at $1,532,740.
On April 10, 1930, the decedent transferred 3,487 shares of Electric Bond & Share Co., a corporation, to his wife without consideration. The value of this stock at the date of his death about two months later was $266,163.75. The petitioners duly made and filed an estate tax return, but did not include these shares of stock in the inventory thereof. Upon audit the respondent determined that the transfer was made in contemplation of death and added the value of the stock to the total taxable corpus of the estate.
For many years prior to his death it was the custom of the decedent to make substantial gifts to his wife and other members of his family in order that they might have property and incomes of their own. Pursuant to such policy he made the following listed gifts to his wife: in 1907, a half interest in a business building in Denver known as the Aspen Block, valued at $42,000, and a set of Russian sables that cost $5,000; in 1910, diamonds that cost $12,500 and a*1413 house in Aspen, Colorado, valued at $12,800; in 1917, a residence in Denver valued at $50,000; in 1919, $141,000 in cash; in 1922, a wrist watch that cost $500; in 1929, a silver tea set that cost $1,250; and in 1930, the shares of stock here in question. In 1919 he gave each of his two daughters by a previous marriage $70,000 in cash, and in 1923 gave $50,000 in cash to each of them.
Decedent was 73 years old at the date of his death. Throughout his entire active life until a year or two before his death he enjoyed good health and was strong, energetic, and vigorous, both in business and recreational activities. Until almost the day of his death he participated in the management of his various business interests, took hunting and fishing trips and made many long tours to different parts of the world for pleasure or on business.
Some two or three years prior to his death decedent began to suffer from indigestion and developed high blood pressure. He consulted several physicians. In 1929 he went to Rochester, Minnesota, and was advised by the Mayo Clinic that his physical condition *1185 was excellent and that his blood pressure was normal for a man of his age. After*1414 returning from Rochester he went duck hunting in the fall of 1929 and spent the succeeding winter in California. Sometime in that year he passed a kidney stone but was incapacitated for business for only a short time. He returned from California in March 1930 and at that time was suffering from indigestion. After consulting with his physician on April 1, 1930, he went to a Denver hospital for observation and remained there for four days. On April 11 he again went to a hospital, but remained only a few days. During all this time while in Denver and not in a hospital he went to his office each day and attended to various business matters. On June 13, 1930, he went to Aspen, Colorado, where he had formerly lived and still owned a residence. He was then not nearly so well as he had been in Denver, but did not take to his bed until three days before his death on June 29, 1930. His death certificate, duly attested, states that the cause of death was chronic constitutional nephritis and that uremia and arteriosclerosis were secondary and contributory causes.
In March 1930 the decedent informed his wife that he proposed to give her a substantial amount of income-producing stocks. *1415 On April 10 thereafter he made the transfer of stocks here in question. On April 11 he made a new will, in which he provided for the disposition of his entire estate. During several years prior to his death he had made and revoked several wills. On the same day that he made what turned out to be his last will he went to a hospital in Denver for observation and treatment.
During the year 1931 there were levied and assessed by the proper taxing authorities of the counties of Pitkin, Garfield, Delta, and Gunnison, Colorado, upon the real and personal property then owned and held by the estate of David R. C. Brown, general taxes in the aggregate sum of $2,876.70. The taxes so levied and assessed for the year 1931 became a lien upon the property so taxed as of the first day of April 1931, and were due and payable the first half on or before the last day of February 1932, and the remainder on or before the last day of July 1932. Assessments on real and personal property in the State of Colorado are made by the county officers on property held and owned on April 1 of each year for that year, although the amounts of such assessments are not finally determined until later in the year. *1416 The executors, who are the petitioners here, between the first day of March 1932 and the first day of September 1932, paid the taxes aforesaid in the amount of $2,876.70 and such payment was thereafter and on November 15, 1932, approved by the County Court of the City and County of Denver, Colorado.
*1186 OPINION.
LANSDON: The respondent has determined that the gift here in controversy was made in contemplation of death. The question is one of fact. . The decedent made the transfer under review only a little more than two months before he died and at a time when he was much concerned as to his health. The weight of opinion, however, in such circumstances, is that neither the state of the donor's health nor the time between the gift and death are factors that conclusively determine the purpose of such a gift.
The facts appear to indicate quite clearly that the decedent made the gift in question as a part of the disposition of his property in the event of his death. After returning from California in March 1930 he was suffering from indigestion and other ailments. In that month he told his wife that he proposed*1417 to hive her some stock of substantial value. On April 1 he went to a hospital for observation and remained there for three days. He returned to his home while still under the care of a physician. On April 10 he made the transfer here in question. On April 11 he made a new will disposing of his entire estate and on the same day went back to the hospital for further observation and treatment, where he remained for a period not disclosed by the evidence. On June 13, feeling less well than usual, he went to Aspen, his former home, and there he died on June 29. We think these circumstances indicate that the gift was made in contemplation of death and that it was in effect a testamentary disposition of a part of the donor's estate. .
Petitioners contend the gift of April 10 was in keeping with the decedent's custom followed for many years for the purpose of providing his wife and children with independent means and incomes of their own. It is true that the decedent over a period of about 25 years made many substantial gifts to his wife and daughters, but, measured by his wealth, such gifts were no more than any*1418 generous man would make to a devoted wife and to daughters who were past their majority and anxious to establish homes and incomes in support thereof for themselves. On the evidence we affirm the determination of the respondent on this issue. .
During the administration of the decedent's estate, the executors thereof, who are the petitioners here, paid certain general property taxes to the State of Colorado and municipal subdivisions of the state, as set out in our findings of fact. Respondent has determined that such payments are not deductible from the taxable corpus of the estate as administrative expenses. This issue must be determined *1187 under the provisions of section 303(a)(1) of the Revenue Act of 1926. 1
*1419 The provisions of Regulations 70 2 relies on by both parties do not conclusively answer the question here, but inferences therefrom seem to sustain the determination of the respondent. The items enumerated in the regulations are obviously expenses arising out of administration. This is not true of taxes, which accrue against property regardless of ownership and in this instance would have accrued in the same amount had the decedent been alive in the taxable year. It seems clear, therefore, that such taxes cannot be regarded as any part of the cost of administration.
*1420 *1188 In , in discussing a similar claim by an estate the court said:
It would seem clear that teh ad valorem tax paid by the executors of the county and city of Durham do not come within the terms of "administrative expenses", nor are such taxes claimed against the estate, at the date of the death of the testator, prior to the date at which such are assessed and levied. Claims against the estate, as defined by a number of cases cited by the defendant, are such demands or claims of a pecuniary nature which could have been enforced against the decedent during his life.
In , we held that taxes accrued before the date of the death of decedent and a lien on his property at that time should be deducted from the corpus for Federal income tax purposes. In the instant proceedings the taxes in question had not accrued when the estate came into existence and so were not a lien against any property thereof at that time.
Counsel for petitioner relies on certain provisions of the statutes of Colorado and decisions of the courts of that and other states. A study*1421 of such laws and decisions fails to convince us that they control here. It is nowhere held that the taxes accrued and paid during the period of administration are administrative expenses. What is uniformly held is that such taxes, together with other items which it is not necessary to discuss, are obligations of the estate and that when paid by the executors credit may be taken for the amount thereof in the final settlement. There is nothing in the record or in the authorities relied on by the petitioners that overcomes the presumption that the determination of the Commissioner is correct.
Reviewed by the Board.
Decision will be entered for the respondent.
Footnotes
1. SEC. 303. 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, claims against the estate, unpaid mortgages upon, or any indebtedness in respect to, property (except, in the case of a resident decedent, where such property is not situated in the United States), to the extent that such claims, mortgages, or indebtedness were incurred or contracted bona fide and for an adequate and full consideration in money or money's worth, losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualty, or from theft, when such losses are not compensated for by insurance or otherwise, 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 the United States, under which the estate is being administered, but not including any income taxes upon income received after the death of the decedent, or any estate, succession, legacy, or inheritance taxes. ↩
2. ART. 37. Taxes. - The deduction of property taxes upon realty and personalty is governed by the following provisions:
(1) Where such taxes became a personal obligation of the decedent in his lifetime, the entire amount thereof is deductible. (See Art. 29.)
(2) Where assessed during the administration of the estate, and the taxes are a proper administration expense, deduction of the entire amount may be taken. (See Arts. 32 and 35.)
Federal taxes upon income received during the decedent's lifetime are deductible, but taxes upon income received after death are not deductible. No estate, succession, legacy, or inheritance tax is deductible.
ART. 32. Administration expenses. - The amounts deductible from the gross estate as "administration expenses" are such expenses as are actually and necessarily incurred in the administration of the estate; that is, in the collection of assets, payment of debts, and distribution among the persons entitled. The expenses contemplated in the law are such only as attend the settlement of an estate by the legal representative preliminary to the transfer of the property to individual beneficiaries or to a trustee, whether such trustee is the executor or some other person. Expenditures not essential to the proper settlement of the estate, but incurred for the individual benefit of the heirs, legatees, or divisees, may not be taken as deductions. Administration expenses include (1) executor's commissions; (2) attorney's fees; (3) miscellaneous expenses. Each of these classes is considered separately in Articles 33 to 35, inclusive.
ART. 35. Miscellaneous administration expenses.↩ - This includes such expenses as court costs, surrogates' fees, accountants' fees, appraisers' fees, clerk hire, etc. Expenses necessarily incurred in preserving and distributing the estate are deductible, including the cost of storing or maintaining property of the estate, where it is impossible to effect immediate distribution to the beneficiaries. Expenses for preserving and caring for the property may not include additions or improvements; nor will such expenses be allowed for a longer period than the executor is required to retain the property. A brokerage fee for selling property of the estate is deductible where the sale is necessary in order to pay the decedent's debts, the expenses of administration, or to effect distribution. Other expenses attending the sale are deductible, such as the fees of an auctioneer, where it is reasonably necessary to employ one.