Nodine v. Comm'r of Internal Revenue (In re Estate of Williams)

• Decision Date: 25 June 1974
• Docket Number: Docket No. 6194-72.
• Citation: 62 T.C. 400
• Parties: ESTATE OF CLARENCE A. WILLIAMS, DECEASED, WILLIAM E. NODINE, ADMINISTRATOR, D.B.N. C.T.A., PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

62 T.C. 400

ESTATE OF CLARENCE A. WILLIAMS, DECEASED, WILLIAM E. NODINE, ADMINISTRATOR, D.B.N. C.T.A., PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 6194-72.

United States Tax Court

Filed June 25, 1974.

Edward S. Wunsch, for the petitioner.

James C. Lynch, for the respondent.

In his will decedent's uncle, Joseph L. Friedman, who died in 1913, established a trust for the benefit of his mother and his three sisters and their heirs. The trust was to continue in existence until 21 years after the death of the last of Friedman's sisters to die, which will be in 1975. The will provided that, at the expiration of the 21-year period, ‘then the estate in the hands of the trustee shall be divided, one-third to the heirs of each of my said sisters.’ Decedent received one-half of his mother's one-third share of the income from the trust until his death in 1968. He was survived by one child of his first marriage and by a second wife. Held, decedent's interest in both the corpus and income of the Friedman trust was contingent at the time of his death and the value thereof is not taxable in his estate.

DRENNEN, Judge:

Respondent determined a deficiency in Federal estate tax for the Estate of Clarence A. Williams in the amount of $115,821.54. The issues before the Court are whether, at the time of his death, Clarence A. Williams had a vested interest in either (1) a portion of the corpus of a testamentary trust established by his uncle or (2) the income from a portion of the corpus of the trust, which is includable in his gross estate under section 2033, I.R.C. 1954.

FINDINGS OF FACT

The facts have been fully stipulated by the parties and are found accordingly.

Petitioner is the Estate of Clarence A. Williams, deceased, William E. Nodine, administrator d.b.n. with the will attached, who at the time the petition was filed had his legal address in Clearwater, Fla. Clarence A. Williams died April 29, 1968, a resident of Clearwater, Fla. The estate tax return for the Estate of Clarence A. Williams was received by the director of internal revenue, Jacksonville, Fla., on February 25, 1969.

Up to the time of his death, Clarence A. Williams received a portion of the income from a trust established under the will of Joseph L. Friedman, the decedent's uncle.

Joseph L. Friedman died a resident of Paducah, Ky., in 1913. His last will and testament, dated June 25, 1908, was duly admitted to probate on July 9, 1913,¹ by the County Court for McCracken County, Ky. The will of Friedman created a testamentary trust. The portion of Friedman's will that established the trust provided:

Now after the foregoing devises and bequests are provided for and executed, it is my will that the balance of my estate be converted into good, interest-bearing securities which shall be turned over by my executors to the Louisville Trust Company of Louisville, Kentucky, as trustee, if in the opinion of my executors that Company is in a position to handle the balance of my estate; but be it understood that it is my will that my executors shall exercise their discretion as to the selection of a trustee, preferring, however, the Louisville Trust Company if it shall continue to be a solvent and reputable concern in their judgment. Such securities shall be held by such trustee and in trust for the benefit of my mother, Mrs. Louisa Friedman, and my sisters, Mrs. Ida Williams, Mrs. Blanche C. Keiler and Mrs. Sunshine F. Nahm and their children and (sic) hereinafter provided. The trustee will keep the trust fund invested in the best and safest securities to be found at the best interest rates to be secured, having at all times due regard to the safety of the investments, and will pay to my mother and my three sisters, or to the heirs of such of my sisters as may die, equally the income from said trust fund. When my mother dies her interest in said income is to go to her daughters or their children, if any of them be dead. And the interest of each of my sisters in the income from said estate in the hands of such trustee upon her death shall go to her children. It being my purpose to create an estate in the hands of the trustee to be selected as hereinabove set forth, the income from which shall go to my mother and my three sisters as long as my mother lives and at her death to my three sisters as long as they live and in the event of the death of either one of them her interest shall go to her children.

It is my will that the funds in the hands of the trustee provided for herein shall be held by such trustee and the income therefrom paid as hereinbefore directed until the death of the last to survive of my three sisters hereinbefore named; and for twenty-one years thereafter; and at the expiration of the period of twenty-one years after the death of the last to survive of my said three sisters then the estate in the hands of said trustee shall be divided, one-third to the heirs of each of my said sisters.

Friedman was survived by his mother, Louisa Friedman, and his three sisters who were named in the will, Ida Williams, Blanche C. Keiler, and Sunshine F. Nahm. Ida Williams was born in 1862, Blanche Keiler in 1866, and Sunshine Nahm in 1869. At the time Friedman's will was executed on June 25, 1908, and at the time of his death in 1913, his sisters had living children as follows:

+-----------------------------------------------+
                ¦(a)¦Ida was the mother of:                     ¦
                +---+-------------------------------------------¦
                ¦   ¦(1) Clarence A. Williams, born in 1879, and¦
                +---+-------------------------------------------¦
                ¦   ¦(2) Jerome J. Williams, born in 1886;      ¦
                +---+-------------------------------------------¦
                ¦(b)¦Blanche was the mother of:                 ¦
                +---+-------------------------------------------¦
                ¦   ¦(1) Leo F. Keiler, born in 1888, and       ¦
                +---+-------------------------------------------¦
                ¦   ¦(2) Anita Keiler (May), born in 1893, and  ¦
                +---+-------------------------------------------¦
                ¦(c)¦Sunshine was the mother of:                ¦
                +---+-------------------------------------------¦
                ¦   ¦(1) Emanie Nahm (Phillips), born in 1895.  ¦
                +-----------------------------------------------+
                

Louisa Friedman died on February 2, 1922. Ida Williams died on December 15, 1914. Ida was survived by her two children, Jerome J. Williams and Clarence A. Williams. Jerome was still living on the date this case was submitted. Clarence, the decedent in the present case, died on April 29, 1968, leaving surviving him his wife, Claribel, and his daughter, Anita Cote. Claribel Williams was the second wife of the decedent and never bore any children by him. Claribel died December 2, 1971.

Sunshine Nahm died in 1937, leaving her daughter Emanie Nahm Phillips surviving, who was also living at the date this case was submitted. The third sister of Friedman, Blanche C. Keiler, died on March 9, 1954, being the last sister to die. Blanche was survived by two children, Anita Keiler May and Leo F. Keiler. Leo F. Keiler died in 1958, leaving two children surviving him, Blanche Keiler Prinzmetal and John W. Keiler II. Anita K. May was alive when this case was submitted.

The following genealogical chart (p. 404) shows the relationship of the above-mentioned people to Joseph L. Friedman, their date of birth, and their date of death, if applicable.

On June 6, 1958, John W. Keiler II was appointed as trustee of the last will and testament of Joseph L. Friedman. On July 28, 1965, he resigned as trustee of the one-third of the assets that were then being held for the benefit of Sunshine Nahm, her children, and heirs. Citizens Fidelity Bank & Trust Co. of Louisville, Ky., was appointed successor trustee of that one-third portion of the original trust estate. That one-third portion that benefited Sunshine Nahm, her children, and heirs was thereafter and is presently known as the Joseph L. Friedman Trust A. The remaining two-thirds portion of the original trust estate, which was held for the benefit of Ida Williams and Blanche Keiler and their heirs, was subsequently designated the Joseph L. Friedman Trust B. Trust B is the trust with which we are presently concerned. The above division of the trust estate was made pursuant to an order entered by the McCracken County Court in the State of Kentucky. The order provided, in pertinent part:

C. Joseph L. Friedman Trust A shall constitute the portion of the original trust estate in which all persons claiming and taking through the deceased sister of the said Joseph L. Friedman, Sunshine F. Nahm, are interested, that is to say, the ‘heirs' of the said Sunshine F. Nahm, and said persons shall not have any claim to or interest in Joseph L. Friedman Trust B whatsoever, unless they should happen to qualify as ‘heirs' of the other two deceased sisters by reason of the death of the direct descendants of said sisters.

D. Joseph L. Friedman Trust B shall constitute the portion of the original trust estate in which all persons claiming and taking through the deceased sisters of the said Joseph L. Friedman, Ida F. Williams and Blanche F. Keiler, are interested, that is to say, the ‘heirs' of the said, Ida F. Williams and Blanche F. Keiler, and said persons shall not have any claim to or interest in Joseph L. Friedman Trust A whatsoever, unless they happen to qualify as ‘heirs' of the other deceased sister by reason of the death of the direct descendants of said sister.

+-----------------------------------------------------------------------------+
                ¦LOUISA FRIEDMAN                                                              ¦
                +-----------------------------------------------------------------------------¦
                ¦(Born ? -- Died Feb. 2, 1922)                                                ¦
                +-----------------------------------------------------------------------------¦
                ¦§                                                                            ¦

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