Opinion
No. 202.
July 13, 1944. Writ of Certiorari Granted December 4, 1944. See 65 S.Ct. 267.
Petition for Review of a Decision of the Tax Court of the United States.
Petition by Barnett Hollander, temporary administrator and executor of the estate of Lester Field, deceased, to review a decision of the Tax Court, 2 T.C. 21, redetermining a deficiency in the tax imposed by the Commissioner of Internal Revenue on decedent's gross estate.
Reversed and remanded.
The facts as stipulated and found by the Tax Court are as follows:
Taxpayer's decedent died on November 16, 1937, at the age of 52. On June 8, 1922, he transferred to Bankers Trust Company, as trustee, certain assets valued at the date of his death at the sum of $307,452.82. This value was included by the Commissioner in decedent's estate in computing the present deficiency. Summarized, the terms of this trust are:
A. The trust is to continue for the joint lives of two nieces and the life of the survivor of them unless terminated earlier under F, infra. B. The income is to be paid to decedent for his life unless the trust terminates before his death. C. Upon the death of decedent prior to the termination of the trust leaving issue or a widow, $150,000 is to be placed in trust for the widow and the balance, or, if he left no widow, all is to be held in trust for his children, the issue of any deceased child to take the share of such deceased child. Separate, equal trusts are to be set up for each. D. The aforesaid trusts are subject to decedent's right to reduce or cancel the amounts of the gifts by will or instrument in writing and the amounts by which any gifts are reduced or canceled are to be added to the gifts for the issue which are not reduced (no restoration being permitted of any gift reduced). E. If the decedent cancels all of the gifts or reduces gifts so that there remains a balance undisposed of, then all of the balance undisposed of is to go to his brother or sister surviving or their issue. F. During the continuance of the trusts the income is to be paid to the beneficiary named and upon the death of the beneficiary during the continuance of the trust the corpus is to be paid to the beneficiary's issue surviving, but if there be none, to the issue of the decedent surviving, if none, then to decedent's brother or sister or their issue. G. Upon the death of the widow, the corpus of the trust created for her benefit is to go to the issue of decedent surviving, but if none, then to the brother or sister or their issue. H. Upon termination of the trust before the death of the decedent the corpus is to be paid over to decedent. I. Upon termination of the trust after the death of decedent but during the existence of any trust the corpus is to be paid to the life beneficiary.
The decedent at no time had any issue. At the time of his death, he was survived by his two nieces, whose lives were to measure the maximum life of the trust, and they were then of the age of 18 and 25 years, respectively. He was also survived by his widow, Blanche Field, by his sister, Ruth Rosenfield Hollander, and by John R. Field and Warren R. Field, issue of a deceased brother, Hugo Rosenfield.
The transfer in trust was not made in contemplation of death, nor did deceased at any time relinquish any power to alter, amend, or revoke the transfer or to change the enjoyment of the property transferred in contemplation of death.
It is conceded by the taxpayer that the value of the corpus of the trust, to the extent of $150,000 directed to be set aside for the decedent's widow, was properly includible in decedent's gross estate at his death, since decedent, to the extent of that value, retained until his demise the power to change the disposition of the widow's fund in that maximum amount by reducing or canceling it in its entirety. The value of a remainder in the sum of $157,452.82, payable at all events upon the death of the survivor of two females, aged 18 and 25 years, respectively, was, at the time of decedent's death, $24,930.76. The value at the date of decedent's death to a man aged 52 years of the right to receive a remainder in the sum of $157,562.82, payable upon the death of the survivor of two females, aged 18 and 25, respectively, contingent upon his survival of both of such females, was $891.18.
The Tax Court sustained the Commissioner's determination of deficiency, holding that the value of the entire corpus of the trust at decedent's death, $307,452.82, was properly included in the gross estate.
Edgar J. Bernheimer, of New York City (Sydney J. Schwartz, of New York City, of counsel), for petitioner.
Samuel O. Clark, Jr., Sewall Key, Helen R. Carloss, and Robert Koerner, all of Washington, D.C., for respondent.
Before AUGUSTUS N. HAND, CHASE, and FRANK, Circuit Judges.
In Helvering v. Hallock, 309 U.S. 106, 111, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368, the Court said that "the measure of the tax is the value of the transferred property at the time when death brings it into enjoyment" Precisely what that means has been a matter of much comment. We do not agree with the Tax Court that Smith v. Shaughnessy, 318 U.S. 176, 63 S.Ct. 545, 87 L.Ed. 690, which dealt with a gift tax, aids decision here. Whatever we might now hold if this were for us a novel question, we need not consider, for the matter is governed in this circuit by our decisions in Commissioner v. Flanders, 2 Cir., 111 F.2d 117 and Bankers Trust Co. v. Higgins, 2 Cir., 136 F.2d 477. Accordingly we hold that the value of the transfer at decedent's death consisted of the value of the trust property minus the value of the life estates of his two nieces. The resulting taxable value here is $24,930.76. We reverse with directions to the Tax Court to fix the tax on that value.
See Paul, Federal Estate and Gift Taxation, Sec. 7.25.
Reversed and remanded.