Helvering v. St. Louis Union Trust Co.

• Decision Date: 17 January 1935
• Docket Number: No. 10016.,10016.
• Citation: 75 F.2d 416
• Parties: HELVERING, Commissioner of Internal Revenue, v. ST. LOUIS UNION TRUST CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

75 F.2d 416 (1935)

HELVERING, Commissioner of Internal Revenue, v. ST. LOUIS UNION TRUST CO. et al.

No. 10016.

Circuit Court of Appeals, Eighth Circuit.

January 17, 1935.

Maurice J. Mahoney, Sp. Asst. to the Atty. Gen. (Frank J. Wideman, Asst. Atty. Gen., and Sewall Key and L. W. Post, Sp. Assts. to the Atty. Gen., on the brief), for petitioner.

Daniel N. Kirby, of St. Louis, Mo. (Arthur B. Shepley, Jr., and Nagel, Kirby, Orrick & Shepley, all of St. Louis, Mo., on the brief), for respondents.

Before SANBORN, WOODROUGH, and BOOTH, Circuit Judges.

SANBORN, Circuit Judge.

This is a petition to review an order of redetermination of estate taxes made by the Board of Tax Appeals. 28 B. T. A. 107.

The question presented is whether the interest of a decedent in the corpus of a trust created by him should be included in his gross estate as a transfer "intended to take effect in possession or enjoyment at or after his death," under section 302 (c) of the Revenue Act of 1924, c. 234, 43 Stat. 253, 304 (26 USCA § 1094 note).

The essential facts are these: William J. Orthwein, a citizen of the United States residing in Switzerland, died testate September 4, 1925. The respondent St. Louis Union Trust Company, as successor trustee to Liberty Central Trust Company, is the sole residuary legatee under his will. On January 1, 1920, the decedent had created a trust primarily for the benefit of his daughter, who was then 29 years of age, married, and living in Peru. He transferred various of his securities to the Mercantile Trust Company, of St. Louis, Mo., as trustee, to manage, invest, and reinvest the principal thereof, and to pay the income therefrom to his daughter during her lifetime. Upon the death of the daughter, if the grantor was then living, the trust property was to revert to him. If he was not then living, the trust was to continue for the benefit of his wife if she were living. In case neither the grantor nor his wife was living at the time of the daughter's death, the trust was to continue for the benefit of the daughter's children, if any, during their minority, and the trust property was to be divided between them as they became of age. In case of the death of all of the designated beneficiaries prior to the termination of the trust, the trust property was to go to those who were appointed to receive it by the daughter's will, or, if she left no will, to the next of kin of the grantor.

The trustee was given power to terminate the trust "at such time as the trustee may deem it wise that the trust be terminated." If the trustee should terminate the trust during the lifetime of the grantor, the trust property was to revert to him. If the trust was terminated after his death, the property was to go to the daughter if living; if not living, to her children; and, if there were no living children, then to the grantor's next of kin. The trust instrument recited that it was the desire of the grantor to make for his daughter, as the life beneficiary of the trust, "an absolute and irrevocable gift and settlement" of the trust property, "so that the grantor shall during the life of his said daughter have no further individual or beneficial interest therein."

The trust was not made in contemplation of death. It was not terminated by the trustee during the lifetime of the decedent. The daughter survived the decedent, the trust still continues for her benefit, and the respondent Mercantile-Commerce Bank & Trust Company has succeeded the Mercantile Trust Company as trustee.

At the date of the decedent's death, the trust estate was of the value of $101,421.24, and the value of the reversionary interest therein, subject to the life estate of the daughter, was agreed to be $34,544.06. The Commissioner of Internal Revenue added to the gross estate of the decedent the value of the reversionary interest in the trust, which resulted in a deficiency in estate taxes. On appeal, the Board held that such interest was no part of the estate. Hence this petition to review.

The theory of the petitioner is that the decedent, in creating the trust,...