Denniston v. Commissioner of Internal Revenue
Decision Date | 01 November 1939 |
Docket Number | No. 7001-7003.,7001-7003. |
Citation | 106 F.2d 925 |
Parties | DENNISTON v. COMMISSIONER OF INTERNAL REVENUE (two cases). PENNSYLVANIA CO. FOR INSURANCES ON LIVES & GRANTING ANNUITIES et al. v. SAME. |
Court | U.S. Court of Appeals — Third Circuit |
Joseph S. Clark and Murray H. Spahr, Jr., both of Philadelphia, Pa., for petitioners.
James W. Morris, Asst. Atty. Gen., and Sewall Key and John J. Pringle, Jr., Sp. Assts. to Atty. Gen., for respondent.
Hugh Satterlee, of Washington, D. C., amicus curiae.
Before BIGGS, MARIS, and BIDDLE, Circuit Judges.
These petitions for review of decisions of the Board of Tax Appeals involve an estate tax deficiency assessed against the executor of the estate of Eleanor H. Denniston and against trustees to whom she had in her lifetime transferred her property.
Eleanor H. Denniston, the decedent, was born on May 6, 1857, and died March 13, 1934. On May 10, 1915, she executed a deed of trust assigning certain securities to two trustees. Under the deed she reserved the income to herself for life, and also reserved a power to appoint the principal by will after her death. Upon failure to exercise the power of appointment the deed provided that the trust assets were after her death to pass to her five children in equal shares. By supplemental indenture dated March 16, 1932, the decedent relinquished her power of appointment. On May 19, 1932, she transferred her real estate to one of her daughters who executed declarations of trust therefor for the benefit of the decedent's five children. The Commissioner included the securities and real estate in the decedent's gross estate for tax and assessed a deficiency. The Board of Tax Appeals found that the transfers were made in contemplation of death, sustained the deficiency assessment, and ruled that the trustees were liable as transferees. 38 B. T. A. 1076.
The question for us to determine is whether the Board's ultimate finding or conclusion that the transfers were made by the decedent in contemplation of death was supported by its findings of evidentiary fact. If so the transfers are taxable by virtue of section 302 (a), (c) and (d) of the Revenue Act of 1926, 44 Stat. 9, 70, 71, as amended by Joint Resolution of March 3, 1931, 46 Stat. 1516, 26 U.S.C.A. § 411 (a, c, d).1 The Board's conclusion is based solely upon its finding that one of the dominant and controlling motives for the relinquishment of the power of appointment and the transfer of the real estate was the decedent's desire to save her estate the burden of death taxes. This clearly appears from its opinion from which we quote as follows:
There was, as the Board points out, substantial evidence to support the finding that the decedent was motivated by the desire to avoid estate taxes and we must accept it. The petitioners argue that it is not sufficient that one of the dominant and controlling motives is associated with death, but that all the motives which controlled the action must be those which lead to testamentary disposition. This question we need not decide. The question remains, however, whether the fact that a transfer was made to avoid estate tax is, without any other evidence of a motive associated with death, sufficient to support an ultimate finding or conclusion that the transfer was made "in contemplation of death," within the meaning of section 302 of the Revenue Act.
In United States v. Wells, 283 U.S. 102, 115, 117, 119, 51 S.Ct. 446, 451, 75 L.Ed. 867, the Supreme Court, in construing the statutory phrase "contemplation of death," said:
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