Gidwitz v. Comm'r of Internal Revenue (In re Estate of Gidwitz), Docket No. 21764.
| Decision Date | 23 June 1950 |
| Docket Number | Docket No. 21764. |
| Citation | 14 T.C. 1263 |
| Parties | ESTATE OF JACOB GIDWITZ, DECEASED, ROSE GIDWITZ, EXECUTRIX, (DECEASED), JOSEPH L. GIDWITZ, GERALD S. GIDWITZ AND WILLARD M. GIDWITZ, EXECUTORS OF THE ESTATE OF ROSE GIDWITZ, DECEASED AND SOLE SURVIVING HEIRS OF JACOB GIDWITZ, DECEASED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
ESTATE TAX— CONTEMPLATION OF DEATH— SUBSTITUTE FOR TESTAMENTARY DISPOSITION— SECTION 811(c).— A transfer in trust made by an elderly man not in the best of health, to be enjoyed after his death, held a substitute for testamentary disposition and in contemplation of death even though made as an inter vivos trust rather than as a part of the will so that income taxes might be saved during the remaining life of the grantor. Harry R. Hurvitz, C.P.A., and Morris W. Needlman, C.P.A., for the petitioners.
Harold H. Hart, Esq., for the respondent.
The Commissioner determined a deficiency of $104,350.08 in estate tax. The petitioner alleges that the Commissioner erred in adding to the gross estate as reported $341,102.02, the value at the date of death of property in a trust created by the decedent on December 30, 1936, and, in the alternative, in adding to the gross estate the income earned by the trust between December 30, 1936, the date of its creation, and December 11, 1944, the date of the death of the decedent.
FINDINGS OF FACT.
Jacob Gidwitz, the decedent, was born on June 17, 1864, in Lithuania, and died on December 11, 1944, in Los Angeles, California. The Federal estate tax return was filed with the collector of internal revenue for the first district of Illinois.
Rose Gidwitz, the wife of the decedent, who was living with him at all times material hereto, was born on August 22, 1880. She and the decedent had the following children, all of whom were living apart from their parents on December 30, 1936: Joseph L. Gidwitz, born January 16, 1905, who was married and had two children; Gerald S. Gidwitz, unmarried, born July 17, 1906; and Willard M. Gidwitz, unmarried, born March 5, 1908.
Gidwitz created a trust on December 30, 1936, and conveyed to it on that day 83 33/100 shares of class A capital stock of the International Furniture Co.
The Commissioner, in determining the deficiency, held that $341,102.02, the value of the assets in the trust at the date of the death of the decedent, was includible in his gross estate as a transfer made in contemplation of death.
There were 500 shares of stock of the International Furniture Co. outstanding on December 30, 1936. Eighty-three and 33/100 of those shares were owned by the decedent, another one-sixth was owned by his brother, Michael, and the remaining two-thirds was owned by his nephew, Philip W. Pelts. That company had never paid a dividend prior to one of $60,000 declared on December 31, 1936, payable in certificates of indebtedness in the form of interest-bearing notes. The stockholders were given the option to receive payment of the notes in cash at maturity or to acquire additional stock as soon as it could be authorized. The decedent knew that this dividend was going to be declared, and one of his purposes in creating the trust above mentioned was to save income taxes by having the trust receive the dividend of $10,000 on his shares.
The decedent filed a gift tax return for 1936, in which he reported the gift of 83 33/100 shares of the stock at a value of $25,929.17. The respondent increased that value to $55,416.67 and the decedent agreed to that value. The tax paid on the transfer was $162.50.
The decedent reported net income of $33,110.16, with tax thereon of $4,284.34 for 1936.
The decedent named himself and his wife trustees of the trust of December 30, 1936. The income was to be accumulated during his lifetime and, upon his death, was to be distributed to his children and their descendants per stirpes. The income thereafter was to be paid to Rose during her life. The principal of the trust was to be distributed upon the death of the survivor of the decedent and Rose. The trust instrument provided that the property of each child or the property of the descendants of any deceased child should be appraised and the principal of the trust should be distributed to the children or descendants of any deceased child per stirpes in such a way that the total value of the property already owned, plus that received from the trust by each child or group of descendants of a deceased child, would be the same.
The trustees were given broad powers to do anything that they might deem expedient or advisable to conserve or protect the trust property.
The beneficiaries were to have no right to alienate their interests. The decedent and Rose resigned as trustees on August 5, 1942, and the three sons became trustees.
The decedent at the same time that he consulted an attorney in connection with the preparation of the trust of December 30, 1936, also...
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United States v. Malley
...death is not includable in the gross estate. Commissioner of Internal Revenue v. Gidwitz' Estate, 7 Cir., 196 F.2d 813, affirming 14 T.C. 1263; Burns v. Commissioner of Internal Revenue, 5 Cir., 177 F.2d 739, affirming 9 T.C. 979. The courts in those cases considered the taxable event to be......
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...Opinion of this Court; Oliver v. Bell, 103 F.2d 760 (C.A. 3, 1939); Estate of A. Carl Borner, 25 T.C. 584, 587 (1955); Estate of Jacob Gidwitz, 14 T.C. 1263 (1950), affd. 196 F.2d 813 (C.A. 7, 1952). Petitioners' arguments to counteract the foregoing considerations are not persuasive. First......
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O'MALLEY v. United States
...disagreement with the McDermott case. The Court of Appeals in deciding McDermott cited and acknowledged their reliance upon Gidwitz v. Commissioner, 14 T.C. 1263, affirmed, 7 Cir., 196 F.2d 813, and Burns v. Commissioner, 9 T.C. 979, affirmed, 5 Cir., 177 F.2d 739. In both Gidwitz and Burns......
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Estate of Cady v. Commissioner
...¶ 9459, 103 F. 2d 760 (3d Cir. 1939); Estate of Borner v. Commissioner Dec. 21,390, 25 T.C. 584, 587 (1955); Estate of Gidwitz v. Commissioner Dec. 17,709, 14 T.C. 1263 (1950), affd. 52-1 USTC ¶ 10,854 196 F. 2d 813 (7th Cir. Petitioner's arguments to counteract the foregoing considerations......