First Trust & Deposit Co. v. Shaughnessy
| Decision Date | 08 April 1943 |
| Docket Number | No. 157.,157. |
| Citation | 134 F.2d 940 |
| Parties | FIRST TRUST & DEPOSIT CO. et al. v. SHAUGHNESSY, Collector. |
| Court | U.S. Court of Appeals — Second Circuit |
Stewart F. Hancock, of Syracuse, N. Y. (Hancock, Dorr, Ryan & Shove and Benjamin E. Shove, all of Syracuse, N. Y., of counsel), for appellants.
Edward First, of Washington, D. C., Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, Sp. Asst. to the Atty. Gen., and Ralph L. Emmons, U. S. Atty., and B. Fitch Tompkins, Asst. U. S. Atty., both of Syracuse, N. Y., for appellee.
Before L. HAND, AUGUSTUS N. HAND, and FRANK, Circuit Judges.
This appeal is from a judgment dismissing a complaint, entered upon a verdict directed by the judge at the conclusion of the trial. The plaintiffs were the executors of one, Ballard, and the action was against a collector of internal revenue to recover estate taxes erroneously collected. The question was whether Ballard had transferred nine insurance policies on his own life to his wife "in contemplation of death" within the meaning of § 302(c) of the Revenue Act of 1926, as amended, 26 U.S.C.A. Int.Rev.Acts, page 228. In all the policies the decedent's wife was the beneficiary, although he had reserved power to change the beneficiary. On January 16, 1929, he transferred all the policies to a corporate trustee, which was to receive any dividends declared upon them and apply them in payment of premiums; Ballard engaging to make up any deficiency. Upon his death the trustee was to collect the proceeds, hold them in trust for the benefit of his wife during her life, and upon her death to pay the principal to his three daughters. Although Ballard retained no power to revoke the trust, he did reserve power to change the beneficiary to anyone except himself. We assume that such a change would not dissolve the trust, but merely substitute the new beneficiary in the policies in place of his wife as cestui que trust.
Some years later Ballard became concerned as to whether the reservation of the power to change the beneficiary might not subject the policies to an estate tax, and in December, 1934, he consulted his lawyer, who advised him that there was a chance that this might be so, owing to a change in the law made after the trust was executed. For this reason on March 26 and 27, 1935, he put an end to the trust, and, having thus resumed ownership of all the policies, transferred them to his wife. She, at once and as part of a single plan, in her turn transferred the policies to a corporate trustee — the successor of the first — to receive any moneys becoming due under them and upon Ballard's death to collect the proceeds, invest them and pay the income to herself (and in its discretion the principal as well); and upon her death to distribute the principal among the three daughters. If she died before Ballard, the trust was to end and the policies revert to him absolutely. She agreed to pay all premiums, and reserved the power to revoke the trust, to change the beneficiaries under it, and to withdraw any policy and exercise any privilege which was reserved in it in favor of its "owner."
At the time of the gift Ballard was a man of 64, in active business in the City of Syracuse as a building contractor. Doctors had pronounced him in good health and he had apparently the same life expectancy — over eleven years — as any other man of his age. However, he died unexpectedly about eight months later — in November 1935 — and the amount of the policies was included in his estate upon the theory that he had made the gift in contemplation of death. His executors, having paid a tax upon his estate so increased, brought this action to recover it. Their position is that since Ballard had no more reason to expect an early death than any other man of his years, it is not enough under the statute that he undoubtedly made the gift in contemplation of his death in the sense that all men know they must die and to some degree prepare for it; and they insist that in any event there was a question of fact for the jury what his intent really was. The judge directed a verdict against them on the theory that they had not overcome the statutory presumption arising from Ballard's death within two years.
Although we agree...
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