The respondent determined deficiencies in income tax as follows: Docket Petitioner number Year Deficiency Estate of J. F Hargis ......... 26474 1946 $36,863.12 Estate of Mary M. Hargis ...... 26475 1946 36,863.12 F. E. Hargis .................. 26476 1946 36,863.12 F. E. Hargis .................. 31694 1947 19,048.31 Ruth Hargis ................... 31695 1947 19,091.06 The two questions in issue, after other issues were conceded by stipulation, are whether income from community property of a husband and wife should be taxed after the death of the husband to the husband's estate and the wife or solely to the husband's estate, and also whether the administration of two estates was completed in 1947.
FINDINGS OF FACT.
The facts stipulated are found accordingly.
J. F. Hargis and Mary M. Hargis were husband and wife and owned as community property a 43.75 per cent partnership interest in the Hargis Motor Company, Houston, Texas, and a one-sixth partnership interest in the Hargis-Jones Motor Company, Corpus Christi, Texas, and each owned certain other assets as separate property. J. F. Hargis died December 11, 1945, leaving a will in which he provided that all of his estate should pass to his widow, Mary M. Hargis, subject to administration thereof. Mary M. Hargis died intestate about a month later on January 16, 1946, and her estate passed under the intestate laws of the State of Texas to her son, F. E. Hargis, subject to administration of her estate.
Both parties resided in Houston, Harris County, Texas, at the time of death. F. E. Hargis was appointed and qualified as administrator of the Estate of J. F. Hargis in the Probate Court of Harris County, Texas, on February 5, 1946. Administration proceedings were also taken out in Oklahoma. Upon petition for ancillary probate of the will, F. E. Hargis was appointed administrator of the Estate of J. F. Hargis on June 3, 1947, in the County Court of Oklahoma County, Oklahoma. F. E. Hargis was appointed as administrator of the Estate of Mary M. Hargis in the Probate Court of Harris County, Texas, on February 20, 1946. Administration proceedings were also taken out in Oklahoma County, Oklahoma, for this estate on March 18, 1946.
Practically all the income received during the periods in question came from the two partnerships mentioned above, and almost all was community income. During the year 1946, such net community income was credited to, and reported in, the income tax returns of the respective estates (one-half each), as follows:
Estate of J. F. Hargis ........................ $47,425.73 Estate of Mary M. Hargis ...................... 45,715.54 Mary M. Hargis, Deceased (for period from Jan. 1-Jan. 16, 1946, the date of her death) . 2,276.73
During the year 1947 net income, almost all of which was from community property, was credited to, and reported in, income tax returns of the respective estates (one-half to each), as follows:
Estate of J. F. Hargis (to Aug. 1, 1947) ....... $25,766.23 Estate of Mary M. Hargis (to Aug. 9, 1947) ..... 25,684.25
The probate and administration proceedings for the two estates were carried on entirely separately in both Texas and Oklahoma. In the accounting made for such administrations, one-half of the community income was separately credited and accounted for by each estate. An accounting of the debts and expenses were also separately kept and accounted for and separately paid. The principal debts and obligations of the estates were for Federal estate, state inheritance, and income taxes. Payments were made on these in 1946 but final investigation and settlement was not made until 1948 and 1949. All returns for these taxes were filed before the end of 1947 and, with the exception of the two Federal income tax returns for 1947 and the Oklahoma inheritance tax returns for the Estate of J. F. Hargis, all returns were filed prior to August 8, 1947.
F. E. Hargis was appointed temporary administrator of the Estate of J. F. Hargis on January 3, 1946, it being shown that there were certain tax payments and other obligations immediately due and payable and that Mary M. Hargis, the surviving widow, who was named as executrix in the will of J. F. Hargis, was unable to act as executrix on account of bad health. This appointment was made final on February 5, 1946. The inventory of the Estate of J. F. Hargis reflects ownership of 8 tracts of real estate in Oklahoma of a value of $4,825 and a half interest in community property of a value of $222,275.56, consisting primarily of the two partnership interests of Hargis Motor Company and Hargis-Jones Motor Company and cash on hand.
F. E. Hargis was appointed administrator of the Estate of Mary M. Hargis on February 20, 1946. The inventory and appraisement of her estate shows that her estate consisted of one item of real estate in Oklahoma (as her separate property) valued at $6,000, her one-half interest in the community estate of herself and husband, and her deceased husband's estate, which was willed to her, a total value of $216,218.12. Oklahoma administration proceedings for the Estate of Mary M. Hargis were taken out in Oklahoma on March 18, 1946, and were terminated by order of September 20, 1946. Probate and administration proceedings for the Estate of J. F. Hargis were filed in Oklahoma on May 2, 1947, and F. E. Hargis was appointed administrator with the will annexed on June 3, 1947. This administration proceeding was not closed until August 31, 1948.
Subsequent to August 8, 1947, the date the order was entered closing the Texas administration proceedings for the Estate of Mary M. Hargis, the following actions and transactions took place:
(a) Preparation and filing of the Oklahoma inheritance tax return for the Estate of J. F. Hargis on November 4, 1947.
(b) Conferences about proposed deficiency in income taxes for the years 1946 and 1947 involving the issues in these proceedings.
(c) Conferences and negotiations in connection with the Estate of J. F. Hargis, which resulted in the payment of a deficiency in estate tax of $414 on December 7, 1948.
(d) Conferences and negotiations in connection with the estate tax return filed for the Estate of Mary M. Hargis, which resulted in a payment of additional estate taxes in the amount of $98.79 on December 7, 1948.
(e) Conferences and negotiations during the year 1949 with an agent of the State of Texas concerning proposed additional inheritance taxes for both estates.
(f) Collection of rents, sales of a lease and payment of ad valorem taxes on Oklahoma properties, as follows: Rents collected Jan. 12, 1948 E. C. Leal ............ Rental 80-acre farm ....... $100.00 Feb. 20, 1948 Kerr McGee Oil Co. .... Delay rental — 5 ac ...... 5.00 July 31, 1948 Sohio Oil ............. Delay rental — 160 ac .... 160.25 Aug. 21, 1948 Kerr McGee ............ Delay rental — 5 ac ...... 5.00 Dec. 20, 1948 Texas Co. ............. Delay rental — 105 ac .... 105.00 June 21, 1949 Texas Co. ............. Delay rental .............. 15.00 Aug. 15, 1949 Sohio Oil ............. Delay rental — 160 ac .... 160.25 Dec. 20, 1949 Texas Co. ............. Delay rental .............. 105.00 Lease sales or bonuses
Apr. 7, 1948 Quintin Little — 105-acre tract ....................................... $5,244.00 Sept. 7, 1948 Quintin Little — 60 ac .......................................... 748.65
Taxes paid (on property)
December, 1947 ................................... $82.31 December, 1948 ................................... 86.87
Royalty — Magnolia Petroleum Co.
1947 ............................................. $43.93 1948 ............................................. 166.14 1949 ............................................. 168.71
(g) Closing out the Oklahoma administration proceedings for the Estate of J. F. Hargis on August 31, 1948.
(h) Payment of additional debts and liabilities of the Estate of J. F. Hargis, as follows:
Date Amount
Nov. 10, 1947 Legal fees .................... $16.00 Nov. 25, 1947 Oklahoma inheritance tax ...... 41.11 Dec. 18, 1947 Federal income tax — 1947 .... 2,446.01 Dec. 15, 1947 Garvin County, Oklahoma, taxes 78.38 Dec. 15, 1947 Oklahoma County, Oklahoma, taxes 88 Jan. 14, 1948 Federal income tax — 1947 ... 2,446.01 Feb. 26, 1948 Oklahoma inheritance tax ...... 7.84 April 5, 1948 Federal income tax — 1947 .... 2,446.01 July 10, 1948 Federal income tax — 1947 .... 2,446.01 Oct. 10, 1948 Legal fees — closing Oklahoma administration ............................ 215.30 Dec. 7, 1948 Additional estate tax .......... 414.00 Dec. 7, 1948 Interest on above .............. 32.07 March 5, 1949 Additional inheritance tax — State of Oklahoma ......................... 17.68 June 21, 1949 Additional inheritance tax — State of Texas ............................ 210.57
(i) Payment of debts and liabilities of the Estate of Mary M. Hargis, as follows:
Date Amount
Dec. 18, 1947 Federal income tax — 1947 ...... $2,434.52 Jan. 14, 1948 Federal income tax — 1947 ...... 2,434.52 April 5, 1948 Federal income tax — 1947 ...... 2,434.52 July 10, 1948 Additional estate tax ........... 98.79 Dec. 7, 1948 Interest on above ................ 8.50
On July 1, 1947, F. E. Hargis, administrator in the Estate of J. F. Hargis, filed a "Final Account" for the estate with the County Court of Harris County, Texas, stating that all debts and expenses of the estate known to the administrator had been paid, and that the estate was subject to being closed. The County Court found that all the debts owing by the estate, including Federal and state inheritance taxes, had been fully paid and that there was no necessity for further continuing the administration. The court approved the "Final Account," closed the estate as of July 31, 1947, discharged the administrator and released his bondsman.
On July 18, 1947, F. E. Hargis, administrator in the Estate of Mary M. Hargis, filed a "Final Account" for the estate with the County Court of Harris County, Texas, stating that all debts and expenses of the estate known to the administrator, including inheritance taxes, had been fully paid and that the estate was subject to being closed. On August 8, 1947, the court found that all debts owing by the estate, including Federal and state inheritance taxes, had been paid and that there was no necessity for continuing the administration. The court approved the "Final Account," ordered a distribution of assets, closed the estate as of August 8, 1947, discharged the administrator and released his bondsman.
A Federal income tax return was filed for the Estate of J. F. Hargis for the period January 1, 1947, to July 31, 1947, and marked "Final." On December 19, 1947, a Federal income tax return was filed for the Estate of Mary M. Hargis for the period January 1, 1947, to August 8, 1947, and marked "Final."
The respondent determined the deficiency against the Estate of J. F. Hargis for the year 1946 upon the basis that the distributive shares of income reported by Mary M. Hargis and her estate were taxable to her deceased husband's estate. The deficiency against the Estate of Mary M. Hargis for the year 1946 was determined as the liability of a transferee of the Estate of J. F. Hargis under section 311, Internal Revenue Code. The deficiency against F. E. Hargis for the year 1946 was determined as the liability of a transferee of the Estate of Mary M. Hargis, it being held to be the transferee of the Estate of J. F. Hargis under section 311, I. R. C. It was stipulated by the parties that any deficiency for the Estate of J. F. Hargis for 1946 is now the liability of F. E. Hargis, as transferee.
The deficiencies against F. E. Hargis and Ruth Hargis for the year 1947 were determined upon the basis that $53,933.03 was derived by F. E. Hargis and Ruth Hargis as a distribution from the Estate of Mary M. Hargis. One-half of this amount was determined to be includible in the income of each. The respondent disallowed certain expenses and contributions claimed as deductions by the estates of J. F. Hargis and Mary M. Hargis in determining the amount includible in the income of F. E. Hargis and Ruth Hargis for 1947. The parties now agree that these contributions and expenses were proper deductions in the determination of the income for 1947 of either the estates or the alleged distributees.
The period of administration or settlement of the two estates expired in 1947.
OPINION.
VAN FOSSAN, Judge:
The first issue for determination is whether all the income from the community property of J. F. Hargis and Mary M. Hargis for the year 1946 is to be taxed to the Estate of J. F. Hargis, or divided between his estate and Mary M. Hargis or her estate. J. F. Hargis died in December 1945, devising all of his estate to his widow, Mary H. Hargis. She died intestate in the next month, January 16, 1946. The income received during 1946 was almost entirely from the community property previously owned by J. F. Hargis and his wife. The question presented has been recently determined by this Court with regard to the income from Texas community property. Estate of J. T. Sneed, Jr., 17 T.C. 1344. We there reviewed the prior decisions and their history and held that the estate of the deceased husband is taxable upon only one-half of the community property during the period of administration. We find here no sufficient distinction to justify a different result. We are therefore of the opinion that the respondent erred in his determination that all of the 1946 income from community property should be taxed to the Estate of J. F. Hargis alone.
SEC. 161. IMPOSITION OF TAX.
(a) APPLICATION OF TAX. — The taxes imposed by this chapter upon individuals shall apply to the income of estates or of any kind of property held in trust, including —
* * * * * * *
(3) Income received by estates of deceased persons during the period of administration or settlement of the estate; and
The second issue is whether the income reported by the estates of J. F. Hargis and Mary M. Hargis for the year 1947 through July 31 and August 8, respectively, is taxable to F. E. Hargis, the sole heir, and his wife, as distributees, because the period of administration of the estates had terminated in 1947. Hazel Kirk Carlisle, 8 T.C. 563, affd. 165 F.2d 645. In 1947 F. E. Hargis, the administrator of the two estates, filed final accountings with the Texas court stating that all known debts and expenses of the two estates had been paid and that the estates were subject to being closed. On July 31, 1947, the court found that there was no necessity for continuing the administration of the Estate of J. F. Hargis, approved the final account, closed the estate, discharged the administrator and released his bondsman. On August 8, 1947, similar actions were taken in the Estate of Mary M. Hargis. Federal income tax returns were then filed marked "Final." Oklahoma administration proceedings for the Estate of Mary M. Hargis were begun on March 18, 1946, and terminated September 20 of the same year. After August 8, 1947, the administrator of the two estates prepared tax returns, engaged in conferences concerning Federal and state taxes, collected rents, sold leases, closed the Oklahoma administration proceedings for the Estate of J. F. Hargis in August 1948, and paid legal fees and taxes for the estates.
The period of administration is the time required by the administrator to carry out the ordinary duties of administration, in particular the collection of assets and the payment of debts and legacies. It is the time actually required for this purpose whether longer or shorter than the time specified by statute. Regulations 111, sec. 29.161-2; William C. Chick, 7 T.C. 1414, affd. 166 F.2d 337. The petitioners F. E. Hargis and Ruth Hargis contend that the periods of administration did not terminate until the Oklahoma administration was completed in August 1948. The respondent argues that the administration periods terminated in August 1947. At the time the Texas administration proceedings were closed in August 1947, the ordinary duties pertaining to the administration of the two estates had been carried out. All debts and expenses had been paid excepting certain taxes and legal fees. Final accountings were filed and accepted by the Texas court which ordered the estates closed, the administrator discharged and his bondsman released. During 1947 final Federal income tax returns for the two estates were filed by the administrator. It does not appear that any outstanding assets remained uncollected after 1947 excepting rents, royalties, and other income.
The respondent possesses the authority to determine that an estate is no longer in the process of administration for tax purposes despite the fact that state administration proceedings have not as yet terminated. Alma Williams, 16 T.C. 893; Joseph M. Roebling, 18 T.C. 788. Here the Texas administration proceedings were closed in 1947. There appears to us no valid reason why the period of administration did not then terminate. The activities carried on in connection with the estates after 1947 were not such as would require the further existence of the period of administration. It is true that the Oklahoma administration proceeding for the Estate of J. F. Hargis was not closed until August 31, 1948. However, the Oklahoma proceeding was merely ancillary and pertained to property of a value of $4,825 in an estate possessing community property of a value of $222,275.56. Here the periods of administration were both practically and legally closed in 1947. Albeit the periods of administration were unusually brief, we find no basis to extend the period of administration of either estate into 1948 and therefore conclude that the periods of administration terminated in the year 1947.
Reviewed by the Court.
Decisions will be entered under Rule 50.