Gamble v. United States, 23479-R.

• Decision Date: 25 March 1946
• Docket Number: No. 23479-R.,23479-R.
• Citation: 65 F. Supp. 114
• Court: U.S. District Court — Northern District of California
• Parties: GAMBLE et al. v. UNITED STATES.

65 F. Supp. 114

GAMBLE et al. v. UNITED STATES.

No. 23479-R.

District Court, N. D. California, S. D.

March 25, 1946.

Claude I. Parker, John B. Milliken, and Ralph Kohlmeier, all of Los Angeles, Cal., for plaintiffs.

Frank J. Hennessy, U. S. Atty., and William E. Licking, Asst. U. S. Atty., both of San Francisco, Cal., and Sewall Key, Andrew D. Sharpe, and James P. Garland, Sp. Assts. to Atty. Gen., for defendant.

ROCHE, District Judge.

Plaintiffs seek, by this action, to recover the sum of $195,342.63 which they paid, under protest, on December 8, 1942, as a deficiency Federal estate tax assessed by the Commissioner of Internal Revenue on the estate of Edwin P. Gamble, deceased. Plaintiffs had previously filed a return for said decedent's estate but had not included therein the assets of an irrevocable trust created by Mr. Gamble on February 28, 1927. The Commissioner deemed such assets includible for Federal estate tax purposes and assessed a deficiency accordingly. A claim for refund was filed on January 23, 1943, and was denied by the Commissioner on August 26, 1943, on the grounds that there was outstanding at the decedent's death a reversion or possibility of reverter of the corpus, and also that the decedent reserved the trust income during his lifetime. The further ground, that the transfer was made in contemplation of death, was advanced after this litigation began.

The applicable provision of the law is Section^* 302(c) of the Revenue Act of 1926 under whose terms there must be included in the value of the decedent's gross estate any property interest of which he 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. The Gamble trust must therefore be examined to see whether it involved a transfer falling in either of the above categories.

The record discloses that Mr. Gamble, who lived in Palo Alto, California, died on April 23, 1939. On February 28, 1927, some twelve years and two months prior to his death, he made an irrevocable transfer, in trust, to the Central Trust Company of Cincinnati, Ohio, as trustee, of certain shares of stock of Proctor & Gamble Company, an Ohio corporation. By its terms this declaration of trust provided that the net income was to be paid to Mr. Gamble during his life and after his death the trust corpus, together with all accrued income therefrom, was to be distributed in equal shares to his four children, if living at the date of his death. If any of them should be deceased and should have no heirs of the body living, such child's share would go to Mr. Gamble's other children and the heirs of the body of any other deceased children. In the event any child should be deceased but with heirs of the body living, such child's share should go to the heirs of his or her body. It was further provided that if any beneficiaries were under the age of thirty at the date of the grantor's death, such beneficiary's share was to be held in trust until he had attained the age of twenty-seven, at which time he would receive one-half his share of the corpus, his remaining half to be distributed to him upon his reaching the age of thirty years. In the event any beneficiary should die before attaining the age of thirty, his or her undistributed share of the trust fund was to be distributed to his or her brothers and sisters, if surviving; if not, such undistributed share was to be distributed to the surviving grandchildren of the grantor; and if no grandchildren of the grantor was surviving, then the deceased beneficiary's share was to be distributed to his or her heirs at law.

The trust instrument further provided that "the Grantor expressly surrenders all right and power to amend, modify...