PICKETT, Circuit Judge.
This controversy arose between the Director of Internal Revenue for the District of Kansas and the executors of the Estate of Charles Sperry, deceased, over the question of whether United States Government bonds purchased by the deceased during his lifetime with his daughter as co-owner, should be considered as a part of Sperry's estate in determining the marital deduction to which the widow was entitled under Section 812 (e) of the Internal Revenue Code of 1939.
The material facts are not in dispute. Charles Sperry died October 23, 1948 leaving an estate in Graham County, Kansas. At the time of his death, he had in his possession United States Government bonds of the value of $89,500 which he had purchased over a period of time with his own funds and wherein he had named his daughter Margaret as co-owner. Sperry's will was admitted to probate and by its terms purported to give all of his estate, with one exception, to his daughter. Margaret and her husband were duly appointed and qualified as executors of the estate. Shortly after the will was admitted to probate, the widow elected to take her statutory share of one-half of the estate instead of taking under the will.
Thereafter, the executors petitioned the Probate Court for a partial distribution of the estate. The widow appeared and filed an answer to this petition setting
The executors filed a federal estate tax return in which a marital deduction of $108,482.35 was claimed. Subsequently the marital deduction was reduced to $60,432.15 and a deficiency of $14,215.06 was determined by the Collector, based upon a disallowance of a portion of the marital deduction claimed because receipt of the bonds was not considered an advancement.
When a widow renounces a will and elects to take under the Kansas Statutes, as to her, the estate is distributed as though there were no will. Tomb v. Bardo, 153 Kan. 766, 114 P.2d 320; Ward v. Ward, 153 Kan. 222, 109 P.2d 68, 134 A.L.R. 657; Lanphear v. McLean, 135 Kan. 266, 10 P.2d 889; Ashelford
The probate courts of Kansas have jurisdiction to determine all matters incident to the administration and settlement of estates. Brodrick v. Gore, 10 Cir., 224 F.2d 892; Rosenberg v. Baum, 10 Cir., 153 F.2d 10. The determination of advancements to heirs is necessary and incident to the administration and settlement of estates and is clearly within the jurisdiction of the Kansas Probate Court. In their complaint, the executors alleged the entry of the orders of the Probate Court which held that the bonds were an advancement to Margaret and were chargeable against her share of the estate. No issue was raised in the pleadings that these orders were obtained through collusion, fraud, or were entered in a non-adversary proceeding. A transcript of the proceedings before the Probate Court was received in evidence and is part of the record here. Although federal courts are not bound by orders of a probate court entered by fraud, collusion, or in a non-adversary proceeding, we said in Brodrick v. Gore, supra [224 F.2d 896], that: "And in the absence of collusion, in the absence of other bad faith, and in the absence of its entry in a nonadversary proceeding, the order or judgment must be given effect as a judicial determination" in a matter properly before the Probate Court. We think that decision is determinative here.
In the Gore case, the Kansas Probate Court had determined and adjudicated the effectiveness of the provisions in a contract which obligated the executors of an estate to convey to surviving partners the interest of a deceased partner in the property of the partnership for a specific sum. The Probate Court found that the provisions of the contract were binding upon the executors. The market value of the interest was more than that specified in the contract, and the Collector assessed the estate taxes based upon the market value. We held that property rights of the estate were determined by the order of the Probate Court, that the order became final, and that the estate tax should be assessed upon the value fixed by that order. The order of the Probate Court in the case now before us, holding that the bonds were an advancement to the daughter, became final. It determined and established property rights of the parties. There was no issue or finding that the order was entered as a result of collusion, fraud, or in a non-adversary proceeding. The fact that the action of the widow may have had the effect of reducing taxes makes no difference. Taxes may be decreased, or avoided altogether, by means which the law permits. Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596; Jones v. Grinnell, 10 Cir., 179 F.2d 873. We therefore conclude that the Collector was bound by the order of the Probate Court.
"(e) Bequests, etc., to surviving spouse
"(1) Allowance of marital deduction
"(A) In general. An amount equal to the value of any interest in property which passes or has passed from the decedent to his surviving spouse, but only to the extent that such interest is included in determining the value of the gross estate.
"(H) Limitation on aggregate of deductions. The aggregate amount of the deductions allowed under this paragraph (computed without regard to this subparagraph) shall not exceed 50 per centum of the value of the adjusted gross estate, as defined in paragraph (2)." 26 U.S.C.A. § 812(e).
"`In its strict technical sense, an advancement is a perfect and irrevocable gift, not required by law, made by a parent, during his lifetime, to his child, with the intention on the part of the donor that such gift shall represent a part or the whole of the portion of the donor's estate that the donee would be entitled to upon the death of the donor, intestate.'" See also Kan.G.S.1949, Sec. 59-510.
"Schedule 1-B "Explanations of Changes in Deductions "Return Corrected "Schedule M. Marital Deduction $108,482.35 $60,432.15 "Net Decrease $48,050.00
"The net increase above results from adjusting the marital deduction in accordance with Section 812(e) of the Code.
"Jointly owned bonds listed in Schedule B of the return have not been considered an advancement to the daughter of the decedent, thus reducing the residue of the Estate and the gross marital deduction as computed in the return.
"Computation of the Marital Deduction is as follows:
"Gross Estate 245,265.22 "Debts and Charges 9,950.03 "Federal Estate Taxes 24,366.78 "Jointly Owned Bonds 90,084.12 124,400.93 ___________ "Residue 120,864.29 "One-half to spouse — Marital Deduction 60,432.15" ===========