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SPAEDER v. U.S.

July 8, 1978.

John A. SPAEDER, Esq. and Robert Francis Bixby, Co-Executors of the Estate of Leo V. Stoeltzlen, Deceased, PLAINTIFFS
v.
U.S. DEFENDANT.



The opinion of the court was delivered by: KNOX

KNOX, District Judge:

Memorandum Opinion Granting In Part And Denying In Part Defendant's Motion For Summary Judgment And Denying Plaintiffs' Motion For Partial Summary Judgment

Plaintiffs, John A. Spaeder, Esq. and Robert Francis Bixby, bring this action as co-executors of the Estate of Leo V. Stoeltzlen (decedent) seeking a refund of $75,583.23 in federal estate tax and interest. The Court has jurisdiction of the action pursuant to Title 28 U.S.C. § 1346(a)(1). Plaintiffs base their claim for refund on two grounds: (1) that the estate was improperly denied a charitable deduction pursuant to § 2055 of the I.R.S. Code of 1954 (IRC) Title 26 U.S.C. § 2055 for bequests in the will to qualifying charities and (2) that the value of cash gifts to Robert and Barbara Bixby and/or the value of certain real estate in Erie, Pa. were improperly included in the gross estate.

 On August 30, 1977 the United States moved for summary judgment pursuant to F.R.C.P. 56(b); on September 30, 1977 the plaintiffs moved for partial summary judgment under Rule 56(a). The defendant contends that the estate is not entitled to a charitable deduction because nothing has been paid to the charitable beneficiaries of the estate. Defendant further argues that paragraph 45 of decedent's will clearly provides that charitable bequests must abate where as here the assets of the estate are insufficient to pay all debts, expenses, taxes and bequests to individual and charitable beneficiaries in full. Thus, there will be no funds qualifying for the charitable deduction under § 2055.

 Second, defendant argues that the full market value of the real estate in Erie, Pa. must be included in the gross estate pursuant to § 2040, as decedent provided the entire consideration for purchase and construction of the premises.

 In their motion, plaintiffs maintain that the will is ambiguous with respect to payment of taxes and that under applicable state law, all estate taxes are to be apportioned equitably among individual and charitable beneficiaries. Plaintiffs contend that under the Pennsylvania Estate Tax Apportionment Act, 20 P.S. § 3701 et seq., the burden of the federal estate tax is to be borne by the bequests to the individual beneficiaries, leaving $158,877.91 for the charitable bequests, which qualifies for the charitable deduction pursuant to § 2055.

 These motions raise four issues for consideration by the Court:

 (1) whether decedent's transfer of cash gifts to Robert and Barbara Bixby, made within three years of his death, are includable in the gross estate as gifts made in contemplation of death.

 (2) whether the value of certain real estate passing to the Bixbys under the joint tenancy provisions is taxable in full to the estate.

 (3) whether plaintiffs fairly raised the question of the valuation of this real estate in their claim for refund.

 (4) whether the estate is entitled to a charitable deduction pursuant to § 2055 for bequests to qualifying charitable beneficiaries.

 The Court heard oral argument on the motions on November 3, 1977 and has received extensive briefs from the parties. In addition, the Court has received briefs on behalf of the individual and charitable beneficiaries with respect to the charitable deduction issue.

 After careful consideration of the briefs and arguments of counsel, the Court determines that defendant's motion must be granted, except with regard to the question of gifts allegedly made in contemplation of death. Accordingly, ...


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