Lasker v. Commissioner of Internal Revenue, 8322.

• Decision Date: 04 December 1943
• Docket Number: No. 8322.,8322.
• Citation: 138 F.2d 989
• Parties: LASKER v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Seventh Circuit

138 F.2d 989 (1943)

LASKER v. COMMISSIONER OF INTERNAL REVENUE.

No. 8322.

Circuit Court of Appeals, Seventh Circuit.

December 4, 1943.

Jay C. Halls, Albert L. Hopkins, and Harry D. Orr, Jr., all of Chicago, Ill., and Samuel H. Horne, of Washington, D.C., for petitioner.

Ray A. Brown, Samuel O. Clark, Jr., Sewall Key, J. P. Wenchel, and Ralph F. Staubly, all of Washington, D.C., and Samuel H. Levy, Sp. Asst. to Atty. Gen., for respondent.

Before SPARKS, MAJOR, and MINTON, Circuit Judges.

MAJOR, Circuit Judge.

This matter is here on petition for review of a decision of the Tax Court of the United States, entered December 8, 1942, deciding that there was a deficiency in petitioner's gift tax for the year 1938, in the amount of $51,123.66. (Other questions decided by the Tax Court are not in issue here.) The deficiency was predicated upon the conclusion that payment by petitioner on December 21, 1938 to his then wife, Doris Kenyon Lasker, of the sum of $375,000 was a gift, taxable as such under Secs. 501 and 503 of the Revenue Act of 1932. Internal Revenue Acts 1924 to Date, Title 26 U.S.C.A. pages 580 and 585.

There is little, if any, dispute as to the facts out of which the legal controversy arises. They are contained largely in three documents: (1) An ante-nuptial contract between petitioner and Doris Kenyon Sills, executed October 14, 1938, in contemplation of their marriage which occurred October 28, 1938; (2) a settlement contract between the same parties as husband and wife, executed December 21, 1938, by reason of which petitioner paid his wife $375,000, the consideration mentioned therein; and (3) a divorce decree entered June 8, 1939 in the District Court of the State of Nevada, approving the property settlement theretofore voluntarily made and awarding an absolute divorce to Doris Kenyon Lasker.

In the view which we take of the legal problem presented, it appears unnecessary to relate in detail the facts as contained in or the circumstances surrounding the execution of the two contracts or the entry of the divorce decree. At the time of the execution of the ante-nuptial contract, petitioner was a widower 58 years of age, with two daughters and a son, all of whom were of age. His net worth was in excess of $10,000,000, largely securities, with real estate in Florida and in Illinois. Doris Kenyon Sills was a widow 40 years of age with one child, a son 11 years of age, without property of consequence.

By the ante-nuptial contract, petitioner agreed that if upon his death Doris Kenyon Sills "should be living with him as his wife," he would leave a will providing that she should have out of his estate any home or homes which he might thereafter acquire, with furnishings, together with the sum of $200,000 to be allowed as a debt against his estate. The will was also to contain a trust provision in her favor, by which she would receive during her life income from about one-half of petitioner's estate, with the income after her death going to her issue, including the son by a previous marriage. It was also provided that should petitioner die without leaving a will, the contract would define the rights of Doris Kenyon Sills in his estate and be binding thereon. Under this ante-nuptial agreement, she released her rights of dower, survivorship and inheritance. There was also a provision in the agreement that if the parties separated or were divorced, the agreement would become null and void and the property rights of each in the property of the other would be the same as if no ante-nuptial agreement had been made.

Of greater significance is the contract of December 21, 1938, under which petitioner paid his wife $375,000, now claimed by respondent to have been a gift. This contract expressed a desire of the parties to make present settlement of their property rights and more definitely and certainly provide for Mrs. Lasker in satisfaction and discharge of the ante-nuptial agreement and of all the rights of each in the property of the other as husband or wife and as surviving spouse or heir of the other. This settlement agreement provided that the ante-nuptial contract be cancelled and terminated and the parties released and discharged of all rights and obligations thereunder. It was further provided that petitioner's wife was to release, relinquish, waive, quitclaim, assign and convey to petitioner all rights, title and interest of every kind and nature which she as the wife or surviving spouse of petitioner under the laws of the State of Illinois may have acquired or which she might thereafter acquire during his lifetime or at his death by reason of the marriage then existing between them. There was excepted from such release statutory homestead and award for support of a widow and minor children. It was also recited that the agreement was not intended as a separation agreement or a release of petitioner's obligation to support his wife.

The Nevada court, in awarding a divorce to petitioner's wife, found "That the written agreements entered into between the plaintiff and defendant herein, settling the property rights of the plaintiff and defendant, and for support and maintenance, be, and the same hereby are adjudged to be fair and reasonable and are approved * * * that the parties henceforth shall have no right, title or interest whatsoever in or to or respecting any property, real or personal, of any kind or nature whatsoever or estate of the other arising out of or based on said...