Estate of Smith v. Commissioner
United States Court of Appeals for the Second Circuit
510 F.2d 479 (1975)
- Written by Tom Squier, JD
Facts
On May 23, 1965, sculptor David Smith died, leaving an estate that included 425 of his sculptures. The executors of Smith’s estate (plaintiffs) gradually liquidated the sculptures through Marlborough-Gerson Galleries, which earned a commission on the sales. The process was drawn out over eight years to avoid a sudden influx in the supply of the artist’s works, which would result in lower proceeds from the sales. The executors paid a total of $1,583,544.67 for the commissions to Marlborough-Gerson Galleries over those years. That total was approved by the New York Surrogate Court. On review, however, the United States Tax Court performed a de novo inquiry into whether the commissions on the sales were a necessary expense of the administration or whether the additional commissions were due to prudent choices that preserved the estate for the beneficiaries. Ultimately, the tax court allowed only $750,447.74 as deductions. That amount was the exact total of the decedent’s debts, the expenses of administration, and the final taxes due.
Rule of Law
Issue
Holding and Reasoning (Anderson, J.)
Dissent (Mulligan, J.)
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