Claiborne v. Commissioner , 40 B.T.A. 722 ( 1939 )

AUSTIN LEIGH CLAIBORNE, JOHN L. CLAIBORNE, AND JAY C. ALLEN, EXECUTORS OF THE LAST WILL AND TESTAMENT OF LAURA ALLEN, DECEASED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Claiborne v. Commissioner

Docket No. 89703.

United States Board of Tax Appeals

40 B.T.A. 722; 1939 BTA LEXIS 810;

October 18, 1939, Promulgated

---

1. The decedent died on January 21, 1934, domiciled in the State of Washington, and left one-fifth of her estate to her surviving spouse and four-fifths to her two sons by a prior marriage, at the same time declaring in her will that her husband had no community interest in her property. Her husband and her two sons thereafter agreed to take one-third and two-thirds of her estate respectively, and the Commissioner accordingly treated two-thirds of her estate as her separate property for estate tax purposes. The decedent's estate was amassed after marriage by her personal efforts and by capital contributions made by her husband, which were substantial but undetermined in exact amount. For 10 years before decedent's death the decedent's income had been returned by both spouses as community property for income tax purposes. Held, on all the evidence, that the estate, except for certain specified parcels, was property of the marital community, a finding which is supported by the presumption raised by state law in such cases.

2. Deductions for state land taxes for the year 1933 are denied, on the authority of Commissioner v. Plestcheeff, 100 Fed.(2d) 62; and deductions for personal property taxes for the same year, and for executors' and attorneys' fees, are allowed to the extent of one-half, following Lang's Estate v. Commissioner,97 Fed. 867.

Jay C. Allen, Esq., and Edgar R. Rombauer, Esq., for the petitioners.

Edward C. Adams, Esq., for the respondent.

---

KERN

This case arises on respondent's determination of a deficiency of $3,924.95 in estate tax. Decedent died domiciled in the State of Washington on January 21, 1934. Three questions are raised: (1) Whether respondent erred in treating as the separate property of the decedent two-thirds of her estate and, if so, to what extent it was her separate property and to what extent the property of the marital community; (2) what, if any, taxes are deductible; (3) what, if any, executors' and attorneys' fees are deductible. The respondent treated two-thirds of decedent's estate as her separate property and denied the deduction of the taxes and fees in question.

FINDINGS OF FACT.

The facts, in so far as ascertainable from the record, are as follows:

1. Extent of decedent's separate estate. - Decedent married Jay C. Allen, hereinafter, as one of the three executors, called "petitioner," on April 6, 1905, and died in coverture on January 21, 1934. She was domiciled in the State of Washington. By prior marriages decedent had two sons, Leigh and Logan Claiborne, and petitioner had one son, Jay C. Allen, Jr. Petitioner and decedent had no issue.

At the time of decedent's marriage she owned certain improved land at the corner of Second and Pine Streets in Seattle, Washington, which she continued to own until her death. This was all the property which she had before marriage and retained until her death. A certain tract, called the "Allendorph property" which decedent had contracted to purchase before her marriage, had been sold before her death. She had at marriage some diamonds and cash and used the cash for the Allendorph purchase. Petitioner, at the time of his marriage to decedent, owned two lots in South Seattle which he gave to decedent, and land at Pleasant Harbor in Jefferson County. Petitioner's personalty consisted of his law office furniture and library. No evidence of the value of this separate property of decedent or petitioner appears.

Petitioner has practiced law in Seattle since 1891 and has thus earned from $25,000 to $40,000 a year. Decedent was in business on her own account. When petitioner met her she had just sold the "Claiborne Flats" and was building the "Allendorph Hotel." In 1910 and 1911 petitioner and decedent bought from her "investment account" certain tidelands, partly under water, filled them in, and leased them under an option to purchase to the Ames Terminal & Dry Dock Co. The lots were sold to the company in 1916 for $154,000 and this sum was reinvested in other realty. Besides her real estate ventures, she was an insurance agent and also lent money for short periods. She continued in business throughout the period of coverture and until her death. She had a separate office near her husband's, but frequently used a desk in his entrance room, and came to the office three or four days a week. Decedent was successful in business, was a keen judge of property, and was very active. She actively bought and sold the realty of the marital community and her own separate realty, and managed it while it was held. She also bought and sold independently for others on commission, or split commissions, acting through various real estate agents in the city. Petitioner and decedent invested in oil wells and mines, petitioner putting in $5,000 in a mine and decedent $25,000 in one. This deal was unprofitable. Decedent had $100,000 at one time which was derived from property which she owned before her marriage. She lent this to the owner of parcels of real estate known as the Sorrento Hotel, the Curtis block, and the Lake Union Shore land, taking second mortgages on these properties as security. These mortgages later became worthless and were worthless at the time of decedent's death.

Petitioner gave his wife, decedent, two checks a week of $20 each, one for household expenses and one for traveling expenses. He also deposited in her "investment account" in the bank from time to time. Canceled checks drawn by petitioner or check stubs on various Seattle banks from March 14, 1910, to November 29, 1933, were put in evidence, totaling $66,752.36, and for what evidential value they may have they are incorporated here by reference. Many of these, none of which include the house allowance checks referred to above, are drawn to decedent. A number are drawn to county treasurers for the payment of taxes, but there is neither any notation on the checks nor any oral testimony to evidence what parcels of land are covered by these. Some of the money was paid on interest on notes; some for rent; some for the purchase of seashore lots and tideland; some for Christmas presents to his wife; some on mortgages. On occasion decedent would ask petitioner for odd amounts of money to complement the sum which she held in her checking account in order to make a particular purchase. Decedent kept separate her rents from the Gordon Hotel, at Second and Pine Streets, which was her separate property. Petitioner was accustomed to retain from $300 to $400 of working capital in his office and to turn over the balance to his wife, which she invested or used to defray the expenses incident to investments already made.

None of petitioner's records from 1905 to 1910 could be found, except a few checks for 1910 and no stubs. His canceled checks from 1916 to 1919, inclusive, were also missing. Decedent about 1932 told petitioner's secretary that she was going to change her will and "fix" petitioner, and that she had destroyed his stubs and canceled checks. Decedent had access to the filing cabinet where petitioner's records were kept and where her own papers were kept. Decedent told her daughter-in-law, Laura Claiborne, who was very close to her, that she was worried about her sons (including her confidant's husband) being deprived of their just share in her property by her death, since petitioner had put a great deal of money in the "investment account" and her own was so intermingled with it that her sons' claims might be difficult to prove.

Decedent's last will, in so far as pertinent, was as follows:

ITEM IV.

I desire that nothing shall be done with my belongings for the period of two (2) years with the exception of trinkets, furniture and personal belongings that Mr. Allen does not care to keep.

ITEM V.

At the expiration of the period of two (2) years from the time of my death, my property shall be distributed in the following manner:

Two-fifths (2/5) of the balance of my estate to my son, Austin Leigh Claiborne, or his heirs, in case of his death prior to the expiration of the said two-year period his wife, Laura Claiborne, is to get one-third (1/3) of two-fifths (2/5), and Hugh Claiborne, his son, to get one-third of two-fifths (2/5), and Allen Leigh Claiborne, his son, to get one-third (1/3) of two-fifths (2/5).

Two-fifths (2/5) of said balance of my estate to my son, John Logan Claiborne, or in case of his death prior to the expiration of said two-year period, one-fifth (1/5) to Logan Proctor Claiborne, and one-fifth (1/5) to Carol Claiborne.

And one-fifth (1/5) of said balance of my estate to my husband, Jay Cooke Allen, or his son Jay C. Allen, Jr., in case of my husband's death prior to the expiration of said two-year period.

[Item VI provides for the assignment to her estate of an insurance policy on the life of Jay C. Allen, Jr.; and item VII gives a legacy of $1,000 to Laura Allen, decedent's daughter-in-law "at such time as my estate can afford it."]

ITEM VIII.

I hereby nominate, constitute and appoint my husband, Jay C. Allen, and my son, A. Leigh Claiborne, and my son J. Logan Claiborne, the executors of this my Will.

It is my desire that my estate be settled as herein provided, without the intervention of any court or courts, and that my executors serve without bonds of any kind being required. My executors are given full, ample and plenary powers. They shall have the right, in their judgment and discretion, to settle my estate; to sell, lease, rent or otherwise dispose of any of the property, publicly or privately, with or without notice, and upon such terms and under such conditions as to them may seem best and proper; in fine, they shall not be hampered or restricted in anywise whatsoever in their dealing with the estate, provided, however, that it is my desire and I direct that my estate shall not be embarrassed or sacrificed in order to pay any of the bequests made by me, but that each and all of the bequests shall be considered due and payable at such time only as they can be paid without injury or embarrassment to the estate. And in this regard the judgment of my executors shall be final and binding. Also, it is my desire that none of my money shall be invested in stocks, mines or oils, or loaned on any real estate or other things. I desire my executors, as they sell a piece of my property, to put the money in good Government bonds.

ITEM IX.

Mr. Allen has no community interest in my property as it has all been made with the rents, issues and profits of the money and property I owned when I married him.

ITEM X.

Jay C. Allen, my husband, owns as his individual property and I claim no community interest thereto:

One-fourth interest in the southwest corner of 9th and Alder.

One-fourth interest in Tracts 2, 6, 14, 17, 23, 24 and 25, Crawford Pool Tracts.

One-fourth interest in the South 5 acres which we bought from Gardner at Salmon Creek.

One-fourth interest in the 20 acres at the head of the creek in which the springs are located at Salmon Creek.

One-fourth interest in the Pleasant Harbor Hood's Canal piece.

One-fourth interest in the Hamm timberland.

All Georgetown lots.

All other real property, of every kind and description and my furniture, belongs to me, to wo [sic ] with as I see fit.

By stipulation of counsel it was agreed that the income of all of the property included in decedent's estate, with the exception of the lot at Second and Pine Streets (westerly half, lot 12, block 45, A. A. Denny Addition), which was returned as her separate property, was returned by decedent in her Federal income tax for the years 1923 to 1932, inclusive, as property of the marital community. She and her husband, petitioner, made separate returns, and he, likewise, returned the income of all such property as that of the community for the years 1923 to 1933, inclusive, and they each paid income tax accordingly.

Petitioner expressed dissatisfaction with the will to his daughter-in-law, Laura Claiborne, and said that he would not "stand anything like that." They discussed the matter and petitioner, thinking he would subject himself to the criticism of overreaching his stepchildren if he attacked the will, and also remembering his affection for his wife's two sons, agreed to relinquish any claim he might have to a moiety of the marital community property and to divide the whole estate with them equally. The sons gave ready assent to this suggestion, since the husband's claim, if established, would embrace the one-fifth interest devised to him and two-fifths more, the latter as his community interest. The consequence was an agreement between petitioner and his two stepsons, Leigh and John Claiborne (also petitioners in this proceeding), the three being the principal beneficiaries under decedent's will, executed on February 17, 1934, the material portions of which were as follows:

WHEREAS, said will is a non-intervention will, and a decree of solvency has been entered in said probate proceedings; and,

WHEREAS, Jay C. Allen, the party of the first part herein, and the surviving spouse, has a community interest in a large portion of the property left by the said Laura Allen; and,

WHEREAS, in and by said Will of the said Laura Allen, he was devised an undivided one-fifth (1/5) of her property, and the party of the second part an undivided two-fifth (2/5), and the party of the third part an undivided two-fifth (2/5) of her property; and,

WHEREAS, it is the mutual desire of the parties hereto, that regardless of what property may or may not be community property, or what property may or may not be the separate property of either the said Laura Allen, deceased, and/or of Jay C. Allen, the surviving spouse, all of the property, real, personal and/or mixed, wherever located, whether the record title thereto may stand in the name of Laura Allen or Jay C. Allen, and whether the same be the separate property of either, or the community property of both; each of the parties hereto shall have an undivided one-third (1/3) thereof; anything in the will of the said Laura Allen to the contrary notwithstanding, to take and receive the same however at the time mentioned in said will and under the circumstances and conditions therein mentioned;

NOW, THEREFORE, in consideration of the premises and of the mutual promises, covenants and agreements herein contained IT IS AGREED:

1. That for the purpose of administration, and for that purpose only, Jay C. Allen, the surviving spouse may claim such community interest in the estate as he may have or be entitled to.

[There then follow mutual covenants by the three signatories to convey to themselves as the three executors all property or interest in the estate individually held, including also any separate property of petitioner and any community interest of petitioner.]

The transfers and conveyances above mentioned shall be in trust nevertheless for the uses and purposes hereinafter mentioned, which shall be expressly set forth and stated therein, that is to say; that the entire fee title in and to all of the properties, real personal and mixed wherever the same may be located owned and/or possessed by Laura Allen and/or Jay C. Allen, and/or in which they or either of them may have an interest, whether the same be separate or community and regardless of whose name the record title may have been at the time of the death of said Laura Allen, is conveyed to the said executors so that and for the purpose of enabling them to transfer by good and sufficient deeds of conveyance, bills of sale, or otherwise, a fee simple title in and to an undivided one-third (1/3) of all of said property to the said Jay C. Allen, a fee simple title in and to be an undivided one-third (1/3) to Austin Leigh Claiborne, a fee simple title in and to an undivided one-third (1/3) to John Logan Claiborne, and that in case anyone of them shall have died prior to the 21st day of January, 1936, then to convey the undivided one-third (1/3) interest of the one so dying to those who under said will of the said Laura Allen shall be entitled thereto.

All cash which may then be on hand shall be by said executors divided in like manner.

3. The said Jay C. Allen shall be the attorney for the estate and shall receive a reasonable compensation therefor out of the property of the estate.

4. The executors shall each receive a reasonable sum as compensation for acting as executors under said will.

IN WITNESS WHEREOF, the parties have executed this agreement in quadruplicate the day and year in this agreement first above written.

The will of decedent was a nonintervention will. The estate is still in process of administration. No real estate has yet been distributed to any of the beneficiaries under the will. Petitioner and his stepson, Leigh Claiborne, and the latter's wife reside together in the house formerly occupied by petitioner and his wife, the decedent. The three executors of the decedent's will are the beneficiaries of the entire estate in equal portions under the agreement above set out.

Using the values returned by petitioners as executors in their estate tax return, and treating as decedent's separate property all that she claimed as such in her will, would result in a deficiency in estate tax of $11,409.63. The value of the property of the gross estate as so returned is overstated by $1,250.47. The respondent chose, however, to treat as separate property of the estate the two-thirds interest which under the agreement of petitioner and the two Claiborne sons would go to the latter, resulting in a deficiency in taxes of $3,924.95.

2. Deduction for taxes. - The decedent held at death certain separate real estate and certain community real estate upon which a deduction for taxes for 1933 was claimed. Taxes for the same year were also claimed on certain personalty which decedent held. It was stipulated by the parties that the so-called Curtis block (lot 3, block 2, A. A. Denny Addition) had a suit for foreclosure instituted against it in 1933 and was sold under foreclosure decree on June 27, 1936. In the estate tax return the legal title retained by the decedent at the time of her death was declared to have no value, and the respondent has not included this tract in the decedent's estate. The same facts of a valueless legal title, a later foreclosure, and the respondent's exclusion are true of the Sorrento Hotel tract (lots 6 and 7, block 76, Terry 1st Addition). The taxes for 1933 claimed by the estate in respect of the first tract were $5,736.28, and in respect of the second, $4,085.35; and both claims were disallowed by respondent. These taxes have never been paid and will now never be paid by petitioners. A deduction claim for $626.36 for 1933 personal property taxes involves furniture and fixtures in the Sorrento Hotel sold before decedent's death, no part of which was returned or included in decedent's estate by respondent. As to other 1933 taxes claimed, respondent waived proof of payment and stipulated that it was immaterial when or whether the taxes had been paid. The total taxes for 1933 claimed in the estate's Federal estate tax return on real property held as part of the marital community were $11,579.01, and on the decedent's separate real estate were $2,969.91.

3. Executors' and attorneys' fees. - The executors' fees had not been paid at the time of the hearing, since the estate was encumbered at decedent's death with a $45,000 mortgage, which has since been reduced by $30,000. It is the "managing" executor's (Leigh Claiborne) intention to pay these fees when the estate is able. There had been paid at the time of the hearing $4,000 on the managing executor's drawing account of $150 a month. Petitioner and W. F. Wilkins were attorneys for the estate until March 1938, and since then petitioner and his law partners, Charles Carey and Edgar R. Rombauer, have been its attorneys. The respondent concedes the reasonableness in amount of the executors' and attorneys' fees claimed. Petitioners claim the deduction of $12,500 in respect of the former and the same sum in respect of the latter.

OPINION.

KERN: 1. The first and primary question involved is whether the respondent erred in allocating to the estate two-thirds of the aggregate of all property of both spouses. The respondent's argument, briefly put, is that the decedent declared in her will that "Mr. Allen has no community interest in my property"; that decedent was engaged for years in real estate deals and through her own efforts and earnings amassed the property in question; that Allen's capital contributions are unknown but if assumed to be equal with those of his wife, her contributions in personal services would offset this advantage, and that the same would be true even if his capital contributions were greater than decedent's; that in these circumstances for the respondent to have followed decedent's will and have treated all the property as her separate property would not have been unreasonable, and by so much the more was the action equitable which he did take, of treating only two-thirds of the property as decedent's in accordance with the terms of the agreement between Allen and decedent's two sons which took the place of the will; and, finally, regardless of whether the petitioner should have been satisfied or not, the respondent's determination has a statutory presumptive correctness which petitioner has not overcome.

We are unable to accept this reasoning. The evidence is clear that the only separate property of decedent which she held before her marriage to petitioner and still held at death was the lot at Second and Pine Streets; that, of the money owned by decedent prior to her marriage, $100,000 was invested by her in worthless second mortgages and wholly lost; and that most of the money which went into the purchase of the realty left at death came from the $154,000 received on the sale of certain tidelands to the Ames Terminal & Dry Dock Co., from decedent's gains on later sales, and/or from petitioner's capital contributions. Now the amount of the capital contributions made by petitioner has not been clearly established, but he is shown to have made as a lawyer from $25,000 to $40,000 a year and to have contributed a large part of this to his wife's investment account. The checks put in evidence show a contribution of over $66,000, and had it not been for the destruction of his records he doubtless could have shown a much greater contribution. That, of course, is speculation, but the evidence on why the records were destroyed by his wife as well as why she drew a will seeking to deprive him of his interest in the marital community property is uncontroverted. In any event, whatever the source of the money with which the "investment account" was started, and whatever the amount of each spouse's contribution thereafter, the facts are clear that both made substantial contributions to this account and treated it throughout as a fund held in common. Most significant of all, we have the evidence of how the two spouses regarded the property in question, in the income tax returns filed by them from 1923 to 1932, inclusive: all the property except the "2nd and Pine" lot was returned as the property of the marital community. It is reasonable, therefore, to conclude that all such property was the property of the marital community, and that decedent's acts in throwing a cloud over this fact in her will moved from a combination of reasons, the strongest of which were the momentary spitefulness of an often sick, nervous, and jealous woman against her husband and her fear that the manner in which the joint enterprise had been conducted, with its inextricable intermingling of the funds of the two spouses, would deprive her two sons of the interest which she wished to leave them. The decedent's description of certain property in her will as her separate property is obviously not binding on us. Commissioner v. Burke, 62 Fed.(2d) 7, 12. The resulting agreement between petitioner and the two sons, which obviously in its apportionment of property interests has no bearing on the question before us, recognized clearly, it seems to us, these motives and fears and sought to reach a solution which, if not strictly just on the basis of legal rights, was at least equitable, considering petitioner's advanced age and needs.

Our conclusion, therefore, apart from any question of legal presumptions, would be that the petitioners have overcome the presumptive correctness of respondent's determination and have sustained the burden of proof on them of showing that the property in question was that of the marital community. When we appeal to the local law, we find that it raises presumptions which fortify this conclusion.

The relevant sections of the Washington statutes, Remington's Compiled Statutes of Washington (1922), vol. 2, are set out in the margin.¹ The property here was admittedly acquired after marriage. The decisions of the Washington Supreme Court, it appears, treat the earnings of the wife while living with her husband as community property, Abbott v. Wetherby,6 Wash. 507">6 Wash. 507; 33 Pac. 1020; and raise a definite presumption, in the absence of countervailing evidence of a convincing character, that property acquired by either spouse during coverture is that of the marital community. Rawlings v. Heal,111 Wash. 218">111 Wash. 218; 190 Pac. 237; Seaton v. Smith,186 Wash. 447">186 Wash. 447, 456; 58 Pac.(2d) 830. Under the law of Washington, had all the property been contributed during coverture by the husband, the wife would nevertheless have acquired a one-half interest in it; and the same would be true as to the husband had all the contributions been made by the wife. We can see no reason to adopt a different rule where the two spouses both contributed to build up a common estate, or to speculate on how much either contributed, as respondent does, apparently forgetting that the marital community rule's very object is to put an end to all such speculations. Respondent refers to an earlier decision of this Board in Laura Allen, 14B.T.A. 223 (1928), saying that in that case decedent "successfully resisted efforts to include one-half the community income in her separate return for 1924." In that case we held on the authority of United States v. Robbins,269 U.S. 315">269 U.S. 315, that all of the community income, which had been returned by the husband as such together with the income from his separate property, was, because of the power of control over it given him by statute, properly taxable to him, and not as respondent contended, one-half to the decedent. We are unable to see any bearing which that decision has on the present question beyond the recognition which the spouses themselves gave, already adverted to, to the existence of a substantial community estate.

Respondent also relies on the decision of the Circuit Court of Appeals for the Ninth Circuit affirming this Board, 30 B.T.A. 1265">30 B.T.A. 1265, in Shea v. Commissioner, 81 Fed.(2d) 937, for the proposition that the presumptive correctness of the respondent's determination can not be overcome by any presumption of state law. In that case, the court after setting forth the presumptions of California law upon which the taxpayer relied, continued as follows, at page 939:

These four propositions are thoroughly established as the law of California by its statutes and by the decisions of its courts. They are not applicable here, however, for the reason that the source of the income derived by the taxpayer is definitely ascertained to have been in large part the income derived from his separate property. The income derived from this capital investment is taxable to the husband as his income. The presumption that it is community property acquired after July 29, 1927, so far as applicable in a tax case, has been overcome.

It will be seen, therefore, that the fact that the husband had separate property which was the source of income to him was there "definitely ascertained." The court went on to point out that, where the existence of such separate property had been factually determined, the fact that its precise amount could not be ascertained would not justify this Board or itself in indulging the presumption of state law that all income was therefore community income, and the Commissioner's segregation of separate and community income must, therefore, be overcome by positive proof and, lacking such proof, must stand. To state these propositions is sufficient to show that they have no application here, where the separately held land still retained at death was proved, and where any capital gain originally derived from the conversion of other property held separately at marriage had long since been merged in a community investment which was regularly treated by both parties as community property for 10 years preceding the decedent's death.

In these circumstances, we are of the opinion that the property in question was the property of the marital community, and that only one-half of it, therefore, was properly includable in the decedent's gross estate.

2. Deductions for taxes. - Decedent died on January 21, 1934. Respondent contends that the lien of taxes on decedent's land did not attach until the first Monday in February 1934, that is to say, after her death, and consequently was not a burden on her estate at the moment of death and subject to deduction from the gross estate.

The applicable statutory provision is as follows (Remington's Compiled Statutes of Washington, 1922):

§ 11272. [9235.] Lien, When Attaches.

The taxes assessed upon real property shall be a lien thereon from and including the first day of March in the year in which they are levied until the same are paid, but as between a grantor and grantee such lien shall not attach until the first Monday of February of the succeeding year. The taxes assessed upon personal property shall be a lien upon all the real and personal property of the person assessed, from and after the date upon which such assessment is made, and no sale or transfer of either real or personal property shall in any way affect the lien for such taxes upon such property. § 11267 constitutes "all taxes and levies" "lawfully imposed or assessed" a lien on the real estate on which imposed or assessed, and gives the lien priority against all mortgages, judgments, debts or obligations. By § 1366, Remington's Compiled Statutes, title to real property of a deceased person vests in the heirs or devisees immediately upon the death. By section 303 of the Revenue Act of 1926, as amended by section 805 of the Revenue Act of 1932, the amount of state property taxes paid or payable is included by implication as a deduction allowable under "claims against the estate", and by Treasury Regulations 80 (1934 Ed.), article 37, "The deduction for property taxes is limited to such taxes as accrued prior to the date of decedent's death."

Petitioner relies on certain decisions of this Board which have since been distinguished as inapplicable to the present circumstances in Theodore Plestcheeff,35 B.T.A. 508">35 B.T.A. 508; affirmed in Commissioner v. Plestcheeff, 100 Fed.(2d) 62 (C.C.A., 9th Cir., Nov. 18, 1938). We think that that case is conclusive here and resolves the question in respondent's favor. There the taxpayer had received certain realty by devise on April 5, 1931, and we held that the lien for taxes assessed for 1931 did not attach until October of that year. We there said (p. 512):

In Puget Sound Power & Light Co. v. City of Seattle,201 Pac. 449, 451, referring to State of Washington v. Snohomish County,71 Wash. 320">71 Wash. 320, the Supreme Court of Washington again emphasized the principles of that case by referring to it as follows:

* * * It was pointed out that in giving a lien for a real estate tax the statute contemplates a levy as well as an assessment, while as to personal property only an assessment is required; and it was decided that as the levy had not been made at the time of the purchase the estate took the real property free of any lien for taxes. * * *

* * *

The question for our determination therefore is the basic date for tax incidence in the State of Washington.

In our opinion, the taxes assessed on real estate for the year 1931 did not. under the statutes of Washington as construed by its courts, attach and become a perfected lien on said realty prior to October 1931, in which month the tax levy is made in that state.

The Circuit Court of Appeals for the Ninth Circuit reached the same result, but rested its decision on the narrower ground that the case fell within the express provision of § 11272, supra, dealing with the situation of grantor and grantee. The instant case, it will be seen, does not fall within the Board's decision, but clearly falls within the decision of the Circuit Court, which held that the Washington courts had construed "grantee" to include a devisee, such as was there involved, and consequently "As thus construed, we think the lien did not attach until the February after respondents acquired the property, and they are entitled to the deduction." The assumption was made by the Circuit Court in that case that the lien would have attached on March 1 (before the testator's death) but for the statutory provision postponing that attachment between grantor and grantee, and the Commissioner apparently adopts the same view, see G.C.M. 21373, so that that case in all respects covers the situation here, and is binding upon us.

In these circumstances, we think that the deduction for all land taxes for 1933 should be denied, and do not consider, therefore, what decision, on a contrary view, would be proper in respect of the deductions claimed for taxes on the so-called Curtis block and the Sorrento Hotel. It would seem that the vesting of the realty in the devisees, with its consequent tax burden, was not suspended, as petitioner contends, by the decedent's provision in her will postponing distribution of her estate (see § 1366, cited above), and even if we are wrong about this, such a postponement would not create a tax burden existing before the decedent's death, and such alone under the statute may be deducted.

As to the $626.36 for 1933 taxes on personal property, the Sorrento Hotel furniture and fixtures, respondent points out that this was no longer the property of decedent at the time of death. Since the lien for taxes on personalty attaches on assessment on all personalty and realty of the taxpayer, § 11272, Remington's Compiled Statutes, quoted above, a different result would be necessary here. We agree with respondent, however, that, since we have held the property to have been community property, the principle of Lang's Estate v. Commissioner, 97 Fed.(2d) 867; cf. Lang v. Commissioner,304 U.S. 264">304 U.S. 264; would apply, and only one-half of this sum would be deductible.

3. Executors' fees and attorneys' fees. - Respondent makes no objection to the amount of these fees. His only objection appears to be that the executors' fees would be paid to the heirs of the estate, and that consequently "there are no adverse interests." Granted that the fixing of the fees would in the circumstances not be an arm's length transaction, we think that this objection would go only to the reasonableness of the amount of the fees, and, since concededly that is reasonable and the managing executor stated under oath that he would pay them in full, we can see no reason to disallow them. The same applies to the attorneys' fees, with added force, since Jay C. Allen's former and present law partners also have an interest in them.

We hold that the executors' and attorneys' fees claimed should be allowed in one-half the amount claimed, under the principle of the decision of the Circuit Court of Appeals for the Ninth Circuit in Lang's Estate v. Commissioner, supra.

Decision will be entered under Rule 50.

---

Footnotes

• 1. § 6890. [5915.] Separate Property of Husband.

  Property and pecuniary rights owned by the husband before marriage, and that acquired by him afterward by gift, bequest, devise or descent, with the rents, issues, and profits thereof, shall not be subject to the debts or contracts of his wife, and he may manage, lease, sell, convey, encumber, or devise, by will, such property without the wife joining in such management, alienation, or encumbrance, as fully and to the same effect as though he were unmarried.

  § 6891. [5916.] Separate Property of Wife.

  The property and pecuniary rights of every married woman at the time of her marriage or afterward acquired by gift, devise, or inheritance with the rents, issues, and profits thereof, shall not be subject to the debts or contracts of her husband, and she may manage, lease, sell, convey, encumber or devise by will such property, to the same extent and in the same manner that her husband can, property belonging to him.

  § 6892. [5917.] Community Property Defined - Husband's Control of Personalty.

  Property, not acquired or owned as prescribed in the next two preceding sections, acquired after marriage by either husband or wife, or both, is community property. The husband shall have the management and control of community personal property, with a like power of disposition as he has of his separate personal property, except he shall not devise by will more than one-half thereof.

  § 6895 [5920.] Separate Earnings of Wife, etc.

  A wife may receive the wages of her personal labor, and maintain an action therefor in her own name, and hold the same in her own right, and she may prosecute and defend all actions at law for the preservation and protection of her rights and property as if unmarried.

  § 6896. [5921.] Earnings of Wife and Minor Children.

  The earnings and accumulations of the wife and of her minor children living with her, or in her custody while she is living separate from her husband, are the separate property of the wife. ↩