Trust Co v. Rothensies
| Decision Date | 05 February 1945 |
| Docket Number | FIDELITY-PHILADELPHIA,No. 263,263 |
| Parties | TRUST CO. et al. v. ROTHENSIES, Collector of Internal Revenue for First District of Pennsylvania |
| Court | U.S. Supreme Court |
Mr. C. Russell Phillips, of Philadelphia, Pa., for petitioners.
Mr. L. W. Post, of Washington, D.C., for respondent.
Our attention here is directed toward the proper valuation for federal estate tax purposes of the corpus of an inter vivos trust where the transfer was intended to take effect in possession or enjoyment at or after death and where the settlor retained a life estate in the trust income and a reversionary interest in the corpus.
On March 26, 1928, the decedent, Anna C. Stinson of Bryn Mawr, Pa., transferred certain property in trust, the value of which at the time of her death was $84,443.49. The income of the trust was to be paid to the settlor during her life and at her death to her daughters (aged 12 and 10 at the time of the creation of the trust) during their respective lives. At the death of each daughter, the corpus supporting her share of the income was to be paid to her descendants. If either daughter died without leaving surviving descendants, the corpus of her share was to be added to the share of the other daughter or of the surviving descendants of the other daughter. But if both daughters died without leaving surviving descendants, the corpus was to be paid to such persons as the settlor might appoint by will. In default of such appointment, the corpus was to go to certain named charities.
The decedent exercised the power of appointment in a will made in 1930. She died in 1934 at the age of 51, leaving two unmarried daughters. The latter have subsequently married and both have children.
The Commissioner determined that this arrangement was a transfer in trust intended to take effect in possession or enjoyment at or after death within the meaning of Section 302(c) of the Revenue Act of 1926, 44 Stat. 9, 70, 26 U.S.C.A. Int.Rev.Acts, page 227, and that the net value of all the property comprising the corpus of the trust should be included in the decedent's gross estate for estate tax purposes. The executors, however, denied that the transfer fell within the meaning of Section 302(c); they further claimed that even if Section 302(c) did apply the value of the life estates of the settlor's daughters and the value of the remainders to their surviving descendants should be deducted from the value of the trust assets for tax purposes.
The executors paid a tax on the full value of the trust assets and filed this claim for refund of the tax. The District Court denied recovery and the court below affirmed. 3 Cir., 142 F.2d 838. Conflict with Field's Estate v. Commissioner, 2 Cir., 144 F.2d 62, 1ed us to grant certiorari, 323 U.S. 693, 65 S.Ct. 60, limited to the question of whether the entire value of the corpus of the trust at the time of decedent's death should have been included in the decedent's gross estate.
The courts below, utilizing the principles set forth in Klein v. United States, 283 U.S. 231, 51 S.Ct. 398, 75 L.Ed. 996, and Helvering v. Hallock, 309 U.S. 106, 60 S.Ct. 444, 84 L.Ed. 604, 125 A.L.R. 1368, correctly held that the decedent's transfer in trust in 1928 was one intended to take effect in possession or enjoyment at or after death within the meaning of Section 302(c) of the Revenue Act of 1926, prior to the amendments of 1931 and 1932. While the matter of valuation was not argued and was not directly in issue in those cases, the inescapable consequence of the principles enunciated there and in the dissenting opinion in Helvering v. St. Louis Union Trust Co., 296 U.S. 39, 46, 56 S.Ct. 74, 77, 80 L.Ed. 29, 100 A.L.R. 1239, is to include the entire trust corpus in the gross estate of the decedent under these circumstances.
Section 302(c) itself provides for the inclusion within the gross estate of property 'to the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death.' As we said in Helvering v. Hallock, supra, 309 U.S. at pages 110, 111, 60 S.Ct. at page 447, 84 L.Ed. 604, 125 A.L.R. 1368, this provision Cf. Reinecke v. Northern Trust Co., 278 U.S. 339, 347, 49 S.Ct. 123, 125, 73 L.Ed. 410, 66 A.L.R. 397. The taxable gross estate, in other words, must include those property interests the ultimate possession or enjoyment of which is held in suspense until the moment of the grantor's death or thereafter.
Tested by that standard, the entire corpus of...
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