Estate of Bryant v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 19 October 1937 |
| Docket Number | Docket No. 72383. |
| Parties | ESTATE OF WALDO C. BRYANT, DECEASED, WALDO GERALD BRYANT AND IDA BRYANT, EXECUTORS, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
David S. Day, Esq., and J. G. Korner, Jr., Esq., for the petitioners.
Lewis S. Pendleton, Esq., for the respondent.
Petitioners seek redetermination of a $91,246.29 deficiency in estate tax. Respondent in his answer makes claim for an increased deficiency. The proceeding was submitted on the pleadings and a stipulation of facts. We adopt the stipulation of facts and the exhibits attached thereto as our findings of fact. Several of the issues were agreed upon in the stipulation and effect will be given thereto under Rule 50. The issues remaining are whether any part of the value of the corpora of three transfers in trust made by decedent during his lifetime in 1917, 1920, and 1902, respectively, is to be included in his gross estate under section 302 of the Revenue Act of 1926. The respondent does not contend that the transfers were made in contemplation of death.
Waldo C. Bryant, the decedent, was born December 17, 1864, and died, testate, July 5, 1930, a resident of Connecticut. Petitioners are the duly appointed and qualified executors of his estate. Ida Bryant is decedent's widow; Waldo Gerald, his son.
1917 Transfer. — On July 2, 1917, an indenture of trust was made between decedent as party of the first part and the Bankers Trust Co. as party of the second part, sometimes called "trustee", under which decedent transferred to the trustee certain securities in trust, the income from which, after deducting trustee's commissions and other trust expenses, the trustee was to pay as and when received:
* * * unto IDA BRYANT, wife of the party of the first part, for and during the term of her natural life; upon the death of said Ida Bryant, to pay the net income to the party of the first part for and during the term of his life.
Upon the death of the survivor of said Ida Bryant and the party of the first part, unless this trust shall have been modified or revoked as hereinafter provided, to convey, transfer and pay over the principal of the trust fund to the executors or administrators of the estate of the party hereto of the first part.
The trust indenture contained the following provision relative to modification, alteration or revocation:
TENTH: Notwithstanding anything to the contrary herein contained, the party of the first part and said Ida Bryant during the period when both shall be living and at any time or times during the continuance of the trusts herein provided for may, by instrument in writing executed and acknowledged or approved by them in the manner required for a deed of real estate (so as to enable such deed to be recorded in the State of New York), delivered to the Trustee, modify or alter in any manner or revoke in whole or in part this indenture and any or all of the trusts then existing and the limitations of estates and interest in property hereby created and provided for subsequent to such trusts; and in case of such modification, alteration or revocation, such instrument shall direct the disposition to be made of the trust funds or of that part of the trust funds affected by such modification, alteration or revocation * * *. In case of the death of either the party of the first part or his wife, the said Ida Bryant, the survivor of them shall have the same right and privilege to modify, alter or revoke the instrument in any manner whatsoever, by giving a notice in writing to the Trustee * * *.
On December 22, 1923, decedent and his wife modified the trust relative to trustee's commissions. Since then there have been no alterations or other modifications. The trust has never been revoked and at the time this proceeding was submitted was still in force and effect.
Decedent was survived by his wife, Ida Bryant, born September 13, 1868. Under article 10 of decedent's last will, executed June 14, 1930, decedent gave, devised, and bequeathed to the Bankers Trust Co. "all my right, title and interest, and the right, title and interest of my estate in and to a certain trust fund held by said Bankers Trust Company under a deed of trust from myself to said Bankers Trust Company, dated July 2, 1917" in trust, nevertheless, for the benefit, after the death of his wife, Ida Bryant, of his children and grandchildren. Paragraph (d) of said article ten of decedent's last will provided:
The trust herein created is not intended and shall not be construed as a modification of said trust deed of July 2, 1917, or said modification of December 22, 1923, or to affect in any way the rights, interests and powers of the said IDA BRYANT thereunder, but only to dispose of the interest vested by said trust deed and modification in myself or my estate.
The value of the entire corpus of the trust executed on July 2, 1917, as of date of decedent's death was $767,706.62; and the value of the remainder thereof, after excluding the value of the wife's right to the income for life, was $478,918.42.
Petitioners in filing the estate tax return did not include in decedent's gross estate the value of any part of the corpus of the July 2, 1917, trust, but submitted with the return a copy of the trust instrument and a list of the securities making up the corpus of the trust, together with the quoted prices thereof on the last business day prior to the date of decedent's death.
The respondent in determining the deficiency herein included in decedent's gross estate, under the provisions of section 302 (c) of the Revenue Act of 1926, the amount of $478,918.42 as representing the "remainder value of trust created under date of July 2, 1917." In his answer the respondent affirmatively alleged that "there should be included in decedent's gross estate the full value of the corpus of the trust executed by the decedent under date of July 2, 1917, pursuant to the provisions of subdivisions (a), (c) and/or (d) of section 302 of the Revenue Act of 1926, instead of the present worth of the reversionary interest in the corpus of such trust as of the date of decedent's death, which said reversionary interest was included in the gross estate by respondent at a value of $478,918.42 * * *."
We shall first consider respondent's affirmative allegation stated above, that the "full value" of the corpus should be included in decedent's gross estate under subdivisions (a), (c) and/or (d) of section 302 of the Revenue Act of 1926. This allegation was made prior to the two Supreme Court decisions of Helvering v. Helmholz, 296 U. S. 93, and White v. Poor, 296 U. S. 98. Under these decisions it is settled that no part of the corpus could be included under subdivision (d), since the trust was created prior to the Revenue Act of 1924, and decedent could not alter, amend, or revoke except in conjunction with his wife, who was the life beneficiary. Mary Q. Hallock et al., Trustees, 34 B. T. A. 575, 579. Neither could the value of the wife's life estate be included under subdivisions (a) or (c), as affirmatively alleged. Cf. May v. Heiner, 281 U. S. 238. The respondent's contention that any value of the corpus of the July 2, 1917, trust in excess of the reversionary interest determined by him in the amount of $478,918.42 should be included in decedent's gross estate is, therefore, denied.
We will now direct our attention to the principal issue involved in this proceeding, namely, whether on July 5, 1930, the date of decedent's death, there was vested in decedent a reversionary interest in the corpus of the July 2, 1917, trust and, if so, whether the value of such reversionary interest should be included in decedent's gross estate. The parties have stipulated "that if there were in the decedent on July 5, 1930, a vested reversionary interest in the corpus of the said trust, the value of which is includable in the gross estate for Estate Tax purposes, the value thereof on July 5, 1930, was $478,918.42."
The applicable statute is the Revenue Act of 1926, the material provisions of which are as follows:
SEC. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated —
(a) To the extent of the interest therein of the decedent at the time of his death;
* * * * * * *
(c) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for an adequate and full consideration in money or money's worth. * * *
In administering the above statute the respondent promulgated Estate Tax Regulations No. 80, article 11 of which provides in part as follows:
The value of a vested remainder should be included in the gross estate. Nothing should be included, however, on account of a contingent remainder where the contingency does not happen in the lifetime of the decedent, and the interest consequently lapses at his death. Nor should anything be included on account of an interest or an estate limited for the life of the decedent. There should be included, however, the value of a reversionary interest retained by the decedent, which reverts upon the termination of a particular estate, or in case of his prior death passes to others. Italics supplied.
In determining whether on the date of his death decedent was vested with a reversionary interest in the corpus of the 1917 trust we are governed by the laws of the State of Connecticut, in which decedent was then domiciled. Kinney's Estate v. Commissioner, 80 Fed. (2d) 568, and cases therein cited on that point.
The Supreme Court of Errors of Connecticut was called upon to consider this very trust in a proceeding by William H. Hackett, tax...
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