Stern v. Commissioner

2 B.T.A. 102, 1925 BTA LEXIS 2543

• Court: United States Board of Tax Appeals
• Decided: June 19, 1925
• Docket: Docket No. 2459.
• Status: Published

Opinion

OPINION.

James:

Aside from tbe admitted errors of tlie Commissioner in this proceeding, there are two issues of substance: First, whether the value placed by the Commissioner upon the Hotel Richelieu should be reduced on account of the allegations of the taxpayer; and, second, whether the taxpayer should be allowed a deduction on account of executors’ commissions prior to the actual allowance or payment of the same in connection with the administration of the estate.

On the first point there is manifestly no evidence before the Board upon which any finding can be made that the interest of the decedent in the hotel property had a value other than $41,666.67. The value ascribed by the Commissioner to the Hotel Richelieu must be affirmed.

With reference to executors’ commissions, it is uncertain when the taxpayer died, and therefore there is some uncertainty as to the act applicable to the situation. Section 203 of the Revenue Act of 1916, section 403 of the Revenue Acts of 1918 and 1921, and section 303 of the Revenue Act of 1924, are substantially the same, and provide:

That for the purpose of the tax the value of the net estate shall be determined—

(a) In the case of a resident, by deducting from the value of the gross estate—

(1) Such amounts for * * * administration expenses * * * as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered * *, *.

It does not appear xroin the above that the amounts are required either to have been allowed by actual order of the court or to have been paid, but merely that they shall be such charges as are proper deductions and as in the ordinary course of the administration of the estate will ultimately be allowed. In case the amount actually expended presents a material variance from the amount “ allowed by the laws of the jurisdiction, * * * under which the estate is being administered,” some question may properly arise as to whether the amount actually expended or the amount lawfully allowable shall be used. It would seem, however, to be the obvious intent of Congress that the determination of the estate tax should not wait upon the final settlement of the estate and a reducion to absolute certainty of all claims against it. The Board is, therefore, of the opinion that the amount claimed by the taxpayer for executors’ fees in the sum of $15,500, not denied by the Commissioner as a reasonable estimate of the amount allowable or allowed by the laws of the State of New York, should be permitted to be deducted in the computation of the tax. Should there be a variance on final administration, the Commissioner, if he believes there is warrant in the law for so doing, may at that time assert a deficiency in tax upon which the Board may then properly pass.

The deficiency determined by the Commissioner should be recomputed by allowing, in addition to those items admitted as errors by the Commissioner, the sum of $15,500 as executors’ fees, and by including in the gross estate the one-third interest in the Hotel Richelieu at the value of $41,666.61.