The opinion of the court was delivered by: WELSH
This is an action brought by the administrators of the estate of Clement R. Wainwright to recover estate taxes alleged to have been erroneously and illegally collected by the formerly acting collector of internal revenue. The parties, through their respective attorneys of record, entered into a stipulation whereby certain facts, for the purposes of this litigation, shall be taken as true, subject to the right of either party to object to the relevancy or materiality thereof, and further provided that said stipulation should be without prejudice to the right of either party to introduce other and further evidence not inconsistent with the facts therein stipulated to be taken as true.
The facts of this case, briefly stated, are as follows:
The decedent, Clement R. Wainwright, died on April 12, 1932. Thereafter, letters of administration were issued to the plaintiffs by the register of wills in and for the county of Philadelphia, commonwealth of Pennsylvania, on Arpil 20, 1932.
On April 11, 1933, the administrators, plaintiffs in this case, filed a federal estate tax return of the estate of Clement R. Wainwright, deceased, with Albert H. Ladner, collector of internal revenue, and reported a total gross estate subject to federal tax in the amount of $552,433.49. The return set forth total deductions from the gross estate of the decedent in the amount of $604,202.03 (including the specific exemption of $100,000 provided by section 303(a) (4) of the Revenue Act of 1926, 26 U.S.C.A. § 412(a), and as a consequence no federal estate tax was shown to be due.
The gross estate of the decedent, Clement R. Wainwright, has now been determined to be $702,883.12, which includes amounts receivable by beneficiaries of life insurance policies totalling $269,454.10, (from which was deducted the specific exemption of $40,000 allowed under section 302(g) of the Revenue Act of 1926, 26 U.S.C.A. § 411(g), thus leaving a net amount included in the gross estate subject to Federal estate tax of $229,454.10 from insurance).
Plaintiffs incurred and paid administration expenses in the sum of $4,835.25, which included executors' commissions, attorneys' fees, and miscellaneous expenses, and, in addition, expended $500 for the support of decedent's widow, all of which is allowed under the laws of the commonwealth of Pennsylvania, under which the estate is being administered, and allowed by the orphans' court of Philadelphia county, commonwealth of Pennsylvania.
Section 303(a) (4) of the Revenue Act of 1926, 26 U.S.C.A. § 412(a), provides a specific exemption of $100,000, this sum to be deducted from the value of the gross estate in addition to the other deductions.
In addition to the above, the plaintiffs incurred and paid from the estate of Clement R. Wainwright, deceased, funeral expenses in the amount of $1,088, which expenditure is allowed by the laws of the commonwealth of Pennsylvania and the payment of which amount out of the estate of the decedent is authorized by the laws of the commonwealth of Pennsylvania, under which the estate is being administered, and were allowed by the orphans' court of Philadelphia county of the commonwealth of Pennsylvania.
By letter dated May 23, 1934, the Commissioner of Internal Revenue, Washington, D.C., advised the administrators, plaintiffs herein, that as a result of an examination of the estate tax return, the revenue agent's report, and other data on file, he proposed to determine the value of the gross estate subject to federal estate tax at $702,883.12, and to allow as a deduction from the gross estate in computing the net estate only a portion of the total deductions claimed by the administrators, for the reason as set forth in said letter: "The deduction for funeral expenses, Executor's commissions, attorneys' fees, miscellaneous administration expenses, debts of the decedent and the support of dependents, is limited to the value of the assets in the gross estate (exclusive of insurance) available for the payment of same."
Based on his determination in the above paragraph, the Commissioner of Internal Revenue computed the amount of the net estate subject to federal estate tax as follows:
Gross estate $702,883.12
Allowable deductions $473,429.02
Specific exemption Sec. 303(a) (4) 100,000.00 573,429.02
Deficiency in tax $ 2,383.62
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