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Johnson v. United States

254 F. Supp. 73, 17 A.F.T.R.2d (RIA) 1403, 1966 U.S. Dist. LEXIS 10004
CourtDistrict Court, N.D. Texas
DecidedFebruary 26, 1966
DocketCiv. A. 4-371
StatusPublished
Cited by20 cases

This text of 254 F. Supp. 73 (Johnson v. United States) is published on Counsel Stack Legal Research, covering District Court, N.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Johnson v. United States, 254 F. Supp. 73, 17 A.F.T.R.2d (RIA) 1403, 1966 U.S. Dist. LEXIS 10004 (N.D. Tex. 1966).

Opinion

BREWSTER, District Judge.

This is a suit brought by the Independent Executors of the Estate of F. Kirk Johnson, deceased, and by his widow, Elizabeth McGhee Johnson, seeking to recover gift taxes, together with interest, claimed by them to have been erroneously assessed and collected. The amount of principal involved is $9,982.51 each as to Mrs. Johnson and as to her husband’s estate, making a total of $19,-965.02 gift taxes paid for the years 1959, 1960, 1961 and 1962.

During the years involved, Mr. and Mrs. Johnson made large interest free loans to their children, repayable on demand. It is stipulated that the loans were bona fide and that most of them had been repaid prior to Mr. Johnson’s death. The District Director of Internal Revenue at Dallas claimed that in each of the years in question Mr. and Mrs. Johnson made a gift to their children of the value of the use of the money at 3% per cent per annum on the average unpaid balance for each year.

The facts are stipulated. The only question is one of law, and that is stated by the parties in the pre-trial order to be:

“(8) The contested issue of law is whether the taxpayers made gifts within the meaning of Section 2501, Internal Revenue Code of 1954, to their children of the value (claimed by the defendant to be 3 Yz per cent of the average unpaid annual balance) of the use of money loaned by the taxpayers to the children, repayable on demand without interest.”

Findings of Fact

The facts are found as stipulated; and, for the convenience of any reviewing court, if this case is appealed, such stipulations are here copied. They read:

“NOW COME the parties, plaintiffs and defendant, through their duly authorized attorneys, and make the following factual stipulation, for the purposes of this case only, which shall constitute the entire evidence in this cause.

*74 1.

“Elizabeth McGhee Johnson and F. Kirk Johnson (Sr.), both of whom were at all times pertinent hereto citizens of the United States and residents of Fort Worth, Tarrant County, Texas, and who are hereafter jointly referred to as ‘taxpayers’, had two children and only two children, F. Kirk Johnson, Jr. and Elizabeth Ann Johnson Mitsch, both of whom were adults, married and maintaining their own homes in Fort Worth in 1955 and at all times thereafter.

2.

“The taxpayers had for more than five years prior to the year 1956 and to and through the year 1962 consistently made bona fide loans to each of their children in varying amounts for various purposes. In addition, all loans were made with the agreement and understanding that the borrower would be obligated to repay same, on demand, without interest. Virtually all of such loans at the time of their original making were in the form of advances and kept on the taxpayers’ records as accounts receivable, although there may have been minor accounts which were evidenced originally by notes payable on demand without interest.

3.

“On January 1, 1959, F. Kirk Johnson, Jr., executed a note payable on demand, without interest, in the amount of $278,-836.10, which was the balance then outstanding on all of his noninterest-bearing debts. On January 1, 1959, Elizabeth Ann Johnson Mitsch executed a note payable on demand, without interest, in the amount of $215,282.27, which was the balance then outstanding on all of her noninterest-bearing debts. Each of the children from time to time made payments upon a particular loan or discharged and repaid same in full.

4.

“Subsequently during 1962 there were additional advances to each of the children, all of the amounts advanced to Elizabeth Ann Johnson Mitsch being repaid before the end of the year, but there being $30,000.00 advanced to F. Kirk Johnson, Jr., which was not repaid by him and which was outstanding at the time of his father’s death and was included in the Estate of F. Kirk Johnson for estate tax purposes and valued therein at its face value.

5.

“For part of the time involved, as more particularly hereafter set out, taxpayers made noninterest-bearing loans to William G. Mitsch, Jr., the husband of Elizabeth Ann Johnson Mitsch, which loans were also bona fide loans, payable on demand, without interest, by agreement between the taxpayers and William G. Mitsch, Jr. Taxpayers, on their books and records, reflected all of such advances as bona fide loans, and borrowers in each instance on their records reflected such borrowings as being loans and not gifts. Taxpayers’ books and records reflected some gifts in each of the years involved, but in no instances were the loans involved in this action reflected as gifts on either the books of the taxpayers or on the books of the children. All of the loans involved in this case were bona fide, and in each instance there was an agreement by the debtor to repay the principal amount, without interest, on demand.

6.

“In accordance with the foregoing facts, the balance outstanding of the sums loaned to F. Kirk Johnson, Jr. as of December 31, 1955, was $154,866.18, and the said F. Kirk Johnson, Jr. was obligated to pay such amount to taxpayers on demand, without interest. In accordance with the foregoing facts, the balance outstanding of the sums loaned to Elizabeth Ann Johnson Mitsch as of December 31, 1955, was $101,740.88. Tabulated below is the balance outstanding at the beginning of each year involved, the amount repaid during that year, the amount of additional loans during such *75 year, and the average of the amount of the loans during such year, for F. Kirk Johnson, Jr. and Elizabeth Ann Johnson Mitsch, and for William G. Mitsch, Jr., to whom no loans were made prior to 1959, all of the figures being within the facts as stipulated in Paragraph 1 through 5.

*76

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Bluebook (online)
254 F. Supp. 73, 17 A.F.T.R.2d (RIA) 1403, 1966 U.S. Dist. LEXIS 10004, Counsel Stack Legal Research, https://law.counselstack.com/opinion/johnson-v-united-states-txnd-1966.