Hoover v. United States

• Citation: 180 F. Supp. 601
• Decision Date: 20 January 1960
• Docket Number: No. 65-58.,65-58.
• Parties: Dan B. HOOVER and Ed Hoover, Jr., Executors of The Estate of Bragg Hoover, Deceased v. UNITED STATES.
• Court: Court of Federal Claims

180 F. Supp. 601

Dan B. HOOVER and Ed Hoover, Jr., Executors of The Estate of Bragg Hoover, Deceased v. UNITED STATES.

No. 65-58.

United States Court of Claims.

January 20, 1960.

Arthur Glover, Amarillo, Tex., for plaintiffs.

June A. Murray, Washington, D. C., with whom was Asst. Atty. Gen. Charles K. Rice, for defendant. Lyle M. Turner, Washington, D. C., was on the brief.

LITTLETON, Judge (Retired).

The principal question here is whether certain gifts made by decedent, Bragg Hoover, to her four children during the period of three years before her death in 1952 were made "in contemplation of death." The Commissioner of Internal Revenue included such gifts in the gross estate of decedent for estate tax purposes, pursuant to Sections 811(c) (1) (A) and 811(l) of the Internal Revenue Code of 1939, as amended.¹

Section 811(c) (1) (A) provides:

"§ 811. Gross estate. 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, except real property situated outside of the United States—* * *

"(c) Transfers in contemplation of, or taking effect at, death.

"(1) General rule. To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise—

"(A) in contemplation of his death; * * *"

Section 811(l) provides:

"Contemplation of death. If the decedent within a period of three years ending with the date of his death (except in case of a bona fide sale for an adequate and full consideration in money or money's worth) transferred an interest in property, relinquished a power, or exercised or released a power of appointment, such transfer, relinquishment, exercise, or release shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of subsections (c), (d), and (f); but no such transfer, relinquishment, exercise, or release made prior to such three-year period shall be deemed or held to have been made in contemplation of death."

Bragg Hoover, the widow of H. E. Hoover, a resident of Canadian, Texas, died August 14, 1952, at the age of almost 89 from a cerebral hemorrhage, leaving two sons, Dan B. Hoover, aged 67, H. E. (Ed) Hoover, Jr., aged 59, and two daughters, Louise Hoover, aged 56, and Vashti Hoover Garver, aged 51. Decedent's husband, H. E. Hoover, died of cancer induced by radium burns on March 21, 1945, at the age of 83.

The two sons, Bragg Hoover's executors, reported a gross estate of $130,388.85, and defendant assessed a deficiency based on the inclusion in the estate of an additional $132,195.72, the amount of certain gifts made by decedent to her two sons and two daughters which were completed within three years of her death. The deficiency has been paid, a claim for refund filed and rejected, and this suit brought to recover the amount paid, with interest.

In 1889, decedent moved to Canadian, Texas, with her husband, an attorney engaged in the general practice of law, who also had many business interests, including lumber, water, light and power, real estate, and oil and gas leases. Except for some help from his son Dan, he did not permit his wife or children to participate in his business affairs. He paid the costs of educating his children, but gave them only allowances sufficient for that purpose. Decedent endeavored from time to time to have him do more for the children out of his wealth, and whenever she could, she sent them extra money. At his death in 1945, decedent's husband left property valued at $591,000, which he devised to his four children in equal parts. By his will, he prohibited the sale or mortgage of the real estate for a period of ten years after his death. One-half of his property descended to his wife under the laws of Texas. About a year before he died, and because of his illness, his sons took over the management of his affairs, which they continued until his death and throughout their mother's lifetime. Both Dan and Ed are practicing lawyers in Canadian. Ed, Louise and Vashti (except for three years) have always lived with their parents.

December 24, 1946, twenty-one months after her husband's death, decedent began making gifts to her children, not in contemplation of death, but for the reasons hereinafter set forth. On that date, she conveyed real estate which had a total value of $11,345. February 3, 1947, and January 5, 1948, she gave $3,000 to each child, and May 28, 1949, she gave them each $1,500. April 4, 1949, she conveyed to her four children her interest in certain real estate for recited cash consideration of one dollar and a vendor's lien note of $97,376.39, bearing 2% interest, due five years after date, and secured only by the land.

Within the three years immediately preceding her death, between August 9, 1949, and July 16, 1952, decedent gave a total of $132,195.72 in equal parts to her four children in gifts as follows:

                Amount to
                Date of gift Kind of gift each child Total gift
                August 9, 1949....... Credit on note ...   $ 7,500            $ 30,000
                August 10, 1949...... Cash .............     1,500               6,000
                March 4, 1950........ Cash .............     1,500               6,000
                June 20, 1950........ Cash .............     1,500               6,000
                February 6, 1951..... Cash .............     1,500               6,000
                December 10, 1951.... Credit on note ...    10,000              40,000
                December 11, 1951.... Cash .............     1,500               6,000
                January 2, 1952...... Cash .............     3,000              12,000
                May 25, 1952......... Cash .............     3,000              12,000
                July 11, 1952........ Cash .............  2,048.93               8,195.72
                                                         _________             __________
                      Total ............................ 33,048.93             132,195.72
                

Under Section 811(l), quoted above, the gifts made by decedent on and after August 9, 1949, are deemed to have been made in contemplation of death, that is, there was a prima facie presumption to that effect, and their value is includible in the gross estate, unless plaintiffs have shown that the immediate and moving cause of the gifts was not contemplation of death, but that such gifts were motivated by other reasons or considerations.

The leading authority interpreting the Federal contemplation of death provision is United States v. Wells, 1930, 283 U.S. 102, 51 S.Ct. 446, 75 L.Ed. 867. In that case the Supreme Court affirmed a determination of this court that gifts made by decedent within two years of his death at 73 of severe intestinal ulceration were not made in contemplation of death. The Court declared the transferor's motive to be the decisive factor. The Court said at pages 118-119 of 283 U.S., at page 452 of 51 S.Ct.:

"* * * The purposes which may be served by gifts are of great variety. It is common knowledge that a frequent inducement is not only the desire to be relieved of responsibilities, but to have children, or others who may be the appropriate objects of the donor's bounty, independently established with competencies of their own, without being compelled to await the death of the donor and without particular consideration of that event. There may be the desire to recognize special needs or exigencies or to discharge moral obligations. The gratification of such desires may be a more compelling motive than any thought of death."

In the Wells case, although decedent had suffered considerably from asthma and inflammation of the large intestine, both of which diseases required his hospitalization during the last two years of his life when the gifts in question were made, the Supreme Court affirmed this court's conclusion that plaintiffs had overcome the statutory presumption and definitely established the fact that "the immediate and moving cause of the transfers was the carrying out of a policy long followed by decedent in dealing with his children of making liberal gifts to them during his lifetime." 39 F.2d 998-1011, 69 Ct.Cl. 485, 513-514.²

In Griffith v. United States, 32 F.Supp. 884, 91 Ct.Cl. 240, the court found that the record disclosed that the paramount considerations in decedent's mind were the particular concern which he felt for his invalid daughter and the assurance of an adequate income for himself in later years, and that these were "the dominant motives which impelled the decedent to act, and any other considerations that might have occurred to him were purely incidental." 32 F.Supp. at page 888, 91 Ct.Cl. at page 248.

In Harris Trust and Savings Bank v. United States, 29 F.Supp. 876, 90 Ct.Cl. 17, although decedent, when in good health, contemplated the creation of the trust in question in order to relieve himself of the burdens of managing his property and in order to put his property in the hands of those most competent to manage it, the court found that the trust was created in contemplation of death because decedent did not in fact create it until three or four years after he had conceived the idea, at which time he had developed a serious heart disease, and the court concluded that "in our opinion the thought that tipped the scales and finally induced him to do the thing he had been contemplating for three or four years was this heart trouble." 29 F.Supp. at page 880, 90 Ct.Cl. at page 26.

In Russell v. United States, 38 F.Supp. 438, 93 Ct.Cl. 675, even though the court found that decedent "desired, as every male parent does who has built up a successful business by hard work and diligence, to have his sons enter the business and to carry it on in future years," 38 F.Supp. at page 447, 93 Ct.Cl. at page 692, it held that "when it is taken into consideration that the decedent made no provision for his family, with the exception of the small amounts given to his...