First Nat. Bank of Boston v. Welch, 7079.

• Decision Date: 13 September 1938
• Docket Number: No. 7079.,7079.
• Citation: 24 F. Supp. 695
• Parties: FIRST NAT. BANK OF BOSTON et al. v. WELCH, Collector.
• Court: U.S. District Court — District of Massachusetts

24 F. Supp. 695

FIRST NAT. BANK OF BOSTON et al. v. WELCH, Collector.

No. 7079.

District Court, D. Massachusetts.

September 13, 1938.

George S. Fuller and Burnham, Bingham, Pillsbury, Dana & Gould, all of Boston, Mass., for plaintiffs.

Francis J. W. Ford, U. S. Atty., and Arthur L. Murray, Sp. Asst. U. S. Atty., both of Boston, Mass., James W. Morris, Asst. Atty. Gen., and Andrew D. Sharpe and Fred J. Neuland, Sp. Assts. to Atty. Gen., for defendant.

BREWSTER, District Judge.

This action is brought to recover an estate tax which, as the plaintiffs allege, was illegally exacted on the estate of Elisabeth M. Dwinnell. The action was heard without jury. From the stipulation and evidence, the following facts appear:

The decedent, Elisabeth M. Dwinnell, was the widow of Clifton H. Dwinnell who, at one time, was president of the plaintiff Bank. Her husband died March 13, 1928, and Elisabeth M. Dwinnell died May 5, 1934.

On November 9, 1927, the decedent and her husband and the First National Bank entered into a trust agreement whereby the decedent and her husband transferred to themselves and the Bank, as trustees, certain securities set forth in a list attached to the trust agreement. On December 6, 1929, the decedent transferred additional property to be held upon the same trust. No controversy arises over the value of the total securities which were contributed to the trust by the decedent. The value of the property so transferred was included by the Commissioner of Internal Revenue. Claim for refund was duly made and was rejected by the Commissioner.

Under the terms of the trust agreement, the trustees were directed to pay over the net income to the decedent for her lifetime, and after her death to her husband for his life, and upon the death of the survivor of the trustors the net income was to be distributed for the benefit of the children of the trustors as, in the opinion of the trustees, their needs might demand, until the termination of the trust.

Article 3 of the agreement provided in part as follows:

"The principal of the said Trust Fund shall be distributed as follows:

"(a) To each of the three children of the trustors—Marshall, Elisabeth and Nancy Tarbell—the sum of fifteen thousand (15,000) Dollars as and when they respectively arrive at the age of twenty-one (21) years;

"(b) To the said Elisabeth M. Dwinnell and, after her decease, to the said Clifton H. Dwinnell, in the discretion of the Trustees, in such amounts and at such time as their comfort, support and/or happiness may require;

"(c) After the decease of the trustors, to their issue, in the discretion of the Trustees, in such amounts and at such times as their comfort, education and/or support may require."

Then followed provisions for the distribution of the principal after a specified time and the death of the Trustors.

The property transferred by the decedent to the trustees represented substantially all of her income-producing property owned at the time.

At the time of her death, on May 5, 1934, the decedent was 60 years of age, and the cause of her death was coronary thrombosis. On November 9, 1927, when the transfer was made, the decedent was 53 years of age, in fairly good health, with no reason to expect that she would not live for many years.

It appeared in evidence that, at the time that the decedent and her husband created these trusts, the avowed purpose was to relieve the husband, who had theretofore taken full charge of the decedent's securities, of the responsibility of managing her affairs.

I find as a fact that the purposes of the trust were not associated with the idea of death, and that the transfer was not made in contemplation of death. The applicable statute is section 302(a), (c) and (d) of the Revenue Act of 1926, 44 Stat. 70, 71. This section, so far as material, provides:

"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. * * *

"(d) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, or revoke, * * *."

The contention of the defendant that the property transferred came within the scope of section 302(c) cannot prevail in the face of an imposing array of authorities. Com'r of Internal Revenue v. Northern Trust Co., 7 Cir., 41 F.2d 732, affirmed 283 U.S. 782, 51 S.Ct. 342, 75 L.Ed. 1412; Com'r of Internal Revenue v. Morsman, 8 Cir., 44 F.2d 902, affirmed 283 U.S. 783, 51 S.Ct. 343, 75 L.Ed. 1412; Com'r of Internal Revenue v. McCormick, 7 Cir., 43 F.2d 277, aff...