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MCCULLOUGH v. GRANGER

January 26, 1955

Anna S. McCULLOUGH and Jay G. Stephens, Executors of the Estate of Frank H. Stephens, Deceased, Plaintiffs,
v.
Stanley GRANGER, Defendant



The opinion of the court was delivered by: WILLSON

This case has been submitted upon an agreed statement of facts. Counsel have been heard on oral argument, briefs have been submitted and have been considered. The complaint is based on plaintiffs' contention that the inclusion of a joint and survivor annuity in the estate tax return filed by executors under the will of Frank H. Stephens, deceased, was erroneous, and a refund is claimed on account of the tax assessed thereon. The defendant now concedes the issues raised in the complaint, but asserts a set-off. The set-off poses the question whether the corpus of an inter vivos trust created by the decedent for his minor son should have been included in the decedent's gross estate under 26 U.S.C.A. § 811(c)(1)(B). The parties make further reference to Treasury Regulation 105:

'Sec. 81.18. Transfers with possession or enjoyment retained. --

 'The use, possession, right to the income, or other enjoyment of the property will be considered as having been retained by or reserved to the decedent to the extent that during any such period it is to be applied towards the discharge of a legal obligation of the decedent, or otherwise for his pecuniary benefit.'

 If the inter vivos trust was not includable in the decedent's taxable estate, then plaintiff is entitled to judgment of $ 9,317.16, being the amount of the overpayment of the estate tax, and an additional sum of $ 60.28, being the amount of overpayment of interest. If the trust corpus was includable in the decedent's taxable estate, then the parties have agreed that plaintiffs may not recover in this action. Based on the stipulation, I make the following

 Findings of Fact

 1. The plaintiffs are the executors of the estate of Frank H. Stephens, who died testate and domiciled in the Commonwealth of Pennsylvania on October 10, 1946. By his last will, dated December 19, 1941, and probated before the Register of Wills of Allegheny County, Pennsylvania, on November 6, 1946, he appointed his wife, Anna A. Stephens, and his son, Jay G. Stephens, executors. Letters testamentary were granted to the said Anna A. Stephens and Jay G. Stephens by the Register of Wills of Allegheny County, Pennsylvania, on November 6, 1946, at No. 5778 of 1946, and such letters are still in effect. Anna A. Stephens subsequently remarried and is now Anna S. McCullough.

 2. The defendant Stanley Granger was, at all times material herein, the Collector of Internal Revenue for the Twenty-third District of Pennsylvania. On November 11, 1952, Stanley Granger ceased to be the Collector of Internal Revenue for the said Twenty-third District of Pennsylvania.

 3. On January 7, 1948, the plaintiffs filed with the defendant the federal estate tax return of the estate of Frank H. Stephens. Of the amount of federal estate tax shown due by the said return in the amount of $ 62,640.97, $ 28,500 was paid by the plaintiffs on November 18, 1947, and the balance of $ 34,140.97 was paid by the plaintiffs on January 7, 1948, both payments being made to the defendant. In the said return the plaintiffs elected to value the estate under Section 811(j) of the Internal Revenue Code (1939), as of a date one year after the death of Frank H. Stephens.

 5. On November 1, 1949, the plaintiffs executed an acceptance of the proposed deficiency and waived restrictions on the assessment thereof and filed the same with the Internal Revenue Agent in Charge, Pittsburgh, Pennsylvania, for transmission to the Commissioner of Internal Revenue.

 6. On December 8, 1949, the plaintiffs paid to the defendant the deficiency of $ 536.04 with interest thereon to November 25, 1949, in the amount of $ 60.28 in accordance with a statement of estate tax due issued by the said defendant.

 7. The value of a joint and survivor annuity contract, reported as Item 8 in Schedule F of the federal estate tax return, was erroneously included in the gross estate of the decedent. The value of this contract for estate tax purposes was determined to be $ 33,836.79, and federal estate tax was paid thereon.

 8. On January 9, 1950, the plaintiffs duly filed with the defendant for transmission to the Commissioner of Internal Revenue, a claim for refund of federal estate tax in the amount of $ 9,317.16, on the grounds that no part of the joint and survivor annuity contract upon which estate tax had been paid was properly includable in the gross estate.

 9. On February 15, 1952, the Commissioner of Internal Revenue disallowed the foregoing claim for refund in its entirety by letter properly addressed to the plaintiffs. All conditions precedent to the entry ...


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