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SILBERMAN v. UNITED STATES

November 3, 1971

James C. SILBERMAN and Alan L. Silberman, Executors of the Estate of Lewis L. Silberman, Deceased, Plaintiffs,
v.
UNITED STATES of America, Defendant


Rosenberg, District Judge.


The opinion of the court was delivered by: ROSENBERG

This matter came on for non-jury trial on a complaint filed by the plaintiffs in which they sought the return of $13,620.47 plus interest which is alleged to be an overpayment of estate taxes by the Estate of Lewis L. Silberman.

 The parties have stipulated and I find that the plaintiffs in this action are James C. Silberman and Alan L. Silberman, Executors of the Estate of Lewis L. Silberman, deceased; that the defendant is the United States of America; that on August 24, 1964, the plaintiffs filed a Federal Estate Tax Return, Form 706, showing a gross estate of $425,018.99, a taxable estate of $108,733.30 and an estate tax due and owing of $22,620.26, which amount was paid with the return; that on August 14, 1967, the plaintiffs filed with the District Director of Internal Revenue, Pittsburgh, Pennsylvania, a claim for refund, Form 843, requesting a refund of $13,620.47, plus interest, on the grounds that the amount included in the decedent's gross estate under Schedule I, Annuities, of the Federal Estate Tax Return was improperly included in the gross estate; that the plaintiffs' claim for refund was rejected by certified mail on May 9, 1968; that pursuant to 28 U.S.C. ยง 1346(a)(1) the complaint in this action was filed on November 26, 1968; that the decedent was employed by the Henry Wilkens Company, prior to 1945; that the Wilkens Company, successor to Henry Wilkens Company was incorporated on June 28, 1945; that from July 14, 1945 until the date of his death, May 25, 1963, the decedent was President, Treasurer and General Manager of the Wilkens Company; that on July 2, 1955, the decedent entered into an agreement with the Wilkens Company (the 1955 Agreement); that the Board of Directors of the Wilkens Company authorized the agreement at the annual meeting of the Board of Directors of the Company held on July 1, 1955; that on June 5, 1959 the decedent entered into an amended employment agreement with the Wilkens Company (the 1959 Agreement) which was ratified by the Board of Directors at a special meeting on June 5, 1959; that the decedent owned 98 percent of the outstanding shares of common stock of the Wilkens Company since 1945 and his wife, Dorothy P. Silberman owned the remaining two percent; that from the date of the 1955 Agreement and continuously until the date of his death in 1963, the decedent fulfilled his obligations under the agreement on a full-time basis; that Lewis L. Silberman died testate on May 25, 1963 and that he was survived by his wife, Dorothy P. Silberman, and two sons, James C. Silberman and Alan L. Silberman, the executors here, as plaintiffs.

 Prior to his death Mr. Silberman entered into an employment agreement with the Wilkens Company. It is the provisions of that agreement, as amended, which now become the focus of this dispute.

 The 1955 Agreement provides in part:

 
"1. Subject to the terms of this agreement, the Company hereby engages the services of Mr. Silberman for and during the term of his life and Mr. Silberman hereby accepts such employment.
 
2. For the period commencing with the execution of this agreement until Mr. Silberman shall attain the age of seventy, or such time as Mr. Silberman shall become incapacitated by a permanent illness or other disability, whichever is sooner, Mr. Silberman is to serve the Company in an executive and managerial capacity and is to render such services and fill such offices as the Company, through its Board of Directors, may from time to time, determine. Upon Mr. Silberman's becoming seventy years of age and from time to time thereafter, the term of employment under this Paragraph 2 may be continued for such period as requested by Mr. Silberman and agreed to by the Board of Directors of the Company. During the period of employment provided for in this Paragraph 2, Mr. Silberman agrees to devote his entire time and attention to the business of the Company.
 
3. For his services under Paragraph 2 of this agreement, the Company agrees to pay Mr. Silberman, and Mr. Silberman agrees to accept, compensation in accordance with the present salary and bonus arrangements.
 
4. From the termination of fulltime employment, as provided in Paragraph 2, until Mr. Silberman's death, the Company agrees to employ Mr. Silberman, and Mr. Silberman agrees to act, in an advisory capacity and when reasonably requested by the Company, Mr. Silberman agrees to make himself available to it for general advice and consultation.
 
5. For his services under Paragraph 4 of this agreement the Company agrees to pay Mr. Silberman, and Mr. Silberman agrees to accept from the Company, compensation at the rate of fifty percent of the salary and bonus receivable by Mr. Silberman under Paragraph 3 on termination of full-time employment under Paragraph 2.
 
6. The Compensation hereinbefore provided in this agreement shall not affect Mr. Silberman's right to participate in or benefit from any subsequent stock purchase, profit-sharing or pension plan of the Company nor shall it affect his right to share from time to time in any distribution of bonuses or additional compensation to officers or employees or to receive compensation from any subsidiary of the Company.
 
8. Mr. Silberman agrees that, without first obtaining the written consent of the Company to do so, he will not accept employment with any company, partnership or individual engaged in a business competitive to that of the Company in the territory in the United States east of the Mississippi River, nor will he engage or participate by way of material ownership, direct or through stockholdings, in any business competitive to that of the Company in such territory east of the Mississippi River.
 
9. This agreement is entered into pursuant to a resolution of the Board of Directors of the Company adopted at a meeting held on July 1st, 1955, ...

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