Estate of Holdeen v. Commissioner
| Decision Date | 19 February 1975 |
| Docket Number | 94066,94085,82081,95143,87569,Docket No. 65867,94107,94081,71972,65869,94186,89076,94084,95138,82946,5376-65 and 5382-65.,94080,71997 |
| Citation | 1975 TC Memo 29,34 TCM (CCH) 129 |
| Parties | Estate of Jonathan Holdeen, Deceased, Randal Holden and Janet Adams, Co-executors, and Estate of Stella H. Holden, Deceased, Randal Holden, Executor, et al. v. Commissioner. |
| Court | U.S. Tax Court |
Louis Bender and Allan Rappleyea, Eno Law Bldg., Pine Plains, New York, N.Y., for the petitioner Estates.
Allan Rappleyea and Henry C. Clark, for the petitioner Trusts.
Dorrance R. Belin and F. Patrick Matthews, for the respondent.
Frank G. Opton filed briefs for the Unitarian Universalist Association as Amicus Curiae.
Respondent determined deficiencies in income tax in these consolidated cases as follows:
Estate of Jonathan Holdeen, Deceased, Randal Holden and Janet Adams, Co-executors, and Estate of Stella H. Holden, Deceased, Randal Holden, Executor.
Docket Taxable
No. Year Deficiency
82081 1951 .......... $162,116.81
82081 1952 .......... 160,835.28
82081 1953 .......... $198,406.06
82946 1954 .......... 390,027.57
89076 1955 .......... 267,438.63
87569 1956 .......... 397,464.25
94186 1957 .......... 441,714.94
Also an addition to tax for the year 1951 for delinquency in the amount of $15,449.90 in Docket No. 82081 under section 291 of the Internal Revenue Code of 1939.
Holdeen Trust II, Janet Adams, Trustee
Docket No. Taxable Period Deficiency Additions to Tax*
65867 1948 $ 5,212.10 $1,303.02
65867 1949 1,685.67 None
65867 1950 2,436.86 609.21
71972 1951 1,947.77 486.94
71972 1/1-6/30/1952 2,249.47 112.47
71972 FY 6/30/1953 2,457.64 122.88
71972 FY 6/30/1954 12,575.64 None
Janet Adams Trust II, Janet Adams, Trustee
94085 FY 6/30/1955 $12,074.75 None
94081 FY 6/30/1956 20,420.51 None
Holdeen Trust 45-10, Janet Adams, Trustee
65869 1949 $ 4,839.62 None
65869 1950 18,805.46 $ 4,701.36
71997 1951 18,174.13 4,543.53
71997 1952 23,158.02 None
71997 1953 26,822.44 6,705.61
94080 1954 67,619.94 None
94084 1955 32,986.27 1,649.31
94107 1956 33,708.35 None
95138 1957 42,294.74 None
5376-65 1958 87,744.39 None
5376-65 1959 28,437.83 None
5376-65 1960 28,789.43 None
5376-65 1961 30,045.53 None
5376-65 1962 27,612.70 None
5376-65 1963 33,319.72 None
5376-65 1964 45,486.34 None
Holdeen Trust 55-10, Janet Adams, Trustee
94066 1956 $34,125.63
95143 1957 44,961.46
5382-65 1958 88,906.31
5382-65 1959 30,363.69
5382-65 1960 30,768.82
5382-65 1961 34,354.98
5382-65 1962 31,299.04
5382-65 1963 36,326.02
5382-65 1964 48,649.28
* Under sec. 291(a), I.R.C. of 1939 or sec. 6651(a) (1), I.R.C. of 1954
Jonathan Holdeen (sometimes hereinafter referred to as Holdeen) entered into a large number of written agreements, as settlor or trustor, with one or more members of his family or a friend, as trustee, in which he created, or purported to create, trusts, some for the benefit of members of his family with remainders to a college or charitable organization, some for the benefit of a charitable organization, and all with a remainder for public purposes, the trusts to have a duration of 500 or 1,000 years. In some of these agreements his wife, Stella, was also settlor or trustor.
Respondent has determined deficiencies against Holdeen and Stella and alternatively against some 50 of the trusts under such agreements. Holdeen and his wife have died while their case was pending and their estates have been substituted as petitioners. By agreement between the parties, three of the trusts so created have been selected as test cases in the present proceeding for decision as to the liabilities of the trusts.
Holdeen filed individual Federal income tax returns for the years 1945, 1946 and 1947. Holdeen and his wife filed joint income tax returns for the calendar years 1948, 1949 and 1950.
On November 28, 1956, the respondent mailed notices determining deficiencies as to each of the foregoing years. Holdeen paid the deficiencies determined and brought action against the district director of internal revenue at Albany, New York, seeking a refund of the tax paid with respect to the year 1945. The deficiencies were based primarily upon including in Holdeen's income income accrued to trusts known as Trust I, Trust II, Naylor-Sanford, MacPherson-Sanford, Trust 44-10 and Trust 45-10. The case was tried in May 1958 before a jury. The jury held for Holdeen as to Trust 45-10 but for the district director as to the income of all the other trusts. The District Court set aside the jury's findings as to Trust 45-10. (58-2 USTC ¶ 9843 166 F. Supp. 694)
On appeal the Court of Appeals for the Second Circuit (59-2 USTC ¶ 9703 270 F. 2d 701) concluded that Holdeen was not taxable on the income of Trust 45-10 but upheld the District Court's conclusion as to the other trusts. The case was remanded to determine the effect of a merger of Trust 44-10 and Trust 45-10 under the terms of the latter trust. Upon the remand the district court in 190 F. Supp. 752 60-2 USTC ¶ 9671 concluded that the income of Trust 44-10 after June 2, 1945, the date of Trust 45-10, was part of the income of Trust 45-10 but the court also concluded that the accumulation under Trust 45-10 was unlawful.
On appeal, the court of appeals reversed the holding that the accumulation was unlawful. (61-2 USTC ¶ 9580 292 F. 2d 338)
Holdeen also brought an action in the District Court for the Southern District of New York to recover the taxes paid for 1946 upon income of Trusts I, II, 45-10, 46-10, MacPherson-Sanford and Naylor-Sanford. The case was tried in December 1960. The jury returned a verdict for the Government. On appeal, the Court of Appeals for the Second Circuit reversed the lower court as to income attributable to Trusts 45-10 and 46-10 but sustained the lower court as to income from Trusts I, II, Naylor-Sanford and MacPherson-Sanford. (62-1 USTC ¶ 9183 297 F. 2d 886)
Holdeen and his wife brought a further action in the District Court for the Southern District of New York to recover taxes paid for the years 1947, 1948, 1949 and 1950 which action is still pending. Trial was begun in April 1965 but was suspended.
Also on November 28, 1956, notices of deficiency were sent to Holdeen Trust II, under the title Janet Adams Trust II, with reference to the taxable years 1948, 1949, and 1950 and to Holdeen Trust 45-10 with reference to the years 1949 and 1950. Notices were sent to several other Holdeen Trusts at that time or in the following years. Petitions were filed with this Court by such trusts.
On May 5, 1959, a notice of deficiency was sent to Jonathan Holdeen and Stella with respect to the years 1951, 1952 and 1953. They filed a petition with this Court for a redetermination of the deficiencies. Subsequent notices were sent with respect to the years 1954 through 1957 and petitions were filed with this Court with respect thereto.
In 1967 respondent moved to disqualify Henry C. Clark, one of the attorneys of record for a number of the trusts, and who was formerly an employee of the Internal Revenue Service. The motion was denied. See MacPherson-Sanford Trust Dec. 29,644, 52 T.C. 580, filed June 30, 1969.
At a conference on December 22, 1969, in the Chambers of the Chief Judge of this Court, the parties agreed that instead of attempting to try all pending individual and trust cases, certain cases would be selected for trial as test cases.
In March 1970 there were 92 docket numbers involved and pending before this Court. We ordered on April 10, 1970, that 19 cases be consolidated in four groups for purposes of trial, briefing and opinion as follows:
The Court having considered respondent's MOTION TO CONSOLIDATE filed herein on March 18, 1970, and having considered petitioners' RESPONSE thereto filed herein on April 6, 1970, and being fully advised in the premises, it is hereby
ORDERED, that the 19 docket numbers which are listed first in the caption hereto are designated for trial in the Tax Court Courtroom, Room 208, Federal Building, 26 Federal Plaza, New York, New York, commencing at 10:00 o'clock a.m. on Monday, June 1, 1970, and that the said 19 cases be and they are hereby consolidated into the following four groups for purposes of trial, briefing, and opinion:
Group Petitioner Docket Nos
I Jonathan Holdeen 82081, 82946, 87569
89076 and 94186
II Holdeen Trust II 65867, 71972, 94081
and 94085
III Holdeen Fund 45-10 65869, 71997, 94080
94084, 94107, 95138
and 5376-65
IV Holdeen Fund 55-10 94066, 95143 and
5382-65
IT IS FURTHER ORDERED, that in accordance with the agreement of the parties, the above 19 cases...
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