1992.03.30   (Anthony O'Connell to Edward White)
"I have a few questions I hope you would be kind enough to answer.
1. As you know, the Lynch Limited Partnership plans to pay my Mother's estate $545,820.43 on April 21, 1992. What is your best guess as to when and in what amount(s) you will make distribution(s) to the beneficiaries?
2. The license plates on my deceased Mother's Van expire in April of 1992. Virginia DMV requires a new title with the new owners name before they will issue new plates {The plates cannot be renewed by the co-executors signing for Jean O'Connell). The bank will give the co-executors the title if you simply pay them the interest on the loan. I understand the principal on the loan has been paid and I am guessing that the interest is something in the range of $1200 to $1400. Would you please pay the bank the interest so they will give you the title? What is your decision as to who gets the van and how much will it costs?
3. What is your fee for being co-executor of my mother's estate?
Yours truly, Anthony O'Connell "

1992.04.04   (Edward White to Anthony O'Connell)
"I have received your letter of March 30, 1992.
The answers are: 
Question 1. As soon as the money is received, the tax liabilities evaluated and upon consultation with the Co-Executor.

Question 2. Paid. It is not my decision as to what it will cost you, though I have been informed that you know full well.  Question 3.  2 Y % of the receipts into the probate estate if approved by the Commissioner of Accounts.
I would call to your attention that on two separate occasions I drove to Sovran and spent a lengthy period of time on the question of the car loan. I did this in person since: I knew that you had the vehicle, that your sisters wanted you to have it, that the insurance and tags were due to expire soon and I did not want you to be inconvenienced. I could have done all of this by mail and it probably would have taken about three months, knowing the nature of the loan problem. I assumed I was doing you a favor.
Now I receive you letter asking that I "simply pay them the interest" I paid the interest and principal in one check on March 12, received the title on March 22 and mailed it to Mrs. Nader to sign over to you on March 23. Have you any suggestions as to how it could have gone faster?
The information of the commission was given to you previously by Mrs. Nader.
I do not know what your problem is, but in the future, please address all correspondence to Mrs. Nader

I am trying to be patient with you, but I find that this estate is time consuming enough without having to deal with letters such as the last two that I have received.
Sincerely, Edward J. White"

1992.11.13   (Edward White to Anthony O'Connell, Jean Nader, and Sheila O'Connell) (No copy to another)
"When I agreed yesterday to the disbursement of the A. G. Edwards accounts by the end of the year, I had not looked at the bank balance of the estate for some time. There is $64,216.83 in the estate account which includes the sum of $14,408.53 received today from the IRS for the estate tax overpayment.
To date the sum of $324,000.00 has been disbursed to the heirs, which has been done on the assumption that we have on hand enough money to pay the rest of the debts. Normally an estate is not disbursed until an Estate Tax Closing Letter has been received from the IRS and Virginia.
I cannot agree to a disbursement from the Edwards accounts until a closing letter is received. As you recall the Accotink property is assessed at $600,000.00 by the county. Based on the appraisal, we used one half of that figure (times the percentage interest owned by your mother). In the event the IRS does not agree and insists on the full valuation, the estate tax liability could increase by about $67,000.
Out of the bank account must come the executors' commission which will be about $45,000.00, a fee for the Fiduciary Income Tax return preparation and various filing fees of a small nature. There simply is not enough money left to cover the contingencies. A disbursal in these conditions would be a violation of the duty of the fiduciaries.
Since the IRS has issued the refund (with interest), I would assume a closing letter is not far behind.
Some questions have arisen as to your tax liabilities. The Estate paid an estate tax on the value of the property owned by your mother at her death. Since the tax is paid, what is distributed to you is tax free.
In addition there is a fiduciary income tax on the earnings of the estate while it is open. The First Accounting shows income of $56,928.52 from 9/15/91 through 9/15/92. Basically this is what will be taxed as estate income. Of this $659.97 can be ignored as it was repayment of a debt from the O'Connell Trust and not income, and at least $13,388.25 was tax free income. The fiduciary income tax is paid by the estate if it was not disbursed during the tax period. In your case it was disbursed, and you will receive a form K-1 showing how much should be added to your regular income. This is why it is called "pass through" income. This might be about $14,000.00 each not counting deductions which are due to the estate. Jo Ann Barnes is preparing this return for the estate at present.
The question of capital gains comes up often in estate situations. Any asset owned by a decedent at the time of death is given a "stepped up" basis to its value at the date of death. If the heirs then sell the asset the only taxable capital gain (or loss) is the change in value between the date of death and the date of sale. The Accotink property falls in that category, though the basis on the share formerly held in trust has a basis as of the date of your father's death. The Lynch note will not produce any capital gain since it was taxed in the estate as part of your mother's assets. It will produce an income tax effect on the fiduciary income tax return since $26,917.17 in interest was received by the estate. This is included in the $56,928.52 referred to above.
The remaining items left to do in the estate are the filing of a request for the publication of Debts and Demands against the estate, filing a second and final accounting, obtaining a court order for the distribution of the estate and filing a second fiduciary income tax return from the period 9/15/92 through the date of disbursement.
Sincerely, Edward J. White"

1992.11.16   (Anthony O'Connell to Edward White)
"Thank you for your letter. You mention that distributions from my mother's estate to the beneficiaries are tax free (except from after death income), and that the Lynch Note will not produce any capital gains. Perhaps I am misinterpreting your letter or perhaps I'm just plain wrong. I hope I am wrong.
The Lynch Note to the estate, a result of the installment sale of my mother's residence on 4/21/88, carries with it a taxable capital gain. The IRS requires that this capital gains tax be paid by the estate or the beneficiaries if the taxable capital gain is passed through the estate to the beneficiaries before the end of the tax year.
The gross profit percentage on the sale was seventy-nine percent (79%). The payoff of the Lynch note to the estate on 4/21/92 was $545,820.42 of which $45,067.74 was income and $500,752.68 was capital. Of that $500,752.68 in capital, 79% or $395,594.62 is taxable capital gain.

In order for the beneficiaries to minimize penalties and interest on their quarterly estimated tax payments to the IRS, would you please tell us what share of the capital gains tax liability or any tax liability, has been distributed from the estate to the
I make much better tax plans if I know what my projected taxable and non-taxable income is going to be. Six weeks remain in the tax year. Would you please send the beneficiaries, with all deliberate haste, your close out schedule for my mother's estate? Please be as specific in dollars and dates as you possible can.
Yours truly, Anthony O'Connell

1992.11.16   (Edward White to Anthony O'Connell, Jean Nader, and Sheila O'Connell) (No copy to another)
"Regretfully I have to amend my letter of Friday. There is no "stepped up basis" on the Lynch note according to the accountantswho are preparing the fiduciary income tax return. This is subject to a credit for tax paid on part of it in the estate tax return, but it will result in an estimated $35,000 to $40,000.00 in tax to the estate due to the note *payoff. 3 This is one of the reasons why a further disbursement would not be vise.
In addition, Jo Ann Barnes commented to me today that the Accotink valuation could well result in a question by the IRS and she feels no disbursement should be made.
Some sale of the Edwards accounts will probably be needed.
Jo Ann also reminds me that each of you should check with your own tax adviser after receiving the K-1 forms as to payment of estimated income taxes.
Sincerely, Edward J. White"