EST. OF HILDA BEECHER STOWE v. Commissioner, Docket No. 4910-68.
| Decision Date | 09 May 1972 |
| Docket Number | Docket No. 4910-68. |
| Citation | 1972 TC Memo 108,31 TCM (CCH) 432 |
| Parties | Estate of Hilda Beecher Stowe, David Beecher Stowe, Robinson Smith Beecher Stowe, and Katharine Jahn Cordes, Executors v. Commissioner. |
| Court | U.S. Tax Court |
Laurence F. Casey and Morris Orenstein, for the petitioners. Marion L. Westen, for the respondent.
Memorandum Findings of Fact and Opinion
The respondent has determined a deficiency in the Federal estate tax of the Estate of Hilda Beecher Stowe, deceased, in the amount of $187,874.76.
The issue to be decided in this case is whether certain transfers by Hilda Beecher Stowe in 1963 and 1964 were made in contemplation of death within the meaning of section 2035.1
Some of the facts have been stipulated and are incorporated herein by this reference.
Hilda Beecher Stowe (hereinafter referred to as "the decedent") was born on October 11, 1883, and died testate on January 3, 1965, at the age of 81. The executors of her estate are David Beecher Stowe, Robinson Smith Beecher Stowe, and Katharine Jahn Cordes. The Federal estate tax return was filed with the district director of internal revenue, Manhattan, New York.
At the time the petition was filed, the legal residences of David Beecher Stowe, Robinson Smith Beecher Stowe and Katharine Jahn Cordes were Darien, Connecticut; Scarsdale, New York; and Salisbury, Connecticut, respectively.
The decedent was married to Lyman Beecher Stowe, who predeceased her on September 25, 1963, at the age of 82. She had no brothers, but had one sister, Gertrude Robinson Smith, who predeceased the decedent on October 22, 1963, at the age of 82.
The decedent was survived by two sons, David Beecher Stowe (hereinafter sometimes referred to as "David"), born October 27, 1916, and Robinson Smith Beecher Stowe (hereinafter sometimes referred to as "Robinson"), born January 21, 1918. In addition, the decedent was survived by three grandsons, Charles Robinson Beecher Stowe, born July 18, 1949; Richard Mather Anthony Stowe, born April 2, 1953; and Henry Beecher Stowe, born April 27, 1964; and by a granddaughter, Ellen Robinson Stowe, born June 7, 1956. The three aforesaid grandsons are the children of David Beecher Stowe, while the granddaughter, Ellen Robinson Stowe, is the child of Robinson Smith Beecher Stowe.
The decedent and her sister were the daughters of Charles Robinson Smith and Jeannie Porter Steele Robinson Smith. Mr. Smith, a practicing attorney and one of the founders of Allied Chemical Corporation (hereinafter referred to as "Allied Chemical"), died on September 7, 1930. Article Eleventh of the Last Will and Testament of Charles Robinson Smith divided his residuary estate into five separate trusts consisting of three equal one-quarter parts and two equal one-eighth parts of said residuary estate.
One quarter of the estate of Charles Robinson Smith was left in trust for the benefit of his wife, Jeannie Porter Steele Robinson Smith. Upon her death, the income of such trust was to be paid to the decedent for the remainder of her life.
A second quarter of the estate of Charles Robinson Smith was left in trust for the benefit of his wife, Jeannie Porter Steele Robinson Smith. Upon her death the income of this trust was to be paid to the decedent's sister, Gertrude Robinson Smith, for the remainder of her life, and upon the death of said sister the corpus of said trust was to be distributed as follows:
* * * to such persons as Gertrude shall by will appoint; and in default of any valid appointment by her made, to Gertrude's next of kin then living.
A third quarter of the estate of Charles Robinson Smith was left in trust for the benefit of the decedent's sister, Gertrude Robinson Smith. Upon her death, the corpus of this trust was to be paid "to Gertrude's next of kin then living."
The decedent's mother, Jeannie Porter Steele Robinson Smith, died on April 7, 1945.
On February 13, 1948, the decedent gave to each of her sons 200 shares of Allied Chemical common stock, valued at $34,500, and cash in the amount of $2,000. The gift occurred only about five months after the marriage of her son, David Beecher Stowe, and he considered the gift as to him to be a wedding present.
On March 4, 1954, decedent's sister, Gertrude Robinson Smith, executed a trust agreement appointing herself and David Beecher Stowe as trustees. At that time she transferred into said trust shares of Allied Chemical common stock having a then aggregate value of approximately $97,000. The income of said trust was required to be applied for the use of David Beecher Stowe during his lifetime.
On August 22, 1956, the decedent executed a trust agreement appointing Gertrude Robinson Smith and Peter V.D. Voorhees as trustees. She transferred into said trust 384 shares of Allied Chemical common stock having a then aggregate value of $40,032. The income of said trust was required to be applied for the use of her son, Robinson Smith Beecher Stowe, during his lifetime.
On September 4, 1956, Gertrude Robinson Smith transferred to the above trust 200 shares of Allied Chemical common stock having a then aggregate value of $20,575.
On July 31, 1957, the decedent executed two trust agreements, naming herself and Gertrude Robinson Smith as trustees of each. One of the said trusts was for the benefit of David Beecher Stowe and his son, Charles Robinson Beecher Stowe, and is hereinafter referred to as "the David trust." The other was for the benefit of Robinson Smith Beecher Stowe and his daughter, Ellen Robinson Stowe, and is hereinafter referred to as "the Robinson trust." To each of the trusts she transferred 999 shares of Allied Chemical common stock having a then aggregate value of $181,318.50. The income of each trust was required to be paid to David and Robinson, respectively, during their lifetimes.
During 1963, Robinson Smith Beecher Stowe incurred expenses in the approximate amount of $10,000 in connection with a separation and divorce from his third wife, Gunnel Borg. At that time the decedent, in conversations with her sons, indicated that she would help Robinson defray these expenses and David suggested that, in order to do this, she make a transfer to the Robinson trust.
On August 20, 1963, the decedent transferred to the Robinson trust the amount of 1,297 shares of Allied Chemical common stock having a then aggregate value of $64,850. Also on August 20, 1963, the decedent made an equalizing transfer to the David trust in the amount of 1,297 shares of Allied Chemical common stock having a then aggregate value of $64,850.
Gertrude Robinson Smith died on October 22, 1963, after an illness of about one month. At her death the principal of the trusts established for her benefit under the aforesaid will of Charles Robinson Smith became distributable to the decedent as the next of kin to Gertrude Robinson Smith. These two trusts are hereinafter referred to collectively as the "Gertrude trusts."
On January 14, 1964, the decedent executed a release which enabled the assets of the Gertrude trusts, less expenses in the total amount of $150,520.03, to be distributed to her immediately. As of December 10, 1963, such assets were as follows:
Market
Property Value
31,400 shares, Allied Chemical common
stock .............................. $1,748,587.50
616 shares, Chemical Bank New
York Trust Co. capital ............. 49,972.00
400 shares, Corn Products Co. common
stock .............................. 23,475.00
1,350 shares, General Electric Co
common stock ....................... 112,050.00
State of California 3¾% bonds, due
2/1/77 ............................. 53,187.50
Chicago, Illinois, Water Revenue
4¼% bonds, due 6/1/78 ............. 55,375.00
Connecticut Expressway Revenue
4¼% bonds, due 1/1/97 ............. 54,187.50
Los Angeles, California, 3.90%
bonds, due 6/1/86 .................. 53,875.00
Memphis, Tennessee, Board of Education
3.70% bonds, due 10/1/81 ........... 53,000.00
New York City Housing Authority
3¾% bonds, due 1/1/97 ............. 5,050.00
New York City Housing Authority
3¾% bonds, due 1/1/99 ............. 15,450.00
St. Paul, Minnesota 3.20% bonds
due 2/1/89 ......................... 48,750.00
Cash ................................. 188,483.60
_____________
Total ............................ $2,461,443.10
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At this time, the decedent's resources and income satisfied her needs. As the result of her sister's death and her consequent inheritance of the property of the Gertrude trusts, the decedent stood to receive a substantial increase in both her assets and income.
The decedent was concerned over the additional income taxes which would result from her receiving the property of the Gertrude trusts. In November 1963, the decedent discussed her inheritance with her son, David, and an attorney, Mr. John Keeffe (hereinafter referred to as "Mr. Keeffe"), who had been contacted by David. Mr. Keeffe suggested that she might transfer the assets of the Gertrude trusts to new trusts for the benefit of her sons and thereby avoid such taxes.2
On March 11, 1964, the decedent executed a trust agreement, naming her two sons and Mr. Carroll J. Dickson, an attorney, as trustees. At that time she transferred to said trust 14,500 shares of Allied Chemical common stock. The trust agreement provided for the payment of trust income to David Beecher Stowe for life and after his death for application of income as follows:
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