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December 26, 1963

EMPIRE TRUST COMPANY, Charlotte Mallory Mixsell, Robert H. Minton and T. Howard Snethen, Executors of the Will of Harold R. Mixsell, Deceased, Plaintiffs,
UNITED STATES of America, Defendant

The opinion of the court was delivered by: LEVET

This is a suit for refund of federal estate taxes. This court has jurisdiction of the action under 28 U.S.C. 1346(a)(1). Plaintiffs, as executors of the estate of Harold R. Mixsell, deceased, bring this action to recover $ 45,561.61 of estate tax and $ 4,911.29 of deficiency interest paid by them to the Internal Revenue Service on March 31, 1961. Three separate and distinct issues are raised in this suit for refund. Two of the issues, whether certain gifts were made in contemplation of death and whether the Commissioner erroneously disallowed a charitable deduction arising from a conditional bequest to charity, were tried to a jury. However, the parties have stipulated that the third issue, the amount of the marital deduction, be tried to the court without a jury.

After examining the exhibits, the pleadings, the briefs and stipulations of counsel, this court makes the following Findings of Fact and Conclusions of Law:


 1. Harold R. Mixsell died a resident of the City, County and State of New York on February 14, 1958. The plaintiffs were appointed executors of the will of Harold R. Mixsell on February 27, 1958 and duly qualified and are now acting as such executors.

 2. On May 14, 1959, plaintiffs filed an estate tax return for decedent's estate and paid the District Director of Internal Revenue for the Upper Manhattan District of New York the sum of $ 135,173.15, the amount shown by the return to be due and payable. Subsequently, the Director assessed a deficiency of $ 45,561.61, which amount the executors deposited with interest of $ 4,911.29, making a total additional payment on account in the amount of $ 50,472.90. On August 1, 1961, the plaintiffs duly filed a claim for refund, which claim was disallowed on March 19, 1962. Thereafter, this action was instituted on May 24, 1962.

 3. The decedent was survived by his wife, Charlotte Mallory Mixsell, and his daughters, Charlotte M. Minton and Mary M. Snethen.

 4. Article First of the will provides:

 'I direct that my just debts, funeral and administration expenses shall be paid as soon as practicable after my death.'

 5. Article Fourth in part provides:

 'If my wife CHARLOTTE MALLORY MIXSELL shall survive me and my daughter MARY or my daughter MALLORY or any issue of either of them shall also survive me, I give, devise and bequeath unto my said wife absolutely an amount equal to one-half of the value of my adjusted gross taxable estate, as determined for Federal Estate tax purposes, after deducting all debts and funeral and administration expenses, but before deducting Federal and State, estate, inheritance and transfer taxes, less the value, as finally determined for Federal Estate tax purposes, of all property received or receivable by my said wife, an any form or at any time, under any other provisions of my Will or outside of my Will, which is includable in my adjusted gross taxable estate and which qualifies for the marital deduction under the Internal Revenue Code. * * *'

 6. Article Twenty-First is as follows:

 'I direct that all State and Federal, estate, inheritance, legacy and transfer taxes payable in respect to my gross estate as determined for tax purposes shall be payable out of my residuary estate.'

 7. Article Fifth sets up a residuary trust, the net income of which is payable to the wife for her life.

 8. The executors elected to treat the $ 25,000 in attorneys' fees and the $ 30,000 in executors' commissions as income tax deductions pursuant to Section 642(g), Int.Rev.Code of 1954. Therefore, they did not deduct these sums in determining the 'adjusted gross taxable estate.' Waivers pursuant to Section 642(g) of the Code were filed by the executors with the fiduciary income tax returns for the years in which these expenses were claimed as income tax deductions. (See Ex. 2 and 3)


 The issue presented is clearly defined by the contentions of the parties. The executors contend that the effect of electing to claim certain administration expenses (attorneys' fees and executors' commissions) as income tax rather than as estate tax deductions was to increase the estate's adjusted gross estate for federal estate tax purposes. Therefore they contend, that the election served to increase the amount of property passing to the decedent's wife from the decedent and, accordingly, the estate was entitled to an increased marital deduction. The government, on the other hand, does not dispute the fact that the executors' election to claim the administration expenses as income tax deductions rather than estate tax deductions served to increase the estate's total adjusted gross estate for federal estate tax purposes. However, the government contends that the election did not serve to increase the amount actually passing to the widow from the decedent under the express language of Article Fourth of the will since Article Fourth limits the amount of the widow's bequest.

 The Commissioner of Internal Revenue rejected the executors' computation of the marital deduction as one-half of the adjusted gross estate determined by excluding certain administration expenses as a result of the executors' election under Section 642(g). The Commissioner redetermined the marital deduction as one-half the amount which the adjusted gross estate would have been had all the assertible deductions been claimed in the estate tax return.

 Simply stated, the issue is whether Article Fourth of the will limits the amount the widow takes, and, therefore, ...

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