McGrew's Estate v. Commissioner of Internal Revenue

• Decision Date: 12 April 1943
• Docket Number: No. 9354.,9354.
• Citation: 148 ALR 1045,135 F.2d 158
• Parties: McGREW'S ESTATE et al. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Sixth Circuit

148 ALR 1045, 135 F.2d 158 (1943)

McGREW'S ESTATE et al. v. COMMISSIONER OF INTERNAL REVENUE.

No. 9354.

Circuit Court of Appeals, Sixth Circuit.

April 12, 1943.

Seymour Samuels, Jr., of Nashville, Tenn. (Seymour Samuels, Jr. and James W. Allen, both of Nashville, Tenn., on the brief), for petitioner.

Bernard Chertcoff, of Washington, D. C. (Samuel O. Clark, Jr., Sewall Key, Samuel H. Levy, and Carlton Fox, all of Washington, D. C., on the brief), for respondent.

Before HICKS, SIMONS, and MARTIN, Circuit Judges.

MARTIN, Circuit Judge.

On petition to review a decision of the United States Board of Tax Appeals (now the United States Tax Court), determining a specified deficiency in the estate tax of a resident of Tennessee who died on March 16, 1937, the executor of Benjamin Franklin McGrew assigns error in two aspects.

1. The first error charged is that, upon a false predicate that the conveyances were made in contemplation of death within the meaning of Section 302(c) of the Revenue Act of 1926, as amended, 26 U.S.C.A. Int. Rev.Code, § 811(c),¹ the Board of Tax Appeals sustained the action of the Commissioner of Internal Revenue in including, in the decedent's gross estate, the value of two tracts of farm land conveyed on April 30, 1935, by the decedent to his wife.

The Board of Tax Appeals found, as a matter of fact, that the conveyance by the decedent to his wife was made without consideration and in contemplation of his death. This ultimate finding flowed from other findings, among which stood out prominently the fact that, within less than three weeks after the conveyance, the decedent executed a will, under the provisions of which he devised and bequeathed his entire estate, after payment of debts, to a trustee, for the benefit of his wife during her natural life, with full power of disposition of the estate by will vested in her. The Board found, moreover, that the deed of conveyance was kept by decedent's wife in her safety deposit box, and was not recorded until after her husband's death.

The findings of the Board embraced the fact that, on account of numerous lawsuits pending against him, the decedent was apprehensive that he would lose the greater part of his property, and desired his wife to own the two small tracts conveyed, adjoining a farm which had been devised to her by her first husband. From the time of her second marriage, she and the decedent had resided on this farm. He managed it, paid the taxes, and took the proceeds of the products. He had often stated that he intended to deed to her the two tracts in controversy. At the time he actually did so, he was in "fairly good health, although he had never been a strong man," and "was not then suffering from the illness which caused his death"; but was worried over the pending litigation.

In its opinion, the administrative tribunal complained that, inasmuch as the burden rested upon the petitioner to overcome the prima facie correctness of the Commissioner's determination that the decedent transferred the property in contemplation of his death, and in view of the presumption created by Section 302(c) of the Revenue Act, the Board "should have been placed in a position to determine by means of a sufficiently complete description of all relevant facts what was decedent's impelling motive in making the two transfers." Declaring that the petitioner "fell far short of doing this," the Board pointed out that the age, and state of mind of the decedent when the transfers were made, and the cause of his death had not been revealed; and that, although he was ill within six months of the time of the conveyance, the nature of his illness had not been shown. It was said: "The single circumstance relied upon to induce us to determine that these transfers were not made in contemplation of death is that decedent had previously intended to transfer the property to his wife and that at the time he feared his creditors might take it. But, even this, in the form in which the evidence appears, is about as consistent with the one motive as with the other. * * * The record, taken as a whole, leaves us far from satisfied that the gift was not brought about by testamentary motives. We have accordingly made the finding that the property was transferred in contemplation of death."

Since United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 452, 75 L.Ed. 867, it has been established law that whether a gift inter vivos was made in contemplation of death within the meaning of the Revenue Act depends upon the dominant motive of the donor, "in the light of his bodily and mental condition," to be determined in each individual case from the circumstances; and that a transfer may be in contemplation of death, even though not induced by the fear that death is "near at hand."

The burden of proving the incorrectness of a decision of the Commissioner of Internal Revenue, that property of the decedent was transferred by him in contemplation of death within the meaning of the Revenue Act pertaining to estate taxes, rests upon the representative of the decedent who attacks the assessment. Wickwire v. Reinecke, 275 U.S. 101, 48 S.Ct. 43, 72 L.Ed. 184; Oliver v. Bell, 3 Cir., 103 F.2d 760, 763; Smails v. O'Malley, 8 Cir., 127 F.2d 410.

The Supreme Court held, in Colorado Nat. Bank v. Commissioner of Internal Revenue, 305 U.S. 23, 59 S.Ct. 48, 83 L.Ed. 20, that the decision of the Board of Tax Appeals as to whether a transfer was in contemplation of death is a question of fact upon which the decision of the Board, if supported by substantial evidence, is conclusive. Compare McCaughn v. Real Estate Land Title & Trust Co., 297 U.S. 606, 56 S.Ct. 604, 80 L.Ed. 879.

The limited power of the circuit courts of appeal in reviewing issues of fact in tax cases has been made clear by the highest authority. In Wilmington Trust Co., Executor, v. Helvering, Commissioner of Internal Revenue, 316 U.S. 164, 168, 62 S.Ct. 984, 986, 86 L.Ed. 1352, the Supreme Court said: "It is the function of the Board, not the Circuit Court of Appeals, to weigh the evidence, to draw inferences from the facts, and to choose between conflicting inferences. The court may not substitute its view of the facts for that of the Board. Where the findings of the Board are supported by substantial evidence they are conclusive. Citing cases. Under the statute the court may modify or reverse the decision of the Board only if it is `not in accordance with law.' 44 Stat. 110, § 1003 (b), 26 U.S.C. Int.Rev.Code, § 1141(c) (1)." See, also, Helvering v. F. & R. Lazarus & Co., 308 U.S. 252, 255, 60 S.Ct. 209, 84 L.Ed. 226; Helvering v. Kehoe, 309 U.S. 277, 279, 60 S.Ct. 549, 84 L.Ed. 751; Elmhurst Cemetery Co. v. Commissioner, 300 U.S. 37, 40, 57 S.Ct. 324, 81 L.Ed. 491; General Utilities Co. v. Helvering, 296 U.S. 200, 206, 56 S.Ct. 185, 80 L.Ed. 154; Helvering v. Rankin, 295 U.S. 123, 131, 55 S.Ct. 732, 79 L.Ed. 1343; Crowell v. Commissioner, 6 Cir., 62 F.2d 51, 53.

In the circumstances of this case, there was substantial evidence from which the Board of Tax Appeals could reasonably draw the inference upon which its decision was based. This court is, therefore, constrained to uphold the decision of the Board that the conveyance by the decedent was without consideration, and in contemplation of his death.

2. The second ground of attack upon the decision of the Board of Tax Appeals is that $19,350, which the decedent's wife had received from him and deposited in a joint savings account, should not have been included in his gross estate under Section 302(e) of the Revenue Act of 1926,² Section 811(e), Internal Revenue Code, 26 U.S. C.A. Int.Rev.Code, § 811(e).

The facts found by the Board, upon which the inclusion was made, will be narrated in substance. At a time when the decedent was ill, a judgment approximating $83,000 was rendered against him. By selling securities and other property, owned partly by herself and partly by the decedent, his wife accumulated sufficient cash to pay the judgment. Twenty-five thousand dollars of the necessary sum was procured from the sale by her of a portion of her individual property. Subsequently, the decedent gave...