Hollander v. Comm'n of Internal Revenue (In re Estate of Field), Docket No. 110585.

• Citation: 2 T.C. 21
• Decision Date: 02 June 1943
• Docket Number: Docket No. 110585.
• Parties: ESTATE OF LESTER FIELD, DECEASED, BARNETT HOLLANDER, TEMPORARY ADMINISTRATOR AND EXECUTOR, PETITIONER, v. COMMISSION OF INTERNAL REVENUE, RESPONDENT.
• Court: United States Tax Court

2 T.C. 21

ESTATE OF LESTER FIELD, DECEASED, BARNETT HOLLANDER, TEMPORARY ADMINISTRATOR AND EXECUTOR, PETITIONER,

v.COMMISSION OF INTERNAL REVENUE, RESPONDENT.

Docket No. 110585.

Tax Court of the United States.

Promulgated June 2, 1943.

On June 8, 1922, decedent transferred property in trust, in all of which he retained a possibility of reverter until his death. He died on November 16, 1937. Held, the measure of the decedent's estate for estate tax purposes includes the value of the entire trust corpus at his death. Sec. 302(c), Revenue Act of 1926, as amended by sec. 803(a), Revenue Act of 1932; Helvering v. Hallock, 309 U.S. 106; Smith v. Shaughnessy, 318 U.S. 176. Sydney J. Schwartz, Esq., for the petitioner.

J. C. Maddox, Esq., for the respondent.

OPINION.

LEECH, Judge:

Respondent determined a deficiency of $4,782.82 in estate tax by inter alia, including in the value of decedent's estate the entire value of the corpus of an inter vivos trust created by the petitioner's decedent in 1922. Petitioner asks a finding of an overpayment of $25,684.23. The propriety of that action of respondent is the only issue here. The estate tax return was filed with the collector for the second district of New York.

The facts were stipulated and are so found.

Decedent died on November 16, 1937, at the age of 52 years. On June 8, 1922, he transferred to Bankers Trust Co., as trustee, certain assets valued at the date of his death at the sum of $307,452.82, which value was included by respondent in decedent's estate in computing the present deficiency.

Summarized, the terms of this trust were:

A. The trust is to continue for the joint lives of two nieces and the life of the survivor of them unless terminated earlier under F, infra.

B. The income is to be paid to decedent for his life unless the trust terminates before his death.

C. Upon the death of decedent prior to the termination of the trust leaving issue or a widow, $150,000 is to be placed in trust for the widow and the balance, or, if he left no widow, all is to be held in trust for his children, the issue of any deceased child to take the share of such deceased child. Separate, equal trusts are to be set up for each.

D. The aforesaid trusts are subject to decedent's right to reduce or cancel the amounts of the gifts by will or instrument in writing and the amounts by which any gifts are reduced or canceled are to be added to the gifts for the issue which are not reduced (no restoration being permitted of any gift reduced).

E. If the decedent cancels all of the gifts or reduces gifts so that there remains a balance undisposed of, then all of the balance undisposed of is to go to his brother or sister surviving or their issue.

F. During the continuance of the trusts the income is to be paid to the beneficiary named and upon the death of the beneficiary during the continuance of the trust the corpus is to be paid to the beneficiary's issue surviving, but if there be none, to the issue of the decedent surviving, if none, then the decedent's brother or sister or their issue.

G. Upon the death of the widow, the corpus of the trust created for her benefit is to go to the issue of decedent surviving, but if none, then to the brother or sister or their issue.

H. Upon termination of the trust before the death of the decedent the corpus is to be paid over to decedent.

I. Upon termination of the trust after the death of decedent but during the existence of any trust the corpus is to be paid to the life beneficiary.

The decedent at no time had any issue. At the time of his death decedent was survived by his two nieces, whose lives were to measure the maximum life of the trust, and they were then of the age of 18 and 25 years, respectively. He was also survived by his widow, Blanche Field, by his sister, Ruth Rosenfield Hollander, and by John R. Field and Warren R. Field, issue of a deceased brother, Hugo Rosenfield.

The transfer in trust was not made in contemplation of death, nor did deceased at any time relinquish any power to alter, amend, or revoke the transfer or to change the enjoyment of the property transferred in contemplation of death.

It is conceded by the petitioner that the value of the corpus of the trust to the extent of $150,000, directed to be set aside for the decedent's widow, was properly includable in decedent's gross estate at his death, since decedent, to the extent of that value, retained until his demise the power to change the disposition of the widow's fund in that maximum amount by reducing or canceling it in its entirety. The value of a remainder in the sum of $157,452.82, payable at all events upon the death of the survivor of two females, aged 18 and 25 years, respectively, was, at the time of decedent's death, $24,930.76. The value at the date of decedent's death to a man aged 52 years of the right to receive a remainder in the sum of $157,452.82 payable upon the death of the survivor of the two females, aged 18 and 25, respectively, contingent upon his survival of both of such females, was $891.18.

Petitioner concedes that the value of the trust remainder, to the amount of the $150,000 allocable by decedent to the trust for the widow, was properly included for estate tax purposes under section 302(d) of the Revenue Act of 1926, as amended. The issue here therefore is whether respondent was correct when he included the balance of that remainder for those purposes. Respondent supports his action of including the entire value of the remainder upon three grounds: (1) under section 302(c) of the Revenue Act of 1926, as amended by section 803(a) of the Revenue Act of 1932, as construed by Helvering v. Hallock, 309 U.S. 106, and other cases; (2) under section 302(d) of the Revenue Act of 1926, as amended by section 401 of the Revenue Act of 1934; and (3) decedent died owning...