The Estate of Grace E. Lang, Deceased. Richard E. Lang v. Commissioner of Internal Revenue
Opinion
Opinion
Wright, J.
The Tax Court held that (1) family loans on which the statute of limitations had run were gifts subject to gift taxes; (2) a penalty should be assessed for the lender’s failure to file gift tax returns; and (3) state gift taxes were deductible from the gross estate as a “claim against the estate.” The taxpayer appealed the gift tax and penalty rulings, while the Commissioner appealed the estate tax ruling.
We hold that the Tax Court erred on the penalty issue but correctly decided the other issues. Our jurisdiction to review Tax Court decisions derives from 26 U.S.C. § 7482 (1976).
FACTS
All facts were stipulated. Mrs. Grace Lang, a Seattle resident, died testate in June 1968. Her estate tax return was filed in September 1969. In 1972 the Commissioner made two additional claims against her estate (“taxpayer”).
The first claim was for gift taxes owing. Mrs. Lang had made two interest-free loans to her son Howard in 1962 and 1963. He failed to repay them, and the state statute of limitations ran on them in 1965 and 1966. The Commissioner claimed that, by allowing the statute to run, Mrs. Lang effectively gave the amount of the loans to her son and-his wife. Mrs. Lang had not…