Commissioner of Internal Revenue v. Grosse, 8728.

• Decision Date: 21 November 1938
• Docket Number: No. 8728.,8728.
• Citation: 100 F.2d 37
• Parties: COMMISSIONER OF INTERNAL REVENUE v. GROSSE.
• Court: U.S. Court of Appeals — Ninth Circuit

100 F.2d 37 (1938)

COMMISSIONER OF INTERNAL REVENUE v. GROSSE.

No. 8728.

Circuit Court of Appeals, Ninth Circuit.

November 21, 1938.

James W. Morris, Asst. Atty. Gen., Sewall Key and Lyle M. Turner, Sp. Assts. to Atty. Gen., Herman Oliphant, Gen. Counsel, Department of Treasury, Ralph F. Staubly, Asst. Atty., Treasury Dept., both of Washington, D. C., and Frank J. Hennessy, U. S. Atty., of San Francisco, Cal., for petitioner.

Ben S. Hunter and Howard W. Reynolds, both of Los Angeles, Cal., for respondent.

Before WILBUR, DENMAN, and MATHEWS, Circuit Judges.

WILBUR, Circuit Judge.

The Commissioner petitions for review of a decision of the Board of Tax Appeals in favor of the taxpayer, in the matter of an estate tax in the estate of John Grosse, deceased.

On March 31, 1919, the decedent conveyed, by absolute and unconditional grant deed, a piece of real estate known as the Grosse Building, in Los Angeles, California, to his wife, Annie Grosse, and his children, Harry F. Grosse, Irene Grosse, Florence Grosse, and the Los Angeles Trust & Savings Bank, as joint tenants. On the same day the grantees executed a declaration of trust providing in detail for the payment of the net income derived from the property to the decedent's mother, Mary E. Grosse, and to his wife and children. Upon the death of all the beneficiaries the Los Angeles Trust & Savings Bank, as trustee, was to "convey, deliver and pay over all the corpus of the trust property then in its possession or under its control, as follows:

"Unto the trustor, John Grosse, in the event he survives the termination of said trust.

"In the event the said trustor does not survive the termination of this trust, unto his lineal descendants, if any, per stirpes, and if none, then unto his heirs at law in accordance with the present statute of succession of the state of California."

The declaration of trust further provides that the property is placed in trust for the care, support and maintenance of the beneficiaries of said trust and for no other purpose whatsoever, and that said beneficiaries are "hereby restrained from disposing of their, or any of their, interests in the income of said trust property or in the corpus thereof."

At the time of the death of the grantor, John Grosse, August 8, 1932, all the beneficiaries of the trust, other than his mother, were living. The value of the real estate conveyed was $600,000. The Commissioner, being of the view that the conveyance and declaration of trust vested a life interest only in the personal grantees, held that the reversionary interest of the decedent was worth $175,152, and that this interest was subject to tax as a part of the decedent's estate for the reason that only upon his death did his lineal descendants become vested with a right to the remainder of the property. This view is advanced by the petitioner in his brief, wherein he contends that "* * * death was the generating source of new rights for the decedent's lineal descendants. Under the provisions of the instrument controlling the transfer, there was no assurance until the death of the trustor that the lineal descendants would ever come into possession or enjoyment of any portion of the trust property. The death of the decedent brought into being enlarged property rights. * * * Upon the death of the survivors, the corpus was to be restored to the trustor. The trustor provided, however, if he should die before the termination of the trust, and only if he should so die, would the remainder be distributed, upon termination of the trust, to his children's children, if any, or, if none, to his heirs at law."

The...