Fatter v. Usry

• Decision Date: 14 June 1967
• Docket Number: Civ. A. No. 14188,14189.
• Citation: 269 F. Supp. 582
• Parties: Dr. Mervin E. FATTER, Transferee Est. of Anthony A. Fatter, Transferor, Plaintiff, v. Chester A. USRY, District Director of Internal Revenue, Defendant. Dr. Esmond A. FATTER, Transferee Est. of Mrs. Pauline J. Marchand Fatter, Transferor, Plaintiff, v. Chester A. USRY, District Director of Internal Revenue, Defendant.
• Court: U.S. District Court — Eastern District of Louisiana

269 F. Supp. 582

Dr. Mervin E. FATTER, Transferee Est. of Anthony A. Fatter, Transferor, Plaintiff, v. Chester A. USRY, District Director of Internal Revenue, Defendant.

Dr. Esmond A. FATTER, Transferee Est. of Mrs. Pauline J. Marchand Fatter, Transferor, Plaintiff, v. Chester A. USRY, District Director of Internal Revenue, Defendant.

Civ. A. Nos. 14188, 14189.

United States District Court E. D. Louisiana, New Orleans Division.

June 14, 1967.

Harry R. Cabral, Jr., Metairie, La., Thomas J. Taylor, New Orleans, La., for plaintiffs.

Louis C. LaCour, U. S. Atty., Gene S. Palmisano, 1st Asst. U. S. Atty., Peter Winstead, Atty., Tax Division, for defendant.

RUBIN, District Judge:

The sons of Anthony A. Fatter and his wife, Pauline J. Marchand Fatter, contend that gifts to them by their parents were not made in contemplation of death and therefore that estate taxes paid with reference to these gifts should be refunded.

The defendant, sued in his capacity as District Director of Internal Revenue, assessed the tax under the provisions of Section 2035 of the Internal Revenue Code which provides, in relevant part, that: "The value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer * * * in contemplation of his death." That section further provides that a transfer made by the decedent within a period of three years before his death shall "unless shown to the contrary, be deemed to have been made in contemplation of death * * *."¹

The statute does not attempt to define the term "in contemplation of death."

But the regulations outline its meaning:

The phrase `in contemplation of death' as used in this section, does not have reference to that general expectation of death such as all persons entertain. On the other hand, its meaning is not restricted to an apprehension that death is imminent or near. A transfer `in contemplation of death' is a disposition of property prompted by the thought of death (although it need not be solely so prompted). A transfer is prompted by the thought of death if (1) made with the purpose of avoiding death taxes, (2) made as a substitute for a testamentary disposition of the property, or (3) made for any other motive associated with death. The bodily and mental condition of the decedent and all other attendant facts and circumstances are to be scrutinized in order to determine whether or not such thought prompted the disposition."²

The court's inquiry then is into the mind of the decedent, into that "heap or collection of different perceptions."³ Transfers prompted by the thought of death, even if they are also prompted by other motives, are includable in the gross estate. Transfers made for other reasons are not.

The motives that move men are often so obscure that it is difficult even for a man consciously probing his own mind to know what prompts him. Psychiatry tells us that cognition may be self-deceptive, that we often do not act on the basis of the thoughts we perceive, and that the subconscious may deceive even the man who thinks he knows his own mind. Man's true motives are often hidden from himself, hidden perhaps best from himself in some situations.

Intent is difficult to define; motive may be yet more secret. The law has traditionally sought to distinguish "motive" from "intent" on the basis that "motive * * * is notoriously difficult to establish and cannot, like intent, be inferred from a person's overt actions."⁴ The tax law does not require us here to determine "motive" in those words, but it seeks an equally elusive shadow from the recesses of the mind of the deceased: did the thought of death prompt him to act?

The dominant purpose of the statute is to reach substitutes for testamentary dispositions and thus to prevent evasion of the estate tax.⁵ "As the transfer may otherwise have all the indicia of a valid gift inter vivos, the differentiating factor must be found in the transferor's motive. Death must be `contemplated' that is, the motive which induces the transfer must be of the sort which leads to testamentary disposition. * * * The question, necessarily, is as to the state of mind of the donor."⁶

But "the determinative motive" cannot be said to be lacking "merely because of the absence of a consciousness that death is imminent. It is contemplation of death, not necessarily contemplation of imminent death, to which the statute refers. It is conceivable that the idea of death may possess the mind so as to furnish a controlling motive for the disposition of property, although death is not thought to be close at hand."⁷ The transfer is in contemplation of death where, for any reason, the decedent becomes primarily concerned about what will happen to his property at his death and as a result takes some action to control its disposition.⁸ Since the thought of death as a controlling motive affords the test, "it follows that the statute does not embrace gifts inter vivos which spring from a different motive."⁹

Courts and commentators have made frequent and, in some cases, lengthy efforts to isolate the criteria that can be used to determine whether or not a particular gift was made in contemplation of death.¹⁰ No single criterion and no assortment of facts has ever been considered conclusive,¹¹ even an admission by the decedent that he made gifts with an intent to defeat death taxes.¹² Advanced age of the donor has not been determinative,¹³ nor has the donor's poor health,¹⁴ although these are obviously factors to be considered.

It is tempting to attempt to catalog those indicia which may indicate that a gift was in contemplation of death and to contrast them with those motives thought to be associated with life. Such a listing, accompanied by elaborate citation of decided cases, might give a superficial air of certainty or indeed of inevitability to this decision. But the sands of evidence are of such uncertain relative weight that the balance of justice cannot measure them sufficiently objectively to decide whether merely by such a measure gifts, deemed by the statute to have been made in contemplation of death, have been proved by the plaintiffs under all the circumstances not to have been prompted by the thought of death.

The United States Supreme Court told us 35 years ago that, "It is apparent that there can be no precise delimitation of the transactions embraced within the conception of transfers `in contemplation of death,' as there can be none in relation to fraud, undue influence, due process of law, or other familiar legal concepts which are applicable to many varying circumstances. There is no escape from the necessity of carefully scrutinizing the circumstances of each case to detect the dominant motive of the donor in the light of his bodily and mental condition, and thus to give effect to the manifest purpose of the statute."¹⁵ All the decisions and the texts since then add little to this analysis.

It is evident that the determination whether a gift was made in contemplation of death requires detailed factual analysis, but the conclusion may not be wholly intellectual. Decision may result also from intuition, emotional reaction, and visceral response to the composite picture that results from the images imposed on each other in court by advocates with opposite motives, one bent on proving that the deceased, whatever his age or health, was convinced of his immortality and impervious to thoughts of death, and the other seeking to show that the donor was weak of body and sick of mind, preoccupied by the converging approach of the grim reaper and the estate tax collector. Regardless of advocacy, however, we know that by the mandate of the statute¹⁶ amplified by the regulations,¹⁷ the burden of proof is imposed on the taxpayer. This means that the taxpayer has the ultimate task of persuading the Court that the gifts were not in fact made in contemplation of death,¹⁸ although it is not necessary for him to show affirmatively that they were made for motives associated with continued life.¹⁹

Mindful that "this portrait" as sought to be painted in the record by counsel for the petitioner may have "more resemblance to a synthesis of decedents whose transfers have been held in many reported cases to have been made not in contemplation of death than to the real" decedents,²⁰ just as the picture sought to be drawn by counsel for the collector may seek to outline the image of taxpayers who have been found by other courts to have acted in contemplation of death, I turn to the facts as presented in court. Anthony A. Fatter and Pauline J. Marchand Fatter made gifts of community property to their two sons in cash on April 28, 1958, in the amount of $47,000 and on February 3, 1959, in the amount of $75,000. The gifts to Dr. Esmond A. Fatter in 1958 amounted to $23,000 and the gifts to Dr. Mervin E. Fatter in that year amounted to $24,000. The gifts in 1959 were equal. Mervin was given $1,000 extra in 1958 because he had one more child than his brother.

At the time the first gifts were made, Anthony A. Fatter was 80 years old. His wife was 69. Pauline died on April 15, 1959, 11½ months after the first gift was made. Anthony died on July 19, 1959, 14½ months after the date of that gift.

With the savings accumulated from his grocery business, Mr. Fatter had purchased several parcels of rent property. For a number of years before his death, his sole occupation had been management of these properties. Until a few years before his death, he was an active man who took a keen interest in business affairs. The plaintiffs sought to show that he did much of the maintenance work on the properties with his own hands, but I am convinced by the evidence that in the period during which these gifts were made he was in failing health, appeared to be pale and anemic, and limited his efforts to such minor exertions as helping a painter mix paint or lifting a board. Some time...