Estate of Curry v. Commissioner - 74 T.C. 540 (1980)

Rule:

Under secs. 2031 and 2033, I.R.C. 1954, the term "property" encompasses choses in action, including claims for services performed. There is no rule of law that contingent legal fees, merely by virtue of their contingency, are automatically excluded from the gross estate. Rather, the contingent nature of the contract right under the circumstances herein bears on the factual question of valuation. 

Facts:

James E. Curry (Mr. Curry or the decedent) died on August 23, 1972. An estate tax return was filed with the District Director, Internal Revenue Service, Philadelphia, Pa., in July 1973. Mr. Curry executed a will on August 4, 1972, which was admitted to probate on November 1, 1972. In 1966, the decedent executed an agreement with another attorney which provided that the decedent would receive a stated percentage of any attorney's fees which might be awarded in a list of docketed cases pending before the Indian Claims Commission. Any award of attorney's fees in the cases was contingent upon an ultimate recovery on behalf of the plaintiff tribal members and would be measured by the extent of the recovery. When Mr. Curry died in 1972, 13 of the cases were still in various unresolved stages of litigation before the Commission. Petitioners argued that because the decedent's right to share in the attorney's fees was not compensable as of the date of death, i.e., that because by their very nature, contingent fees did not accrue until a final judgment is rendered, the decedent's interest in the fees had no market value when he died. Respondent Commissioner contended that the contractual right to share in future attorney's fees is an interest in property includable in the decedent's gross estate, and that notwithstanding the contingent nature of the fees, the decedent's interest had substantial value on the date of death.

Issue:

Were the contingent fees includable in the gross estate?

Answer:

Yes.

Conclusion:

Under secs. 2031 and 2033, I.R.C. 1954, the term "property" encompasses choses in action, including claims for services performed. There is no rule of law that contingent legal fees, merely by virtue of their contingency, are automatically excluded from the gross estate. Rather, the contingent nature of the contract right under the circumstances herein bears on the factual question of valuation.  It cannot, as a matter of law, preclude the inclusion of the interest in the decedent's gross estate or command that the value be fixed at zero. Although uncertainty as to the value of a contract right may postpone the inclusion of the income until it is actually realized for income tax purposes, for estate tax purposes, the value of an asset must be determined in order to close the estate. The Court held that under the circumstances, the contractual right herein to share in future attorney's fees which are contingent in nature, was property to be included in the decedent's gross estate under section 2033.