*43 Decision will be entered under Rule 50.
Upon the issue presented, whether certain property standing in the name of decedent's wife at his death was community property of the decedent and includible in his gross estate for estate tax purposes, the respondent pleaded affirmatively an equitable estoppel. Held, since the proof establishes all the essential elements necessary to warrant the application of the doctrine of equitable estoppel, the plea is sustained.
*838 This proceeding involves an estate tax deficiency in the amount of $ 27,960.83. Petitioners claim an overpayment of $ 7,327. The contested issue is whether certain property, i. e., securities standing in the name*44 of decedent's wife at his death, and the personal residence of decedent and his wife, the deed to which was taken in the wife's name, was community property includible in decedent's gross estate for estate tax purposes, or was the separate property of the wife. By an amended answer the respondent pleaded certain facts upon which he relies as constituting an affirmative defense of estoppel. Petitioners filed a written reply admitting certain of the facts, denying others, and setting forth matter denominated a "First" and "Second" defense.
The case was submitted on a stipulation of facts, oral testimony, and documentary proof. The facts as stipulated are so found. Facts found which were not stipulated are found from the evidence.
FINDINGS OF FACT.
The decedent, George Kingdon, was born on October 3, 1862, in Cornwall, England. He died on November 21, 1942, in Mercy Hospital, San Diego, California, at the age of 80 years, 1 month, and 18 days. At the time of his death he was a resident of San Diego, California, and the Federal estate tax return, Form 706, for his estate was filed with the collector of internal revenue for the sixth district of California at Los Angeles.
The immediate*45 cause of death as revealed by the death certificate was benign hypertrophy of prostate, duration -- two plus years; due to chronic uremia, duration -- not stated; due to urinary obstruction, duration -- not stated; other conditions -- coronary disease, duration -- three years.
*839 The decedent left him surviving Maud Bertha Kingdon, his wife, who at the time of his death was 66 years of age. They had no children other than an adopted daughter, Audrey Kingdon Klosterman, who was then married and living apart at San Diego, California.
In the estate tax return, which was filed on February 17, 1944, a total gross estate of $ 344,662.52 was reported; deductions of $ 20,590.43 were claimed; net estates of $ 224,072.09 and $ 264,072.09, respectively, were shown for basic tax and additional tax; and the total estate tax, reported and paid on February 17, 1944, was in the amount of $ 65,832.77.
Under schedule B, "Stocks and Bonds," securities were listed of the total value of $ 220,173.24. Upon investigation the values of the securities listed were increased in the amount of $ 1,592.50, which adjustment is not contested by the petitioners. Securities of the total value of $ 84,870*46 held in the name of Maud Bertha Kingdon, the decedent's wife, and not reported in the return were determined by the Commissioner to be includible in the gross estate, on the ground that they constituted community property of the decedent and his wife.
Under schedule G, "Transfers During Decedent's Life," the personal residence of the Kingdons was included in the decedent's gross estate at a value of $ 19,500 (which was increased by the Commissioner to $ 20,000), with the following explanation:
Decedent supplied the entire consideration for the purchase and acquisition of the following described real property and had deed taken in the name of his wife Maud Bertha Kingdon, said purchase having been made during the year 1939 and no gift tax return having been made or filed on same. * * *
In an amended petition it is alleged that the residence "was purchased with community funds of the decedent and of the surviving spouse and immediately deeded to the surviving spouse as her sole and separate property. * * *" Based on such allegations, it is contended by the petitioners that in filing the estate tax return the residence should not have been included in the decedent's gross estate. *47 No gift tax return was ever filed covering this transfer.
The determination by the Commissioner with respect to the inclusion of the securities valued at $ 84,870 and the contention of the petitioners with respect to the exclusion of the personal residence valued at $ 20,000 are the only issues for determination by this Court (the values are not in dispute), it being agreed by the parties that (1) proper credit for California inheritance tax paid in the amount of $ 5,141.88, (2) deduction for attorneys' fees and other administration expenses incident to the prosecution of this appeal, and (3) deduction for additional Federal income tax imposed on the decedent for the period from January 1, 1942, to the date of death on November 21, 1942, in the amount of $ 104.93, will be adjusted in a computation under Rule 50.
*840 The decedent and his surviving spouse were married in Globe, Arizona, in 1904, and throughout their entire married life they lived in community property jurisdictions. The income tax returns of the decedent and his wife for such period of time as either party has records available show that from 1920 to 1937, inclusive, such returns were filed on a community property*48 basis, whereby there was an equal devision between the decedent and his wife of the income from all sources, as well as an equal division of the deductions claimed. The schedules attached to the returns reported that certain securities were held in the name of the decedent, while other securities were held in the name of his wife, and the income from all such securities was likewise divided between the decedent and his wife and reported as community income.
For the taxable year 1938 the decedent and his wife began filing their income tax returns on the basis that the income from the securities held in their separate names was the separate income of the decedent and his wife, respectively. This practice was continued for the taxable years 1939 and 1940. In 1941 the decedent and his wife again began to file their income tax returns on a community property basis, showing equal division between the decedent and his wife of the income from all sources, including the income from securities held in their separate names.
Claims for refunds were filed by the decedent in which it was contended that for the years 1938, 1939, and 1940 the decedent had overpaid his Federal income tax (consequently*49 his wife had underpaid hers) because they had included in their returns as their separate income the income from the securities held in their separate names, whereas all securities, whether or not held in their separate names, constituted community property and, therefore, the income therefrom constituted community income. In support of their contentions the decedent and his wife executed an affidavit on May 24, 1940, reading as follows:
We, George Kingdon and Maud B. Kingdon, husband and wife, swear to the following facts as being the reasons for considering that all property now in each of our seperate [sic] names or in joint names as being community.
We were married in October 1904 and have lived together continuously ever since. At time of marriage neither of us were [sic] in possession of any property and all property acquired since marriage has been the result of the personal services of husband. None has been acquired by legacy or otherwise.
Immediately after marriage we lived in Mexico, where husband was living prior to marriage, we resided there for a period of four years. We then returned to the United States and resided in the State of Arizona for a period of*50 five years after which we again returned to Mexico and resided there for a period of five years. We then returned to the State of Arizona and resided there until husband retired from position with the United Verde Extension Mining Company in July 1938.
*841 We are now residing in the State of California.
We have always considered any property owned by us, even though carried in our seperate [sic] names, to be community and owned equally by each of us.
Subscribed and sworn to by George Kingdon and Maud B. Kingdon before me this 24th day of May 1940.
[Signed] George Kingdon
Maud B. Kingdon
[Signed] James W. Looby
Internal Revenue AgentAfter due investigation by internal revenue agents and on the basis of the affidavit dated May 24, 1940, the following overassessments were found with respect to the decedent's tax liability and the following deficiencies were found due from the decedent's wife by reason of the adjustment of all items of income and expenses from the separate property basis to the community property basis:
| Deficiencies | ||
| Overassessment | due from | |
| Years | due | decedent's |
| decedent | wife | |
| 1938 | $ 580.08 | $ 137.42 |
| 1939 | 625.50 | 592.23 |
| 1940 | 287.19 | 189.79 |
*51 The decedent and his wife joined in signing a consent with respect to the year 1939 providing for the crediting of the decedent's overassessment against his wife's deficiency and their tax liabilities were settled on that basis. The decedent died prior to the time that the revenue agent's report covering the reexamination of the years 1938 and 1940 was completed, and Form 873, "Acceptance of Proposed Overassessment," on account of his tax liability for those years was filed by his wife as executrix of his estate and their tax liabilities for those years were settled on that basis.
The income tax returns for the years 1941 and 1942 were prepared on the basis that all the property of the decedent and his wife was community property and the income was reported in equal shares in their separate returns. The decedent's return for 1942, beginning January 1 and ending with the date of his death on November 21, was subscribed and sworn to by Maud Bertha Kingdon, the decedent's wife, and Walter L. Kingdon, the decedent's nephew, executrix and executor, respectively, of the decedent's estate.
In March 1901 Maud Kenyon (the decedent's surviving spouse) purchased four lots in Globe, Arizona, *52 comprising approximately 12,488 square feet, for the sum of $ 40; and in August 1939, "For and in consideration of the sum of One Dollar," Maud B. Kingdon (the decedent's surviving spouse), then a married woman, obtained from the *842 First National Trust & Savings Bank of San Diego, California, a "Quit-Claim Deed" to two lots in San Diego, California, as her separate property.
For the years 1916 to 1937, inclusive, the United Verde Extension Mining Co. stock had a high of 47 in 1919 (during which year the low was 31 1/8) and a low of 1 1/4 in 1937 (during which year the high was 4 7/8). During the period 1916 to 1937, inclusive, dividends paid on the United Verde Extension Mining Co. stock totaled $ 45.525 per share. In 1937 to 1939, inclusive, three liquidating dividends were paid, totaling $ 3.25 per share, making a combined total of $ 48.775 per share as cash dividends, plus a stock dividend consisting of one share of the Clemenceau Mining Corporation for each share held of United Verde Extension Mining Co. The fair market value of each share of the Clemenceau Mining Corporation was reported to be $ .414 per share at the time the stock dividend was paid.
Maud Bertha Kingdon*53 was born in 1876 and at the time of her marriage to the decedent in 1904 was 28 years old. She went to grammar school in Globe, Arizona, and took a course in a private school. Before her marriage she studied piano and gave music lessons.
Beginning in 1914, decedent and his wife invested in the stock of the United Verde Extension Mining Co. at prices ranging from 65 cents up. Several thousand dollars of such stock was issued in the name of the wife. This stock was put up as collateral for bank loans and the dividends were applied to the payment of interest on the loans. Considerable of the United Verde stock was sold and a great deal of the money realized therefrom, as well as large checks derived therefrom, was turned over to a brokerage firm and used to purchase stocks on a margin account. By reason of the stock market crash of 1929 and the depression which followed, all securities in the brokerage account were either lost or turned over to decedent to reimburse him for what he advanced. Other stocks not in the margin account, but pledged with the bank as collateral, were sold and the money in excess of the loan was used in an attempt to save the stocks in the margin account. *54 The only stocks standing in the name of decedent's wife which survived the depression were 100 shares of Kennecott Copper Co. and 500 shares of Valley Bank stock. At times the stocks standing in the name of the wife of the decedent were placed in his safe deposit box in an envelope marked "Mrs. Kingdon," and later they were kept in her mother's safe deposit box. At one time the net worth of the decedent and his wife was around $ 2,150,000. The securities standing in the decedent's name amounted to approximately $ 2,000,000 and those standing in his wife's name amounted to about $ 150,000. Each year prior to 1938 Mrs. Kingdon gave a list of the dividends received on the stocks standing in her name to the decedent and he would have the income tax returns prepared. *843 When he brought the returns to her she would sign them, as she had implicit confidence in him and did everything he told her. For years beginning with 1938 Mrs. Kingdon's returns were prepared by an accountant at San Diego.
The decedent and his wife, until 1938, had lived in mining towns in houses owned by the mining company with which decedent was connected. They had never owned a home. Upon retiring in*55 1938 decedent and his wife moved to San Diego and lived with Mrs. Kingdon's mother for about a year. Mrs. Kingdon found in San Diego a residence she desired as a home. Decedent gave his wife a check for $ 20,000 and stated "You can buy it and then you will have to keep it up the rest of your life. Now don't bother me any more about a home." Title to the property was taken in the name of decedent's wife on August 3, 1939. At that time decedent was 76 years and 10 months of age, and his wife was 63. On February 14, 1939, decedent received a routine examination by an old friend and former physician in the employ of the company of which decedent was manager. His physical condition at that time was good. The decedent's blood pressure was 134/80. The doctor did not caution the decedent to take things easy. On July 11, 1939, the decedent went to Dr. Churchill in San Diego for a general physical examination. Dr. Churchill's report with respect to this examination is as follows:
This man was seen by me on July 11, 1939. He came to the office stating he was quite well, but that he had retired from business the year before, and thought he should have a general examination. He was*56 very active physically at the time. He told me he was remodelling a house and was actively engaged along with the workmen. Appetite, digestion, bowels, sleep, etc., were perfectly normal. He had lost the vision in the right eye the year before because of glacoma. He stated he had passed a kidney stone in 1920. He was examined ten years previously at Johns Hopkins Hospital and was told his prostate was very large but was advised against operation. He had had large varicose veins for several years and had worn elastic stockings.
Examination on July 11, 1939 showed a very husky appearing man of 77. Weight, in clothing, was 177. Right eye was sightless. Remaining teeth were good. Chest was large. Lungs clear. Heart was regular, rate 70, heart tones clear. Some enlargement of the heart outline to the left, both on percussion and on fluoroscopic examination. Blood pressure was 160/80. The abdomen was large. He had a right inguinal hernia. Prostate was large, smooth, quite hard, not tender. Bad varicose veins below the knees. Urine was normal except for an occasional pus cell.
Patient was seen again on October 26th of the same year. He came to the office for advice as*57 to the advisability of having an operation on his hernia. He told me he had been in Colorado since the previous examination and had been quite active at 11,000 feet, without any symptoms. His examination was the same as before. No treatment was indicated or prescribed at any time.
The decedent did not have any heart attacks until the latter part of 1941 or the early part of 1942. He underwent an operation in the early *844 part of 1942 and was hospitalized for 10 weeks. After his release he was again active.
OPINION.
The respondent, by his answer, affirmatively alleges facts which he contends estop the executors of the decedent's estate from claiming the properties in controversy were other than community property. The respondent, therefore, has the burden of proving all the essential elements constituting an estoppel. United States v. Dickinson, 95 Fed. (2d) 65; Hull v. Commissioner, 87 Fed. (2d) 260; Commissioner v. Union Pacific R. R. Co., 86 Fed. (2d) 637; Joyce v. Gentsch, 141 Fed. (2d) 891. The facts upon which the respondent*58 relies as constituting an equitable estoppel are admitted by petitioners. Do they contain all the essential elements to justify the application of the doctrine? The essential elements of an equitable estoppel as outlined in many cases are briefly summarized in United States v. Scott & Sons, 69 Fed. (2d) 728, 732, where it is said:
* * * To constitute estoppel (1) there must be false representation or wrongful misleading silence. (2) The error must originate in a statement of fact and not in an opinion or a statement of law. (3) The person claiming the benefits of estoppel must be ignorant of the true facts, and (4) be adversely affected by the acts or statements of the person against whom an estoppel is claimed.
The stipulated facts show that decedent and his wife since their marriage have always lived in community property jurisdictions. For the taxable years 1920 to 1937, inclusive, their income tax returns were filed on a community property basis. For the years 1938, 1939, and 1940, decedent and his wife began filing their income tax returns on the basis that the securities held in their separate names were their respective separate property. *59 In 1941 decedent and his wife again began to file income tax returns on a community property basis, showing equal division of their income from all sources. Decedent filed claims for refunds for the years 1938 to 1940, inclusive, contending for those years that he had overpaid his Federal income tax (consequently his wife had underpaid hers) because they had included as separate income the income from the securities held in their separate names, whereas all securities, whether or not held in their separate names, constituted community property and the income therefrom was community income.
In support of such contention the decedent and his wife executed an affidavit under date of May 24, 1940, stating, in substance, that at the time of their marriage neither was possessed of any property, none had been acquired by legacy or otherwise, and all property acquired since was the result of the personal services of the decedent. They further stated: "We have always considered any property owned by us, even though carried in our seperate [sic] names, to be community and owned equally by each of us."
*845 Since this affidavit was made subsequent to the time the decedent gave his*60 check for $ 20,000 to purchase a home on August 3, 1939, the deed to which was taken in the wife's name, such property was covered by such affidavit. The respondent, relying upon such statements of fact, found overassessments due decedent and deficiencies due from the wife in each of those respective years. For the year 1939 decedent and his wife joined in signing a consent providing for the crediting of decedent's overassessment against the wife's deficiency, and their tax liabilities were settled on that basis. The decedent's death occurred prior to the time the revenue agent's report covering the years 1938 and 1940 was completed. Acceptance of proposed assessment on account of decedent's tax liability for such years was filed by his wife, as executrix, and their tax liabilities for those years were settled on that basis. The income tax returns for the years 1941 and 1942 were prepared on the basis that all the property of the decedent and his wife was community property and the income therefrom was reported in equal shares in their separate returns. The decedent's income tax return for the period January 1, 1942, to his death on November 21, 1942, was subscribed and sworn*61 to by decedent's executors, petitioners herein.
The respondent, in his answer, alleges that the statute of limitations bars the reopening of all the Federal income tax returns filed by the decedent and his wife for the purpose of recomputing the increased tax which would be due if, in fact, the securities standing in the name of decedent's wife were not a part of their community property. We think it apparent that the respondent is now barred from recomputing and collecting the increased taxes that would otherwise be due. Petitioners concede that injury has been suffered by the respondent, and, in their reply to the defense of estoppel, by way of avoidance, offer to pay the increased tax with interest that would be due if the property standing in the name of decedent's wife was not community property. We are without jurisdiction to consider such offer. We think that the respondent has established all the essential elements of an equitable estoppel warranting the application of the doctrine. Petitioners contend that, since the residential property has produced no income, the respondent has suffered no detriment and the estoppel should not be applied to such property. We find *62 no merit in such contention. The stipulated fact is that decedent furnished all the consideration for the purchase of the residential property. Subsequent to the taking of the deed in the wife's name, decedent asserted under oath that such property was community property. The position now urged by the decedent's executors is contrary to that consistently taken by decedent during his lifetime. They are estopped from so doing to their present advantage by the pleaded estoppel. Stearns Co. v. United States, 291 U.S. 54">291 U.S. 54; *846 Alamo National Bank of San Antonio, 36 B. T. A. 402; affd., 95 Fed. (2d) 622; certiorari denied, 304 U.S. 577">304 U.S. 577. The fact that decedent's wife, individually, joined in making such affidavit renders her assertion, as the legal representative of the decedent, less impressive. At the trial the wife vigorously maintained that she had not read the affidavit before signing and did not understand its purport. Since the estoppel is not being applied against her individually, the truth or falsity of such fact is of no controlling significance. *63 The further testimony of the wife attempting to establish that the property standing in her name at decedent's death was, in fact, her separate property, even if we were inclined to give her testimony in this respect full credence, likewise is unimportant. Its effect here is to show the falsity of the statement made under oath by the decedent to the contrary. Our conclusion that the affirmative plea of equitable estoppel has been established disposes of the issue as to the character of all the property in controversy. It is, therefore, unnecessary to pass upon the further contention of the petitioners that the decedent made a gift of the residential property to his wife in August 1939 and such gift was not made in contemplation of death.
All the property here in question, being the community of the decedent and his wife, is properly includible in his gross estate under section 811 (e) (2) of the Internal Revenue Code as amended by section 402 of the Revenue Act of 1942. Since other issues have been covered by stipulation,
Decision will be entered under Rule 50.