Estate of Hurd v. Comm'r of Internal Revenue
| Decision Date | 25 April 1946 |
| Docket Number | Docket No. 7443. |
| Citation | 6 T.C. 819 |
| Parties | ESTATE OF EDWARD L. HURD, CHARLOTTE H. HURD, EXECUTRIX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
The decedent created an irrevocable trust, naming himself as one of the two initial trustees. The trustees were authorized to distribute the new income to or expend it for the benefit of decedent's daughter or her survivors, or they could distribute it to decedent's wife during her lifetime. The corpus could be paid over in whole or in part to decedent's wife during her lifetime at the sole discretion of the trustees, or it could be held for ultimate distribution to other remaindermen upon the termination of the trust. From 1939 to his death in 1941 the decedent suffered from cerebral arteriosclerosis and, in the opinion of his physician, he was incapable of making normal decisions. He was never removed as a trustee, nor was he ever adjudged in incompetent. Held, the value of the trust estate at the optional valuation date is includible in decedent's gross estate under section 811(d)(2) of the Internal Revenue Code. Daniel A. Rush, Esq., for the petitioner.
A. J. McDowell, Esq., for the respondent.
This proceeding involves an estate tax deficiency in the amount of $7,843.58.
The only question for our determination is whether the value of the corpus of a trust created by the decedent in 1935 is includible in his gross estate under section 811(c) or section 811(d)(2) of the Internal Revenue Code.
The other issues raised by the petition have been settled by the stipulation of facts.
Part of the facts have been stipulated. In so far as they have been stipulated, they are found accordingly.
Edward L. Hurd, hereinafter referred to as the decedent, died May 26, 1941. At the time of his death he was a resident of Milton, Massachusetts. His wife, Charlotte H. Hurd, the petitioner herein, was duly appointed executrix of his estate by the Probate Court of Norfolk County, Massachusetts. The Federal estate tax return was filed with the collector of internal revenue at Boston.
On November 1, 1935, the decedent created a trust, naming himself and his wife as the first trustees. He transferred in trust 300 shares of the capital stock of the American Telephone & Telegraph Co.
In so far as here material, the trust instrument provided as follows:
II. During the continuance of the Trust, the Trustees shall pay over to Catherine Hurd Graton, daughter of the Donor or to her husband if she dies leaving a husband or to her lawful issue, or shall expend for her or his benefit or their benefit from time to time the whole or such parts of the net income of the Trust Property and in such proportions as the Trustees may in their own discretion deem necessary for the comfortable support and maintenance of the said Catherine Hurd Graton or of her husband if he survives her or of her said issue, provided always that the Trustees may in their own discretion during the life of Charlotte H. Hurd, wife of the Donor, without regard to the circumstances of the said Catherine Hurd Graton or of her said husband or of her issue, pay over to the said Charlotte H. Hurd or expend for her benefit the whole or part of the net income of the Trust Property.
III. During the life of the said Charlotte H. Hurd the Trustees may, if in their opinion the circumstances so require, pay over to or expend for the benefit of the said Charlotte H. Hurd the whole or any part of the principal of the Trust Property.
The trust instrument provided that the trust should continue during the joint lives of Catherine Hurd Graton (his daughter) and Charlotte H. Hurd (his wife) and the life of the survivor and thereafter until the youngest child to be born to Catherine Hurd Graton reached the age of 21 years or possibility of issue of his said daughter became extinct, whichever of the two events should first occur. It was provided, however, that the trust should not terminate during the life of the surviving husband, and there was added a safeguard against violation of the rule against perpetuities. Upon termination of the trust the trustees were directed to distribute the remainder of the trust property to the lawful issue of Catherine Hurd Graton should by her last will direct and if she should die intestate, the trustees were directed to distribute the property among the heirs of the donor ascertained in accordance with the laws of Massachusetts.
Additional or succeeding trustees could be appointed from time to time by the donor, or, in case of the death or disability of the donor, by the remaining or succeeding trustees. In case of the absence or disability of any trustee the remaining trustee or trustees could act alone or in behalf of all the trustees as effectually as if all were present and acting. Each trustee was responsible for his own acts only and was not liable for the default or omissions of his cotrustee or cotrustees.
The trust instrument expressly provided that the donor had reserved no right to revoke, modify, or change any of the provisions of the agreement, or to repossess himself of the trust property under any circumstances whatsoever.
In the fall of 1939 the decedent suffered from cerebral arteriosclerosis. It was the opinion of his physician that the decedent was from that time until the date of his death incapable of normal decisions and did not regain that power at any time before his death, and that for a considerable period immediately prior to decedent's death he was physically and mentally incapable of performing any acts involving the use of discretion with respect to property or proprietary rights of himself or any other person. From and after 1939 decedent's cotrustee acted alone or in behalf of all the trustees. The decedent was never adjudged mentally incompetent, nor was he removed as a trustee.
The executor elected to have the gross estate valued as at the optional valuation date, and it is agreed that the value of the shares on that date was $34,950.
The decedent filed a gift tax return in 1935, reporting a gift of the shares to his daughter Catherine Hurd Graton.
The trust filed Federal income tax returns for the years 1936 through 1941, indicating that the entire net income of the trust had been distributed or was distributable to Catherine H. Graton, and Catherine H. Graton, in her income tax returns for the same years, reported the entire net income of the trust.
The respondent has determined that the value of the trust property on the optional...
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Round v. CIR, 6248.
...was not the definitive act called for by Hurd v. Commissioner of Internal Revenue, 160 F.2d 610 (1st Cir.1947), affirming Estate of Edward L. Hurd, 6 T.C. 819 (1946). The three trust instruments contained the following "Upon the decease, resignation or incapacity of * * * decedent, the corp......
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McClintock v. Comm'r of Internal Revenue (In re Estate of Pardee)
...A comparison of two other decisions highlights this distinction. In Hurd v. Commissioner, 160 F.2d 610 (C.A. 1, 1947), affirming 6 T.C. 819 (1946), the trustees were empowered to invade corpus ‘if in their opinion the circumstances require.’ As the court correctly concluded, ‘The word ‘circ......
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Myatt v. Comm'r of Internal Revenue (In re Estate of Gilchrist)
...his position as cotrustee. Moreover, in citing its earlier decision in Hurd v. Commissioner, 160 F.2d 610 (1st Cir. 1947), affg. 6 T.C. 819 (1946), the court stated at page 594: “The statute is not concerned with the manner in which the power is exercised, but rather with the existence of t......
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...C. Budlong, 7 T.C. 756 (1946), followed, notwithstanding that upon decedent's petition a conservator had been appointed, Estate of Edward L. Hurd, 6 T.C. 819 (1946), followed; undistributed trust income accumulated and added to principal, held, further, to be includable, Estate of E. A. Sho......