Lindsay v. Comm'r of Internal Revenue (In re Estate of Lindsay)
| Decision Date | 22 June 1943 |
| Docket Number | 109982.,Docket Nos. 109981 |
| Citation | 2 T.C. 174 |
| Parties | THE ESTATE OF SAMUEL S. LINDSAY, DECEASED, ALEXANDER P. LINDSAY, EXECUTOR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Held, two trusts created by decedents, husband and wife, were not executed in consideration of each other and respondent erred in including in the taxable estate of each decedent the corpus of the trust created by the decedent's spouse, as to which such decedent was the life income beneficiary. Norman D. Keller, Esq., for the petitioners.
Orris Bennett, Esq., for the respondent.
The respondent determined deficiencies in estate tax as follows:
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¦Docket No. 109981, estate of Samuel S. Lindsay¦$27,963.61¦
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¦Docket No. 100982, estate of Helen P. Lindsay ¦30,278.95 ¦
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The deficiency in Docket No. 109981 resulted from the inclusion in the decedent's estate of an item of $116,100 representing the value of the corpus of a trust created in December 1934 by Helen P. Lindsay, then wife of the decedent, wherein decedent was a life beneficiary of the income.
The deficiency in Docket No. 109982 resulted from the inclusion in the decedent's estate of an item of $171,000 representing the value of the corpus of a trust created in December 1934 by Samuel S. Lindsay, then husband of the decedent, wherein decedent was a life beneficiary of the income.
The facts, part of which were stipulated, are as follows:
Samuel S. Lindsay died testate, a resident of Pittsburgh, Pennsylvania, on December 18, 1938, at the age of 82 years, leaving to survive him his widow, Helen P. Lindsay, and six sons, the children of himself and Helen P. Lindsay, all of whom were adults and married on the date of his death. His son, Alexander P. Lindsay, a practicing attorney of Pittsburgh, Pennsylvania, was duly appointed and qualified as the executor of his estate.
Helen P. Lindsay died testate on January 24, 1940, at the age of 75 years, leaving to survive her her six sons above mentioned. Her son Alexander P. Lindsay was duly appointed and qualified as the executor of her estate.
About the year 1917 Samuel S. Lindsay began to discuss with his son Alexander P. Lindsay the creation of a trust for the benefit of Samuel S. Lindsay's six children. The matter was taken up from time to time thereafter until 1928, when Alexander P. Lindsay prepared a rough draft of a trust agreement and submitted it to his father for examination. This draft contained no provision for a life estate for Helen P. Lindsay.
About the end of the year 1932, another rough draft of an agreement was prepared, at which time Alexander P. Lindsay suggested to his father that a provision be inserted giving a life estate to Helen P. Lindsay. This suggestion was first opposed by Samuel S. Lindsay but later acquiesced in by him. The trust agreement prepared at this time was not executed by Samuel S. Lindsay.
In October or early November of the year 1934 Alexander P. Lindsay prepared another agreement which was identical with the agreement as finally executed by Samuel S. Lindsay, except for certain amendments thereafter attached and the omission of the description and the value of the securities comprising the corpus of the trust thereafter inserted.
The agreement provided in general that Samuel S. Lindsay had transferred to the Peoples-Pittsburgh Trust Co., a Pennsylvania corporation, and Alexander P. Lindsay, as trustees, the property set forth in an attached exhibit, in trust to pay over and distribute the net income therefrom to the donor's wife, Helen P. Lindsay, for her life in such installments as she might from time to time designate; upon her death to divide the corpus into six equal parts and to pay over the net income from one of said equal parts to each of the donor's sons for life; upon the death of each son to such son's wife, if living, for life; upon the death of each son and his wife to pay over the income to such son's issue until they should severally attain the age of 30 years, when the corpus of such part should be divided equally among such issue, with provision for payment over in default of issue.
Early in November 1934, after this trust agreement had been read by Samuel S. Lindsay, it was submitted by Alexander P. Lindsay to a vice president in charge of trusts of the Peoples-Pittsburgh Trust Co., for suggestions. While the agreement appeared to the vice president to be satisfactory, and he so advised Alexander P. Lindsay, he in turn submitted it to a trust officer of the Peoples-Pittsburgh Trust Co. for his views.
Shortly after the middle of November 1934, not having heard from the trust officer and assuming that the agreement as drafted was satisfactory, Alexander P. Lindsay had his secretary prepare a final copy of the trust agreement.
Thereafter during the first week of December 1934, Alexander P. Lindsay discussed the trust agreement with the trust officer and, pursuant to the latter's suggestion, prepared and attached an amendment substituting the word ‘children‘ for the word ‘issue‘ in a number of places in the agreement.
The trust agreement was signed by Samuel S. Lindsay at the office of his son Alexander P. Lindsay between the 4th and 10th of December 1934, and the securities comprising the corpus of the trust were delivered by Samuel S. Lindsay to his son, one of the trustees thereunder, either at the time of signing the agreement or within a day or two thereafter. Helen P. Lindsay was not present when the agreement was signed.
The agreement was dated December 28, 1934, in accordance with Samuel S. Lindsay's wish to retain for himself the year end dividends on the stock comprising the trust corpus and yet to complete the transaction before the first of the following year in order to avoid increased gift tax rates.
The securities constituting the corpus of the trust, consisting of 1,900 shares of stock of the Pittsburgh Plate Glass Co. of a value at that time of $104,500, were delivered by Alexander P. Lindsay to the Peoples-Pittsburgh Trust Co., cotrustee, on or about December 28, 1934, and the trust was accepted by the Peoples-Pittsburgh Trust Co. on December 28, 1934.
Sometime during the third week of November 1934, after Samuel S. Lindsay's trust agreement had been written in its final form and a copy had been delivered to the Peoples-Pittsburgh Trust Co., Helen P. Lindsay asked her son Alexander P. Lindsay to come to her house for the purpose of discussing a proposed trust to be created by her. In this discussion Helen P. Lindsay stated that her husband had shown her a copy of his trust agreement and that she would like to do the same thing, but stated that she did not want her husband to know anything about it until the matter was done.
At the time the conversation just mentioned took place, no schedule of securities had been attached to Samuel S. Lindsay's trust agreement and no amount had been inserted representing the value of the securities he intended to place in his trust. Alexander P. Lindsay had no discussion with his mother concerning the amount of securities to be placed in his father's trust.
Thereafter, in the last week of November 1934, Alexander P. Lindsay prepared a trust agreement for Helen P. Lindsay, transferring to...
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