# Appendix — Kraft v. Commissioner > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_3095%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1984 - **Citation:** 469 U.S. 852 ## Text c= _ TT lla /Y ) | Office-Supreme Court, U.S. saat FILED | NO. JUL 3 1984 | ALEXANDER L. STEVAS, In The CLERK -_ —. me. SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1983 FLORENCE KRAFT, and PHYLLIS BERLIANT, Petitioners, vs. COMMISSIONER OF INTERNAL REVENUE SERVICE, Respondent. APPENDIX TO PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT Richard M. Kates Suite 3400 30 N. LaSalle St. Chicago, I11. 60602 312/236-0267 Counsel for Petitioners July 2, 1984 TABLE OF CONTENTS OF APPENDIX Page Seventh Circuit Opinion---------- 1 Tax Court Opinion---------------- 14 Tax Court Decreen-- ee cee meee cee 67 Tax Court Decree---- ———— nn: 6 Nos. 83-1413 and 83-1414 Kraft and Berliant argue that, with only two exceptions,® Rae did not own these assets but held them for her child- ren who had given her money to invest for them. Although they cannot trace to particular investments the money they claim the children gave Rae, Kraft and Berliant con- tend that Rae must have used the children’s money since she had virtually no resources of her own with which to amass the sizable estate. In response to similar arguments below by petitioners, the Tax Court found as facts that any contributions made to Rae by her children “were in the nature of gifts rather than conveyances in trust for the benefit” of the children (App. 7) and that Rae “supplied all the consideration for the * * * joint tenancy property and totten trust accounts” (App. 10). These findings are amply supported in the record. Neither Rae nor any of the children kept records of the amounts contributed to Rae (App. 7, 39). Rae reported on her individual income tax returns the dividend and interest income from the contributed money; neither her children nor their spouses did (App. 7, 27). The child- ren never questioned Rae about the nature of her invest- ment of their money or in any other way exercised control over the investments (App. 7-8, 27). Because these find- ings are amply supported by the record and certainly are not clearly erroneous, we must sustain them on appeal. Commissioner v. Duberstein, 373 U.S. 278; Avco Delta Corp. Canada Ltd. v. United States, 540 F.2d 258 (7th Cir. atin appeal, Kraft and Berliant contend that the case of Mende on v. Commissioner, 52 T.C. 727 (1969), supports their claim that the estate assets are actually the child- ren’s and not Rae’s. However, in Mendelson the Tax Court found that the petitioner had not made a gift of her funds, so that her retaking of them did not make her a transferee. Since the Tax Court found that the Berliant ® Petitioners concede their liability as transferees with respect to the Clara’s Ltd. proceeds and the annuity (Reply Br. 2). Appendix p. 6 Nos. 83-1413 and 83-1414 7 children had made a gift to their mother, Mendelson has no application here. Therefore, we sustain the Tax Court’s finding that Rae owned all the probate and non- probate assets at issue inthis proceeding. III In order for Kraft and Berliant to be liable as transfer- ees of probate assets for unpaid estate taxes, there must be a basis under state law or state equity principles for imposing transferee liability. Commissioner v. Stern, 357 U.S. 39. Section 6901(a) merely establishes a procedure for tax collection but does not establish transferee liability. Since Rae Berliant’s probate estate was adminis- tered under Illinois law, that law governs whether Kraft and Berliant are liable, legally or equitably, for the es- tate’s unpaid taxes. The Tax Court concluded that Kraft and Berliant, as transferees of probate assets, could be held liable for estate taxes up to the value of probate assets received, or $46,000.7 We agree with this conclu- sion but in part for different reasons than set forth by the Tax Court. The Tax Court first decided that Section 293, ch 3 IIL Ann. Stat. (Smith-Hurd 1961),* provided for transferee 7 See table supra Part II. 8 § 293. Refunding by Distributees If at any time after payment of a distributive share it becomes necessary for all or any part of the distributive share to be refunded for the payment of any claim entitled to be paid from the estate distributed the probate court upon the application of any interested person shall order the distributee to refund that portion of his distributive share which is necessary to pay the claim. If there is more than one distributee the court shall apportion among the distributees the amount to be refunded according to the amount received by each of them, but specific legacies need not be refunded unless the residue is insufficient to satisfy the claims entitled to be paid from the estate distributed. If a distributee refuses to refund within sixty (Footnote continued on following page) Appendix p. 7 8 Nos. 83-1413 and 83-1414 liability. In reaching this conclusion, the court relied on the fact that under Section 293 the Illinois Probate Court may order a distributee to return whatever share of his distribution is necessary to pay claims “entitled to be paid from the estate distributed.” Since tax claims of the United States are claims entitled to be paid from the estate (Section 202, ch 3 Ill. Ann Stat. (Smith-Hurd 1961)), the court reasoned that Kraft and Berliant as transferees are liable to the United States. However, the Tax Court’s reasoning is flawed because it did not consider the nature of the transferee liability established in Section 293. By its own terms, Section 293 imposes transferee or distributee liability only when “the probate court upon the application of any interested person shall order the distributee to refund that portion of his distributive share which is necessary to pay the claim” (emphasis added). The government contended at oral argument that Section 293’s probate court order requirement is a technical re- quirement relating only to the procedure for collection from the transferee and not to the establishment of trans- feree liability in the first place. But Section 293 imposes no transferee liability in the absence of an application to the probate court and a probate court order, so that the statute cannot provide a basis for transferee liability absent such an order. There is no indication that the government has applied to the Illinois Probate Court or that the Probate Court has issued an order to Kraft and 8 continued days after being ordered by the court to do so and upon demand, * * * a civil action may be maintained by the ex- ecutor or administrator against the distributee * * * for the amount due together with the expenses of recovery including reasonable attorney’s fees. The order of the pro- bate a is evidence of the amount due. (Emphasis added. The Tax Court noted that it was basing its decision on Illinois statutory law in effect at the time the transfers were made (App. 29 n.13). appendix p. 8 Nos. 83-1413 and 83-1414 9 Berliant to pay the estate taxes. Therefore the govern- ment has not met its burden of establishing that petition- ers are liable as transferees under Section 293. Alternatively, the Tax Court decided that transferees Kraft and Berliant are liable under Illinois equity principles. The Tax Court is correct in this conclusion As a matter of equity, Illinois has long imposed on estate transferees liability to creditors of the estate. “Legatees are always compellable to refund in favor of creditors be- cause the latter have a priority of right to satisfaction out of assets.” Union Trust Co. v. Shoemaker, 258 Ill. 564, 572, 101 N.E. 1050, 1053 (1913); see also In re Bird’s Estate, 410 Ill. 390, 396-397, 102 N.E.2d 329, 333 (1951); Snydacker v. Swan Land & Cattle Co., 154 Ill. 220, 225, 40 N.E. 466, 468 (1895). In Shoemaker, the Illinois Su- preme Court analyzed extensively the scope of a creditor’s equitable remedy against transferees of an estate’s assets. Later cases have merely applied Shoemaker to the particular facts at hand without performing further inde- pendent analysis. See, e.g., Olsen v. Hartford Accident and Indemnity Co., 368 IIL 194, 197, 13 N.E.2d 159, 161 (1938). In Shoemaker, the claim asserted against trans- ferees of estate assets first arose five years after dece- dent’s death, when judgment was entered in a case in which decedent and his business partners had become par- ties long before the death. At decedent’s death, that claim was only contingent because its maturing depended on decedent’s opponents’ obtaining judgment, “a contingency which may or may not ripen into a liablility and [was] dependent on an event that neither party can control,” (Pet. Br. 7). Because Shoemaker involved a contingent claim, the Tax Court apparently assumed that the rationale for the decision there to allow recovery by an estate creditor against estate distributees was limited to cases of contingent claims. Since, as the government insists, estate taxes are not contingent liabilities, the Tax Court reasoned that Shoemaker’s equitable principle should be applied analogously to petitioners’ case (App. 32). Petitioners argue that the court erred in extending Appendix p. 9 10 Nos. 83-1413 and 83-1414 this equitable principle to cases involving non-contingent claims and contended that the principle must be limited to contingent claims cases. Both the Tax Court and petitioners view too narrowly the equitable principle explicated in Shoemaker. It is clear that the Illinois Supreme Court established a rule with application beyond contingent claims cases. “It is an established doctrine of equity that creditors who have not been guilty of laches may pursue assets into the hands of distributees, where distribution has been made without discharging their debts,” Shoemaker, 258 Ill. at 573, 101 N.E. at 1053. Even assuming that the defense of laches could be asserted against the United States, petitioners do not claim that the government unreasonably delayed in taking action to recover the unpaid taxes. Indeed, on the facts of this case, there is no basis for such a claim. The estate tax return was filed over five and a half years late on December 16, 1971 and omitted substantial assets. See supra note 3. Nevertheless the Internal Revenue Service completed its review of the return and filed a notice of deficiency within approximately two and a half years, on August 22, 1974. (I.R.S. Statutory Notice Statements to Kraft and Berliant.) Under Illinois equity principles, the government may recover from Kraft and Berliant unpaid estate taxes of Rae Berliant’s estate to the value of probate assets each received plus interest.® ® In its argument before the Tax Court, the government relied exclusively on Illinois Fraudulent Conveyance statutes, IIL Rev. Stat. ch. 59, §§ 4 and 5 (1972), as a basis for establishing transferee liability under Illinois law (App. 33 n16). The Tax Court did not rely on these provisions in reaching its decision but instead relied on Section 293 (supra note 8) and the equita- ble provisions discussed in the text. Because we conclude that transferee liwbility is based on Illinois equity principles, it is not necessary to decide the government’s alternative argument that liability might also be established under Illinois’ fraudulent conveyance statutes. (Footnote continued, on following page) “Appen 1X Pp. _ Nos. 83-1413 and 83-1414 11 IV The Tax Court also decided that Florence Kraft is liable, under I.R.C. § 6324(a) (2), for unpaid estate taxes to the extent of the date-of-death valuation of non- probate assets she received in connection with Rae Berliant’s death.° As noted at Part II supra, in the Tax Court proceeding Kraft contested liability with regard to the joint tenancy bank property and the totten trust accounts. On appeal, she continues to press only two argu- ments with respect to these assets. First, she contends that she and not Rae was the owner of the assets so that no transferee liability could arise on Rae’s death This argument has been considered and rejected in Part II. Second, Kraft contends that her joint tenancy in the bank accounts was not proved because the government has not presented signature cards signed by her and Rae and stating that the accounts are joint with a right of survivorship. Kraft claims that such signature cards are required under Illinois law to establish joint tenancy in a bank account and that since joint tenancy has not been es- tablished under Illinois law, the property is not includable 8 continued Kraft and Berliant argue that the Tax Court erred in basing its decision on theories not relied on by the government. However, it is well-settled that where, as here, the government was correct in its determination that petitioners were liable for the tax, the Tax Court may approve tax liability even for a reason not relied on by the government. Helvering v. Gowran, 302 U.S. 238, 245-246. Where, as here, the result of the lower court is correct, it must be affirmed on appeal, even if the lower court relied on the wrong ground or gave the wrong reason for its decision. Id.; Panter v. Marshall Field & Co., 646 F.2d 271, 281 (7th Cir. 1981), certiorari denied, 454 U.S. 1092. 10 The government has not asserted a claim against Phyllis Berliant with regard to the non- probate assets (Govt. Br. 7-8). Appendix p. ll 12 Nos. 83-1413 and 83-1414 in the gross estate under I.R.C. § 2040," and transferee liability cannot arise under I.R.C. § 6324 (supra note 5). Kraft misinterprets Illinois law. The Illinois authorities on which Kraft relies state merely that a joint tenancy bank account may only be created when the parties to the account sign a written agreement such as a signature card. In re Estate of White, 56 Ill. 2d 265, 268-271, 307 N.E.2d 122, 124-125 (1971); Doubler v. Doubler, 412 II. 597, 600, 107 N.E.2d 789, 790 (1952); In re Estate of Gubala, 81 Ill. App. 2d 378, 384, 225 N.E.2d 646, 650 11 1.R.C. § 2040 reads as follows: 2040. JOINT INTERESTS. The value of the gross estate shall include the value of all property to the extent of the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money’s worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than an adequate and full consideration in money or money’s worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further, That where any property has been ac- quired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so ac- quired by the decedent and any other person as joint ten- ants and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the proper- ty by the number of joint Lea ta i. x3 , im tj & o ye : re ir ae Ly Sats Se 9 es " = Nos. 83-1413 and 83-1414 13 (1967); Illinois Law and Practice, Joint Tenancy § 5. None of the authcrities state that the only way to prove a joint tenancy in a bank account is by presenting the signa- ture card as evidence. Here the Tax Court noted that Kraft stipulated that at Rae’s death she received and took possession and control of the bank accounts titled in her and Rae’s names. The court found this behavior inconsis- tent with the tenancy in common which Kraft now urges on this Court (App. 33 n.19). Furthermore, Kraft stipulat- ed that these accounts were titled “joint tenants with the right of survivorship and not as tenants in common.” /d. These stipulations provide sufficient proof that the bank accounts in issue were joint tenancy accounts.!2 The Tax Court was correct in deciding that under Section 6324(a)(2) Kraft was liable to the extent of the $76,467.25 date-of-death value of the non- probate assets (see table supra, Part II) she received due to Rae’s death plus interest, for the unpaid estate taxes. The decisions of the Tax Court involving the estate tax liabilities of Florence Kraft and Phyllis Berliant are affirmed. A true Copy: Teste: Clerk of the United States Court of Appeals for the Seventh Circuit 12 The inclusion of the $31,459.04 totten trust accounts is not separately challenged in petitioners’ briefs probably because LR.C. §§ 2036, 2037 or 2038 apply to them as the Tax Court held (App. 40). Appendix p. 13 USCA 40227—Midwest Law Printing Co., Inc., Chicago—3-5-84—400 EDITOR'S NOTE PAGES Aes pid thr EMO WERE POOR HARD C TIME OF FILMLNG. IF AND WHEN A BETTER COPY CAN BE OBTAINED, A NEW FICHE WILL BE ISSUED. T. C. Memo. 1982-148 UNITED STATES TAX COURT lL IRENE MAGILL, TRANSFEREE, ET AL., Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket Nos. 9094-74, Filed March 24, 1982. 9126-74, 9127-74. Richard S$. Hartford, for the scetiticoner in Decket No. 9094-74. Richard M. Kates, for the petitioners in Bryan R. Sullivan, for the respondent. l. Cases of the following petitioners are consolidated herewith: Irene Magill, docket No. 9094-74; Floranmce Kraft, dockec No. 9126-74; Phyllis Berliant, docket No. 9127-74. Appendix p. 14 SERVED MAR 2 4 S82 -2-. MEMORANDUM FINDINGS OF FACT AND OPIN=ICN DANSON, Judce: Respondent has determined chat the petitioners in these consolidated cases are liable as transferees (or, in the case of petitioner ?hylli Serliant, as a transferee of a transferee) for the unpaic ~ estate tax of the estata of Rae Serliant, as follcws: Estate Tax Addition to Tax Petitioner Docket No. Deficiency Under Section 6651(a) 13 rene Magill 9094=74 $67,550.63 $16,387.66 orence Kraft 9126-74 67,550.63 16,387.66 Phyllis Berlianc 9127-74 67,550.63 15,887.66 After concessions we are left with the following issues for decision: (1) Whether petitioners Irene Magill and Florence Kraft are liable as transferees under section 6901(a) for any unpaid estate tax with respect to the value cf 2. Respondent determined that each petiticner vas liable for che full amoumt of the estate tax deficiency and addition to tax. 3. All section references are to the Incernal Revenue Code of | 1954, as amended and in effect at the time of Rae 3erliznt’'s death, unless otherwise indicated. Appendix p. 15 = 3- stock and liquidation proceeds they received as beneficiaries of the estate. (2) Whether petiticner Phyllis 3erliant is liable as a transferee of a transferee under section 6301(a) for any unpaid estate sax with respect to the value of stock and liquidation proceeds she received {following the death of her husband, who was a beneficiary of the estate. (3) Whether petitioners Florence Kraze and izene Magill are liable uncer section 6324(a) (2) for any unpaid estate tax with respect to certain joint tenancy property, sotcen trust accounts and annuity proceeds which passed to them cutsice the probate estate by reason of Rae Berliant's death. (4) Whether cercain stocks, bonds and savings accounts in which decedent held an interest as a joint tenant are includgable in the gross estate uncer secticn 2040. (S$) Whether certain totten t-ust accounts, of which Sececent was trustee and her children or grandchildren beneficiaries, are includable in the gross estate under secticns 2036, 2037, of 2038. . Appendix p. 16 -i4i- (6) Whether the estate is entitled to deduct a fee paic to an attorney who represented cercain beneficiaries in litigation concerning the administration of the estate. (7) Whether the late filing of the estate tax return was due to reasonable cause. PINDINGS OF FACT Some of the facts have been stipulated and are found accordingly. ‘The stipulations of fact and the attached exhibits are incorporated herein by reference. Rae Berliant (decedent) died testate on November ¢, 1964, a residen= of Chicago, Illinois. Decedent was massied to Julius Berliant, a doctor, who died on or about December 3:1, 1933. Four children were born of Shis marriage, Sidney Berliant, Ernest Berliant, and petiticners Irene Magill and Florence React (hereinatte> individually referred to as Sidney, Ernest, Irene and Plorence) . Eznest was born in 1907, married in 1944, and fathered two children curing the 1940's or 1950's. Irene was bers in 1910, married in 1929, and gave birth to three chiléren during the 1930's. Florence was born in 1915, married in 1939, and gave birth to five children foam 1940 to 1954. Sidney was born in 1917, married petitioner Phyllis Serlianc (Phyllis) in 1940, and had four children igh Appendix p. 17 - 5- with Phyllis in the 1940's and 1950's. Each of decedent's childzsen resided with decedent until he or she married. Petitioners Irene, Florence anc Phyllis residec in Wilmette, Chicago: and Skokie, Illinois, respectively, when they filed their petitions in these consclidated cases. Decedent's father, Nathan Rosenblat, died in 1931. He lett assets valued at $42,930.31, most of which were placed in a trust which named his wife | and their five children as life income beneficiaries. Under the terms of the trust the income was generaliv required to be divided equally among the surviving income beneficiaries. Upor the death of the last surviving income beneficiary she corpus of the trust was to be distributed to- Nathan Rosenblat's grandchildren. During her lifetime Gecedens received at least $9,356.52 from this trust. Decedent's mother, Clara Rosenblat, died in i937 and left assets valued at $8,975. These acsets were placed in an investment company operating under the name of Clara's, Ltd., and each of Clara Rosenblat's children, including decedent, received an interest in the company. During her lifetime decedent receivec income from Clara's, Lsd., totaling at least $2,4 35.39. Appendix p. 18 - 6- Upon the death of her husband, Julius Berliant, decedent received she proceeds of a $19,000 life insurance policy and certain other assets of an undetermined amount fran his estate. Decedent was never formally employed during her litetime. She was, nevertheless, an excellent business- woman anc regularly traded in the bond and stock markets. During the 1920's and 1930's she also actively ssaded in so-callec “gold bonds,” which were commonly issued by private individuals during that era in order to finance the construction of real estate. Her shrewd investment dealing and extracrdinarily frugal nature enabled her to amass a substantial amount of cash anc other assets before she died in 1964. All four of decedent's children began working fulltime jobs by aces 16 or 17. Until they married and moved out of decedent's home intarest-Searin¢e savinss accounts and certificates. Florence anc her husband also supplied decedent with free food from their grocery Appendix p. 19 “Je store nest 1,129.89 # 65648-8 Sidney 24,737.83 # 129730-8 Irene 20,404.27 $106. 293.32 Appendix p. 22 = 10 - Decedent supplied all the consideration for sche fore- going joint tenancy property and totten trust accounts. By virtue of their rights as surviving tenants or beneficiaries Sidney and petitioners Irene and Florence teok possession and control of the following assets upon the death of decedent: Surviving Joint Tenant Date of Death ices Balance oF Value Irene . CFSL Sav. Acc. # 30847 $ 7,000.00 Irene CYSL Sav. acc. # 129730-8 20, 404.27 BEVERY S Florence CFSL Sav. acc. # 70260-5 © $27,894.87 Florence CYSL Sav. acc. # 30887 7,900.00 Florence BFSL Sav. acc. # 213455 12,638.26 Florence BFSL Sav. acc. # 107139 16,006.72 Florence Montgomery Ward Stock-24 Shares 1,026.00 Florence Cities Service Stock- 7 Shares __ 528.50 $67 .4 Sidney CPSL Sav. acc. # 30848 $ 7,000.00 Sidney CFSL Sav. acc. # 95207-7 2,814.05 Sidney CFSL Sav. acc. # 65648~-8 24,737.83 Sidney BFSL Sav. Acc. # 19228 1,097.94 Sidnay BFSi Sav. acc. # 1LO7141 ah 525.28 Appendix p. 23 -lleé- Decedens was survived by all four of her children. However, only Irene, Florence anc Sidney were named as beneficiaries in her will. Irene was also named executrix of the estate and served in that capacity from January 18, 1965 until the estate was closed on June 30, 1972. Prior to her appointment as executrix Irene had never before acted as a perscnal representative for an estate. She had only a high-school education. Sometime in November cf 1964 she enlisted the services of Caplow & Zimmerman, a law fiz, to assist her in the administration of the es=ate. The probate of the estate generated a considerable amount of litigation among the estate and decedent's chilézen. In 1965 Esnest, who hac been disinherited by decedent, commenced litigation to contest the will and to establish ownership of certain stock titled in his name which Izene had attempted to include in the probate inventory. In connection with shis litigation Irene, Florence and Sidney filed an answer with thie probate cour: on May 12, 1969, in which they allegec that decedent held ‘legal title to approximately $200,000 of property at her death, of which approximately $60,000 “arose out of dizrec= contributions by [them] to the decedent in trust and safekeeping and represented (their) savings." Appendix p. 24 In another paragraph of their answer shey admitted shat "decedent made substantial sitts to [them] during her lifetime” in the course of establishing the savings accounts of which thev became she sole owners upon her death. On December 10, 1969, the probate court, pursuant to an agreement of the parties, dismissed Ex=nest's peciticn to set aside the will. It also cetermined that Ernest had paid full consideration for she disputed shares of stock pursuant to a4 purchase agreement entered into with the decedent in 1964, and decreed thas he was the scle owner of the property. Plorence and Sidney also filed a petition with the probate court in March 1970 calling for the removal of Isene as executrix and the appointment of Sidney as a successcr executor. The petition complained of Irene's failure to (1) file a Final Account by August 31, 1965, as required in a previous order of the court, and (2) cimely file Federal estate an¢ Illinois inheritance tax returns. In particular, the petition alleged in par> Cuties as executrix and handling the tigation with Ernest. He died on July 8, 1s71. The Federal estate “ax return was eventually prepared and filed by Maurice Saban, an accountant whom Mr. Vosnos had hired for this purpose. Ivene was aware that a Federal estate tax return was required to be filed, but she did not ascertain the @ue date or determine whether filing extensicns had been requested or obtained. Instead, she relied exclusively on her attorneys to make sure that any filing deadlines were complied with. She became aware that the return was Gelinquent ne later than March 1970, when the petition *s oust her as executrix was filed by Florence and Sidney, but even shen she assumed no personal responsibility for filing the return in an expeditious manner. She did act monitsr the progress of the attorneys in the preparaticn of the return or otherwise attempt to minimize any furcher delays. Appendix p. 28 ES SS SS eS eee - 16 = On August 10, 1965, Sidney and petitioners Irene and Florence each received 4 check for $6,027.34 which Tepresentec his or her share of an annuity owned by decedent worth $23,440.53 at the date of death. On January 1, 1973, one-third ct the stock in deceaden='s probate estate was distributed to each petitioner. This stock was she same stock which decedent owned at her death, with the exception of minor srading activity and stock Gividends and splits occursing after the date of death. Each petitioner' the will of her husband, Sidney, who diec testate on February 24, 1972. Neither Irene, Florence, Sidney nor Phyllis provided any consideration for the transfers. All the assets in the Rae Berlian= estate have been distributed. Appendix p. 29 OPINION Rae BSerliant died on November ¢, 1964, a resident o= Chicago, Illinois. She was survived by four chiidren, Irene, Florence, Sidney and Ernest. Only Irene, Florence and Sidney were named as beneficiaries in her will. Her estate was closed on June 30, 1972, although the final Gistribution of assets to the beneficiaries did not take place until October 1, 1974. Sidney died on February 24, 1972, leaving his wite Phyllis as the sole beneficiary under his will. We must decide whether petitioners Irena and Florence are liable as transferees, and Phylli as a transferee of a transferee, for any unpaic estate tax of the estate of Rae Berliant. i. Issues pertaining to vetitioners' transferee liabilisy , Section 6903 (a) states that the unpaid estate tax liability of an estate may be assessed against and collected 4. SEC. 6901. TRANSFERRED ASSETS. (a) METHOD OF COLLECTION.—The amouncs of the following liabilities shall, except as hereinafter in this section provided, be assessed, paid, and collected in the same manner and subject co che same provisions and iimitations as in the case of the taxas with respect to which the liabilities were incurred: (1) INCOME, ESTATE, AND GIFT TAXES.— (A) TRANSFEREES.-—-The liability, at law or in equity, of a transferee of property— xe (id) of a decedent in the case of a tax imposed by chapter 1l (relating to estate taxes), x *k in respect of the tax imposed by subtitle A or 38. xe ek Appendix p. 30 - 18 - srom a transferee of its assets in the same manner as the estate itsel:. However, section 690i(a) does not actually Teate transferee liability; it merely provides an alternative procedure for collecting the unpaid taxes of the transferor. The substantive liability of the transferee must be determined under state law with respondent being viewed in the same Light as any other creditor of the transferor. Commissioner v. Stern, 357 0.S. 35 (1958). since decedent was a resident of Illinois at her death and her estate was acministered under its laws, we must look to Illincis law to determine whether the petiticners were liable, at law or in equity, for the estate's taxes. Respondent bears the burden of proving that the petiticners were liable as transferees of the estate, whereas the petitioners bear the burden ef proving that the estate did not owe the underlying tax. Section 6902(a); Rule 142(d), Tax Court Reles of Practice and Procedure. Somewhat diferent principles apply, however, where the property received by =he transferee passes outside Appendix p. 3l - 19 - the probate estate. Section 6324(a) (2) states that where propesty is included in the gross estate pursuant to sections 2034 through 2042, the transferee of the property (such as a surviving joins tenant or remainderman beneficiary) automatically beccmes personally liable for the estate tax to the extent of the date of death value of she property receivec. Such a person is also considered a transferee under section 6901 (h) be thereby pe=mitting the liability created by section 6324(a) (2) to be assessed and collected according to the rules specified in section 6901. Thus, Se The pertinent porcion of section 6324(a)(2) reads as follows: SEQ. 6324. SPECIAL LIENS FOR ESTATE AND Girt TAXES. (a) LOZSS FOR BSTATE Tax.-——* * * x ak (2) LIABILITY OF TRANSFEREZS AND OTHERS.-—-If che estate tax imposed by chapter 11 is not paid when due, chen the spouse, transferase, trustee (except the trustee of an exployees'’ trusc wnich meets the requirements of section 40l(a)), surviving tenant, person in possession of che property by reason of the exercise, nonexercise, or Telease of a power of appointment, or beneficiary. who receives, or has on the date of the decedent's death, property inciudea in the gross estate under sections 2034 to 2042, inclusive. to the extent of the value, at the time ol che decedent's death, of such property, shall be personally liable for such tax. * * * 6. SEC. 6901. TRANSFERRED ASSZTS. za (h) DEFINITION OF TRANSFEREZ.—As used in this seccicr, the term “cransferee” includes donee, heir, legatee, devises, and distributee, and with sespess to estate taxes, also includes any person who, under section 6324(a)(2), is personally liable for any parc of such tax. Appendix p. 32 - 20 = substantive transferee liability with respect to nonprobace assets is ordinarily supplied by section 6324(a) (2), makine an examination of state law unnecessary. See Schuster v. Commissionez, 312 F.2d 311, 314-316 (9th Cir. 1962), atig. 32 T.C. 998 (1959) and revg. on another issue 32 T.C. 1017 (1959); Groetzinger v. Commissioner, 69 T.C. 309, 316-317 (1977); Bergman v. Commissioner, 66 oes 887, 892 (1976). Based on the foregoing provisions, respondent contends chose assets which were part of the probate estate, namely, the stock and proceeds in G@issclution of Clara's, Ltd. The petitioners concede that these assets were acministered as part of the probate estate arc were reported on the Federal estate tax return as part of decedent's gross estate. They also concede that they received the assets on the cates indicated above as the named beneficiaries of the estate (or in Phyliis' case, 4s the scle beneficiary under the will of her husband, who was in tuzsm a beneficiary of the estate). Thus, on the face of it, there would appear to be no question that Sidney ard petitioners salaries or business income after they married and moved elsewhere. Florence also testified that she and her husband regularly supplied decedent with free food from their grocery store. Irene, Florence and Sidney allecedly continuec ts make these contributions until their mother Gied in 1964. The witnesses characterizec these trans‘ers not as gifts to be used for their mother's support and maintenance, hut rather as transfers in trust with the intention that the funds be invested by decedent ‘for their benefit. They stated that theiz> mother repeatedly assured them that the money she was investing was theirs, and that eventually they would get the money back, plus a return on their investment. Florence was also allecedly promised that she would be repaid for she food she and her husband provided. We have made a care*ul study of the lengthy and confusing record in this case and have net found any competent, reliable evidence to suppor: “he petitioners’ story. Although we are willing to accept that the childcren Appendix p. 36 - 24 t may, upon she petition of any interested person, order a distributee to refund all or a part of his distributive share in order to pay any claims “entitled to be paid from the estate distributed." Normally claims are not “entitled to be paid" unless they are filed within the nine-month claims period provided under the Illinois nonclai=m statute. See sec. 204, ch. 3, Z1ll. Amn. Stat. (Smith-Hurd 1961). However, claims of 14. § 293. Refunding by Discrtbutees Té at any time after payment cf a distributive share it becomes necessary for all or any part of the distributive share *o be refunded for the payment of any claim ene‘tied co ce paid from the estate distributed “he probate court wpon the application of any interested person shall order the discributae to refund chat portion of his distributive share which is necessary to pay the claim. [If there is more than one distributee the cours shall apportion among the distributees the amount co be refunded according to the amount received by each of them, but specific legacies need not be refunded unless che residus is insufficience to satisfy the claims entitled to be paid from the estate distributed. If « distriburee cafuses to refund within sixty days after owing ordered by the court to do so and upon demand, * * * 4 civil action may be maintained by the executor or administrator against the distributee * * * for tne wmount dus together with the expenses of recovery including reasonable attorney's fees. The order of the probate -court is evidence of che amount due. Appendix p. 43 - 31 - 15 the United States are nct subject tc this limitacion. See Unitec States v. Summerlin, 310 U.S. 414 (1940); In re Estate of McBride, 110 Ill. App.2d 200, 249 N.E.2¢ 266 (Ill. App. Ct. 1969); see also Dillmar v. Commissioner, 64 T.C. 797 (1975). Thus, we think the petitioners would be liable as distributees under this provision ‘for che Feceral estate tax Owed by the Rae Berlian= es, the normal claims limitation period does not apply to claims of the United States. Thus, we thick the rationale for allowing ecuitable relie* with regard to contingent claims which mature after the claims period has expired and the estate is distributed would apply with equal force ts cutstanding estate tax clains. Accordingly, we hold that under Illinois law the petiticners are liable as transferees for any unpaid estate tax to the extent cf the value of the stock and liquidation proceeds Appendix p. 45 16 which shey received. 16. Arguably petitioners’ transferee liability could also be said to derive from the Illinois fraudulent conveyance statutes, which provide as follows (secs. 4, 5, ch. 59, Til. am. Scat. (Smith- Burd 1972)): § 4- FRAUDULENT CONVEZANCES, E=C. Every gift, grant, conveyance, assigument or transfer of, or charge upon any estate, real or personal, or right or thing in action, or any rent or profic thereof, made with the intent to disturb, delay, hinder or defraud creditors or other persons, and every bond or ocher evidence of debt given, suit commenced, decree or judgment suffered, with like intent, shall be void as against such creditors, purchasers and other persons. § 5. TDMNOCENT PURCHASER The foregoing section shall not affect che title of a purchaser for a valuable consideration, wnless it appear that he had nocice of the fraudulent intent of his iomediate grantor, or of che fraud rendering void the ticle of such grantor. (Fa. ref. omicred.] Under Illinois jurisprudence the fraudulent intent referred to im these statutes must be specifically proved if the conveyance ia supported by adequate comsideration. On the other hand, if there is no consideraticn or insufficieut consideration and the transéer impairs the rights cf creditors (which we find to be tie case here), chen fraud is presumed and no inquiry Into cne debtor's aotives is necessary. See Stovka v. commercial Embroidery, inc., Til. App.3d 428 N.E.2d 1130, 1132 (Ll. app. Cc. 1981); wi v. Wax, 82 Til. App.2d 67, 225 N.Z.2d 813, 814 (Iii. app. Ce. 156 j see also Hendelscn v._Commisstoner, 52 7.°. 727, 734 (1969), and Tchereonia v. franz, «/5 ve Supp. 92 (B.D. Tl. 1979). Respondent has relied exclusively on these provisions as che source of petitioners’ transferee liubilirty. Y"owever. while we do not necessarily disagree with respondent's rights as surviving joint tenants or beneficia=ies rather than as legatees under dceceden='s will. If the property received is includabie in “he sross estate under one or more of sections 2034 through 2042, then secticn 6324(a) (2) imposes personal liability upon Irene and Florence for any tax cue from the estate to the «extent of the value of such property at the date of decedent's death. Under section 6902(a) respondent has the burder of proving gument is without meriz. The parties stipulated that the savings accounts were titled in the asmes of "Rae Berliant or [one of the children], as joint tenants with the right of survivorship and not as tenants in common.” They also stipulaced chac Irene, Florence and Sidney received and tock possession and control of their respective joincly held savings accounts upon the death of decedent, and presumably Ernesc did the same thing with Fespect to his jointly held savings account. This is hardly consiscent with the legal characteristics associated with a tenancy at common. 20. SZC. 2040. JOINT INTERESTS. The value of the gross estate shall include the value of all property cto the extent of the interes interests are not ocherwise specified or fixed by law, then co the extent of the value of a fractional pars to be ‘determined by dividing che value of che property by she aumber of joint tenants. Appendix pv. 48 - 36 om decedent's estate tax return: Date of Death Description Balance or Value Jointly held stocks, bonds and savings accounts $ 59,624.37 Totten trust accounts 106,293.32 Upon the death of decedent this property passed by operation of law to the respective surviving joint tenants (decedent's Children) and trust beneficiaries (deceden='s children anc 2. Since liability under section 6324(a)(2) is measured by the value of che property ac date of deach, ic would seem chac [rene and Florence would each be personally liable to che extent of one-third of che amnuity value on chat date, or $7,813.51, rather than the lesser amount of the subsequent cash discributiocns. However, because respondent has made no argument to chac effect, we will infer a concession on this issue and limic peticioners' liability co the actual cash received. Appendix Dp. 51 - 39 = grancchilésen). Respondent maintains that the joins tenancy property is includable under section 2040, which provides that the value of property held bv a Gecedent and any other person as joint tenants is included in his estate except to the extent that it can be shown that the surviving tenant contributed to the cost of the propersy. The estate has she burden of proving such conzributions, and in this case that burden also fall upon che petitioners. Secticn 6302(a). The petitioners’ arguments on shis issue paralle. the arguments they presented ix their attempt to insulate themselves from transferee liability with the respect to Gecedent's solely held stock: the children supplied the consideration for the jointly neld property throush regular ccntributions to the decedent out of sheir separate Property, decedent had no other sources of income so the property must necessarily be theirs, etc. We reject these arguments on the same grounds we discussed earlier. There is no reliable evidence to indicate how much the chicdren com==ibuted, or that che children intended she transfer=ed funds to be used in the acquisition of jointly held property. On this record we conclude that any contributions were gifts to the decedent and the joint tenancy property was accuired with the decedent's own ‘funds. Thus, che S212 value of she prope>tv must be included in the ¢rsss estate. Appendix p. 52 - 40 - We reach a similar conclusion with respect to the sotten t>uss eccounss. OSecedent secained “ull use and enjoyment of the Sunds until her death, ac which cime che property passed Sy operation of law tc the beneficiaries named is the trust agreements. This property is includable under secticrs 2036, 2037, or 2038 except to the extent the petitioners can demonstrate that deceden= never owned the amounts in question, cr, alternatively, that the children gave adequate consideration for the interests transferred so them. They have done neither. Accordingly, we hold that the petitioners have failed to meet cheiz burden of proof with respect to both the joint tenancy property and trust accounts and the date of Geath value of such property must be included is the gross estate. B. Deduct:bilicy of attsormev's fee This issue concerns she deductisil.sy of the $3,500 fee paid to attorney Aaron Jacobs, who represented flcrence and Sidney in theiz= petition to remcve Irene as executrix of the estate. The probate court approved she ‘ee and ordered it paid cut of she assets of the estate, stating that the services rendered by the attorney were “for anc on behal*” anc “in the best interests” of administration exvenses allowable under «he laws of the jurisdiction where the estate is beins acminiscered. Respondent contends that the legal fee is nondecuctible because it was a direc= consecuence of Irene's failure to discharge her duties as executrix in @ competen= manner. In other words, respondent's position is that the Peceral Governien= should not be required to subsicize Izene's incompetence through che allowance of an estate tax deduction. We disagree. SEC. 2053. ECPENSES, CNDESTEDNESS, aND TAXES. (a) GENERAL RULE.—fFor purposes of the tax imposed by section 2001, the value of the taxable estate shall be determined by deducting from che value of the gross estate (3) for claims against the estate, and (4) for umpaid mortgages on, or any indebtedness in Tespect of, property where the value of the decedent's interest therein, undiminished by such aorcgage oz indebtedness, is included in che value of che gross estate, as are allowable by che laws of the jurisdiction, whether withia or without the Uniced States, umder which the estate is being administered. ; Appendix p. 54 The position cf this Coust is that adminiserasicn expenses =ust pass two hurdles in order state law, and (2) they must satisfy the conditions set forth in respondent's 23 regulations. Estate of Posen v. Commissioner, 75 T.C. 23. The pertinent regulations provide, in perc, as follows: § 20.2053-1. Deduccions for expenses, indebtedness, and taxes; in general— eee (b) (2) E&Sece of cours decree. The decision of 4 local court as to the amount and allowability uider locai law of a claim or administration expense vill ordinarily be accepted if che court passes upon the faccs upon which deductibilicy depends. If the . court does no= pass upon those facts, ics decree will, of course, not be followed. For example, if the question before che courc is whether a claiz should be allowed, che decree allowing i= will ordinarily be accepted as establishing she validicy and amount of che claim. However, the decree will mot necessarily be accepted even chough ic purports to decide che faccs upon which deduccibilicy depends. It must appear chat the court actually passed upon the merits of the claiz. * * * § 20.2053-3 Deducsion for expenses of admizistering estate— (a) In general. The amounts deductible ‘rom a deceden='s gross estate as "aczinistration expenses” of the firse category (see paragraphs (a) and (c) of § 20.2053-1) are limited to such expenses as are actually end necessarily incurred in the admin- istration of the deceden=’s estate; chat is, in che collection of assets, payment of debts, and distribution of property co the persons extitled co ic. The expenses contemplated in che law are such only as accend the sectlemen= of an estate and the sransfer of the property of che estate to individual beneficiaries or to a trustee, whecher the crustee is che executor or some ocher person. Expenditures noc essential co the proper sectlemenc of the estate, sus incurred for the sadividual benefic of che heirs, legatees, or devisees, may aot be taken as deduccions. administration expenses CONTINUED Appendix p. 55 - 43 - 355 (1980). Zowever, the regulations “improperly add to or override” the requirement in the Code that administration expenses be allowable under local law. It would appear, then, tnat this is not a case which would call for the application of our rule in Golsen v. Commissicner, 54 T.C. 742 (1970), 24. Ie detarzining whether an expense is allowable wader local law for Federal estate tax purposes, this Cours is not necessarily bound by the decision of che probate court which approved che expense for payment, and is free co make an independent examination = seams Sap -Se. Seneumaen: 68 the allowance was proper. See Estate sionez, 76 T.C. 369, 372 (1981); Estate of — sete v. Cee peg va £6. 355, "359 (1980). However, respondent has act shown us any authority, nor have we been able so locate any, — would indicate that che probate court overstepped its bounds in approving the Aaron yacobe, pendix D. 57 _———— ee ss— - 45 - afte. 445 F.2d 985 (10th Cis. 1971), and obviate the necessity of testing the claimed deduction against respondent's segulations. In our judoment, hcwever, there is nothing in the regulations (see w=%e 23, supra) which would require that the decuction be cisallowed. Section 20.2053- 1(5) (2), Estate Tax Regs., states that the decision of a local court as to the amount and allowability under local law will ordinarily be accepted if it appears that the court actually passed on the merits cf the clain. The recoré leads us to believe that the Illinois probate court did exactly that. In addition, we think that the See was “essential to the proper settlement of the estate,” as required by section 20.2053-3(a), Estate Tax Regs., because the related legal services were aimed at expediting Irene's filing of the Final Account and the required tax seturns. The end product of the litigation was a court order dissecting Irene to take care of those matters within $0 days. The probate court later characterized Aaron Jacobs’ fee as “in the best interests” of the estate, anc we can perceive of no sound basis for holding otherwise. Accordingly, the estate is entitled to deduct the $3,500 fee as an acminist=ation expense under section 2053(a). Appendix p. CC. Late filine addision Secticn 6651(a) (1) imposes an addition to tax where the taxpayer's return is filec after the prescribed due date unless the delay is due to reasonabie cause. Section 301.6651-lLic) (1), Proced. & Admin. Regs., provides that reasonable cause exists where the taxpayer exerc:ses ordinary business care anc prudence anc is still tumable to file the return within the statutory time pericc. It is well established that ignorance of the need to file a tax return will not, in and of itself, excuse a taxpayer from liability for the addition to tax for late filing. Estate of Lammerts v. Commissioner, 54 T.C. 420, 445 (1970), affd. per curiam on this issue 456 F.2d 681, $83 (2d Cir. 1972). It is also well established that a rsoral representative has a positive duty *o ascertain the nature of his or her responsibilities as the fiduciary of the estate and that chis duty is not satis of occasions that “everything was all right” and that there was no need tc worry about she filing of the 62 return. Appendix p. - 50 - To put it simply, we do not believe much of Irene's selt-serving testimony. Her story was confusing, disjointed and not corroborated by any other competent evidence. M>. Zimmerman, whose testimony would have been particularly revealing, was not called as a witness. The only attorney who cid testify, Mr. Gelderman, stated that he anc his associate were hired solely to represent the estate in the prcbate litigastion, and flatly denied any responsibilicy for the preparation or filing of the estate tax return. Purthermore, concerning Mr. Zimmerman's purported assurances that an extension had been obtainec, we think it strange, to say the least, that such a highly significant matter was nowhere mentioned in a previous explanation of the late filing contained in an interrogatory response which was reac into the record at trial. Finally, we fine it aisficult, if not impossible, to believe that until 1972 Irene was unaware that the return was delinquent. Even if she had no suspicions on this score during the first five years after decedent's ceath (anc we hasten =o adc that we doubt that tc be “he case), she surely must have been alerted to the problem when Florence and Sicney filed Appendix p. 63 - Sl - " 26 ; cthei> petition co oust her as executrix in March 1970. The petitisn complained specificaliy of her “failure and refusal" to file the estate tax return, and warned that 27 the estate might be penalized for the delay. This promptec the probate court to issue an orders directing 26. The Seventh Circuit has recognized thac if the executor continues to delay filing the return after becoming aware that it is overdue, the imposition of the penalty may be warranted even though the initial delay.was supported by reasonable cause ‘ (Jetted States v. Kroli, 547 F.2d 393, 396 (7th Cis. 1977)): ; Whether or not [the executor] kmew the date of the deadline (October 13, 1968) before it passed, he ’ was apprised on January 9, 1969 that che deadline had passed three months previously. His reliance eon (the attorney] from this date onwards was not am exercise of ordinary business care and prudence. (Fa. ref. omitted. ] 27. It appears that Florence, and presumably Phyllis as well, have undergone a drastic change of heart since the time of the proceeding on the question of whether Irene's delay in filing the return was justified. Appendix p. 64 - 52 - Irene to file the returns in 90 days or face removal as executrix anc a possible surcharge for any penalties and interes: which might be owing. Under these circumstances we think Irene's plea of ignorance simply cannot be taken seriously. Since we refuse to accept Irene's testimony at face value, we are lef= without a satisfactory explanaticn for the over 5-1/2 year delay in filing the return. The probate litigation with Emest may have made it difficult to determine the exact amount of the estate tax liability, but it did mot prevent the estate from filing a timely return based om reasonable projections and thereafter filing an amended return should that prove to be necessary. See Estate cf Duttenhofer v. Commissioner, supra at 2C6- 207; Estate of Sikler v. Commissioner, 7.C. Memo. 1981-587. The fact is that Irene knew the return had *o be fied, and she had a positive duty sco do so on time. We cannot say on this record that she made reascnable efforts to carry out this responsibility. Accordiasly, Appendix p. 695 tal he Med * - $3 - we mole that the petitioners have not estab.ishec reasonable cause for the late filing and she adéision to tax is sustained. To give effect to concessions and our conclusions on the disputed issues, Decisicns will be enszered under Rule 155. Appendix p. 66 =8 At the parties’ request we have left che resolution of the amounts of interest owed by the petitioners to the computations to be submicced under Rule 155, Tax Court Qules of Practice anc Procedure. -inion of the aad WPCOrDCrating herein the facts reci tation as the findinss Cf the Court, j ORDERED and DECIDED: That the of $67,294.95 Plus interest thereon Revenue Code of 195 rom February in liabii; Y is Paid, due from the pe s transferee Of the Estate of Rae Berliant, Deceased, transferor, for unpaid estate tex ane addition to the @x Of the transferor nder the TOVisions |. OF I.R.c, $66Sl (a), / A Bee | OAV, . ‘ ‘ , Judge, / ta : 2 262 Eatered: GEC ” i : i 2 ae idulateg that the Court ™2yY enter the foregoin ~Ve-entitleg Case S ‘ it is further S*idula+ee SRat the afore jaig liability, Plus interes: @S Provided Sy law, is a Sudlicatio. Of the liabilicy set Porsh sn “Ne Case Cf Irene Magill, Transferee, Docket No. 2094-74, mM which Cése a Stidulation of liebilicy is con mth the Tax Cours currently “Ng fj) | SERVED DEC 2 1989 34 wm ‘ _— -—— — gon MTR EABEVTZ HD SAP KES} = No, 9126-74 ; Pursuant to the esi * and ;: ; 4 “ a mae ? ) t re oO +? fu wu = =D: That the of $67,294.95 Plus interest thereon as ii Revenue Coce of j9 4 from February ” i sadility 25 paid, due “rom the Petitioner as transferee Of the iit Estate Of Rae Berliant, Deceased, ~ansteror, for unDaid estate a6 6tex anc addition to the tax of the transferor nder the TOVisions i; OF I.R.¢, $6651 (a), / A Dy {- a. : : ? a Uw ‘ a¢ a; 3 : * Judge, / Be. abl s ' 2 we2 3 -EXttereg. GEC ia > #f m ® 2 ® 4 2 aa s* Zt is hereby Stidulat+eg that the Court may enter the foregoing 9} eecisicn in the *bove-entitled Case, ‘ae 2 s% is “"’tiner s+ PUulatee that the @20resaig liability, Plus ¢ interes: as Proviceed Y law, is a Surlication Of the liability set $ Sores 2 the case Of Irene Magill, Trans‘eree, Docket No, 2094-74, Sin which Cease a Stibulation of liability is concurrently Cing fileg g 53th the Tax Coyr- of the Uniteg States appendix Pp. 6 Pe, eS: | pre SERVED ee DEC 2 1982 wo. a «4 Tee et Ss ~. Opinion by fudge Cummings ‘ JUDGMENT - ORAL ARGUMENT Hnited States Court of Appeals For the Seventh Circuit 10 Chicago, Illinois 60604 Mo h 5 arch § 19 84 Before t : Hon. -_¥ALTER J. CI™MINGS, Chief Judge ' Hon. HARLINGTON woop, JR., Circuit Judge i t Hon. ‘WILLIAM J, CA“PBELL, Senior Distri ce Judge* . 83-1413 TLORENCE KRAFT, Transferee, Petitioner-Appellant, vs. On Appeals from the Order and PMISSIONER OF INTERNAL REVENUE, Decision of the United States | Respondent-Appellee. Tax Court. eYLIS BERLIANT, Transferee, Petitioner-Appellant, vs. e“ISSIONER oF INTERNAL REVENUE SERVICE, _ 2espondent-Appellee. ‘ RS Ar These causes came before the Court for decisions on the record P-om the United States Tax Court, and were argued by ccunsel. ; On consideration whereof, IT Is ORDERED AND ADJUDGED by this urt that the judgments of the said District Court in these pealed from be, causes and the same are hereby, AFFIRMED, with costs, in cordance with the opinion of this Court filed this date. —__—____ _ The Honorable William J, Campbell, Senior District Judze for the tthern District of Illinois, is sitting by designation. Appendix p. 69 United States Court of Appeals For the Seventh Circuit Chicago, Illinois 60604 April 4 , 19.84 | Before Hon. _WALTER J. CUMMINGS, Chief Judge Hon. — HARLINGTON WOOD, JR., Circuit Judge Hon. WILLIAM J. CAMPBELL, Senior District Judge* FLORENCE KRAFT, Transferee, Petitioner-Appellant, Appeal from the United States T C ¢. Nos. 83-1413, 83-1414 Vs. ax Cour COMMISSIONER OF INTERNAL REVENUE SER- VICE, Respondent -Apnellee, PHYLLIS BERLIANT, Transferee | Petitioner-Appellant, ) ) | > ) ° ) COMMISSIONER OF INTERNAL REVENUE ) SERVICE, ) ) Respondent-Appellee. On consideration of the petition for rehearing and sug- gestion for rehearing en banc filed in the above-entitled cause _ by appellants Kraft and Ber ant, no judge in active service has requested a vote thereon, and all of the judges on the original panel have voted to deny a rehearing. Accordingly, IT IS ORDERED that the aforesaid petition for rehearing de, and the same is hereby, denied. * The Honorable William J. Campbell, Senior District Judge of the Northern District of Illinois, is sitting by designation. Appendix p. 70 31 U.S.C. 8 192 (1975) "Every executor, administrator, or assignee or other person, who pays, in whole or in part, any debt due by the person or estate for whom or for which he acts before he Satisfies and pays debts due the United States from Such person or estate, shall become answerable in his own person and estate to the extent of such Payments for the debts so due to the United States, or for so much thereof as may remain due and unpaid. 110 1/2 T1l. Rev. Stat. 18-12 (a) All claims against the estate of a decedent, except expenses of administration and surviving spouse’s or child's award, not filed within _ 6 months from the issuance of letters of of fice are barred as to the estate which has been inventoried within 6 months from the issuance of letters. If after 6 months from the issuance of letters the representative files an iaventory listing estate not previously inventoried and thereafter the clerk of the court publishes once each week for 3 successive weeks a no- tice informing all persons that claims may be filed against the estate on or before a «date as designated in the publication (the designated date to be the first Monday in the second month following the month in which the first publication is made), all claims not filed on or before the desig- nated date are barred as to the estate listed in such inventory. Notwith- Standing the foregoing, the representative may pay a claim in whole or in part, even though the claim has not been filed, if it is paid or approved for payment in writing within the time for filing claims. In determin- ing the estate from which payment is made, an unfiled claim shall be treated as if filed on the date it is paid or approved, whichever is earlier. (b) All claims barrable under this Section are, in any event, barred unless letters of office are issued upon the estate of the decedent within 3 years after his death. Appendix p. 71 Chapter 76 Ill. Rev. Statutes § 2. Survivorsmip rights abolished—Exceptions—Bank ac- Of I11. counts and deposits—Stocks, bonds, ete.—U. S. Gov- ernment obligations Except as to executors and trustees, and except also where by will or other instrument in writing expresfing an intention to create a joint tenancy in personal property with the right of survivorship, the right or incident of survivorship as between joint tenants or owners of personal Property is hereby abolished, and all such joint tenancies or ownerships shall, to all intents and purposes, be deemed tenancies in common; pro- vided, that the foregoing shall not be deemed to impair or affect the rights, privileges and immunities, as set forth in the following provisos, (a), (b), (c) and (d): (a) When a deposit in any bank or trust company transacting busi- ness in this State has been made or shall hereafter he made in the names of two or more persons payable to therm when the account is opened or thereafter, such deposit or any part thereof or any interest or dividend thereon may be paid to any one of said persons whether the other or others be living or not, and when an agreement permitting such pay- ment is signed by all said persons at the time the account is opened or thereafter the receipt or acquittance of the person so paid shall be valid and sufficient discharge from all parties to the bank for any payments so made; (b) When shares of stock, bonds or other evidences of indebtedness or of interest are or have been issued or registered by any corporation, asso- ciation or other entity in the names of two or more persons as joint ten- ants with the right of survivorship, such corporation, association or other entity and their respective transfer agents may, upon the death of any one of such registered owners, transfer said shares of stock, bonds, or other evidences of indebtedness or of interest to or upon the order of the survivor or survivors of such registered owners, without inquiry in- to the existence, validity or effect of any such will or other instrument in writing or the right of such survivor or survivors to receive the prop- erty, and without liability to any other person whomsoever who might claim an interest in or a right to receive all or a portion of the property so transferred; (c) When shares of stock, bonds, or other evidences of indebtedness or of interest are or have been issued in the joint names of two or more . “Appendix p. 72° a persons or their survivors by corporations, including state chartered savings and loan associations, federal savings and loan associations, ani state and federal credit unions, authorized to do business in this state, all payments on account thereof made then or thereafter, redemption, repur- chase ar wiithdiwin! vinke we price; accumuiuons Ulercon, credits to, profits, dividends, or other rights thereon or accruing thereto may be paid or delivered in whole or in part to any of such persons whether the other person or persons be living or not, and when an agreement permit- ting such payment or delivery is signed by all said persons at the time when the shares of stock, bonds or evidences of indebtedness or of in- terest were issued or thereafter, the payment or delivery to any such Person, or a receipt or acquittance signed by any such person, to whom any such payment or any such delivery of rights is made, shall be a valid and sufficient release and discharge of any such corporation for the payment or delivery so made; (d) When the title to real property is held in joint tenancy by two Or more persons, and payment of compensation is made to any County Treasurer for the taking or damaging of such real property pursuant to “An Act to provide for the exercise of the right of eminent domain”, *pproved April 10, 1872, as heretofore or hereafter amended,' or pursu- nt to any act of the General Assembly aow or hereafter enacted for the exercise of the sovetcign power of eminent domain, the right of sur- Vivorship to the title in and to such real property shall be transferred to the money so paid to and in the hands of such County Treasurer; pro- Vided, however, upon application to such County Treasurer holding such Money by any such joint tenant for his proportionate share thereof, he shall receive the same from such County Treasurer without the consent °F approval of any other joint tenant, and the person making such appli- tion shall have no survivorship rights in the balance remaining in the ands of such County Treasurer after deducting therefrom such propor- Nonate share. Provided, further, that any non-transferable United States Savings nd, debenture, note or other obligation of the United States of Amer- ica Now or hereatter issued made payable to a designated person and upon his death to another person therein named shall, upon the death of the designated person, if such bond or other obligation is then outstand- ing, become the property of and be payable to the other person therein named. If any such non-transferable bond, debenture, note or other obligation of the United States of America be made payable to two Persons, in the alternative, such bond or other obligation shall, upon the death of either person, if such bond or other obligation is then outstand- ing, become the property of and be payable to the survivor of them. Appendix’ p.73 °- - --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_3095%3A2. Public record. Not legal advice.