McIntosh v. Comm'r of Internal Revenue (In re Estate of McIntosh)
| Decision Date | 18 January 1956 |
| Docket Number | Docket Nos.,51125,51124,31130. |
| Citation | 25 T.C. 794 |
| Parties | ESTATE OF MARY LOIS K. McINTOSH, DECEASED, RUSSELL L. McINTOSH AND EMPIRE TRUST COMPANY, EXECUTORS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.ESTATE OF MARY LOIS K. McINTOSH, DECEASED, RUSSELL L. McINTOSH AND ST. LOUIS UNION TRUST COMPANY, TRUSTEES AND TRANSFEREES, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.ESTATE OF MARY LOIS K. McINTOSH, DECEASED, EUGENE KILPATRICK PERRY, TRANSFEREE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
1. ESTATE TAX— GROSS ESTATE— SEC. 811(d)(2).— Decedent in 1929 through a nominee set up a spendthrift trust for her benefit for life, remainder on death to her then heirs at law. She retained a power to appoint by will which she relinquished in 1943 to avoid estate taxes. Held, the trust was revocable under Missouri law where it was created. Held, further, the power was relinquished in contemplation of death. Accordingly, the value of the corpus was includible to gross estate.
2. DEDUCTIONS FOR ADMINISTRATION EXPENSES AND CLAIMS— SEC. 812(b)(5).—Decedent's estate took a deduction of $15,000 for a dependent's allowance and later amended pleadings to claim $18,000, which was paid pursuant to order of local Probate Court. Respondent allowed $12,000. On facts, held, respondent's allowance approved. No more than $12,000 shown to have been ‘reasonably required’ for widower's support. Arthur M. Conley, Esq., and Frederick Pope, Jr., Esq., for the petitioners in Docket Nos. 51124 and 51125.
Raymond A. Carter, Esq., and Sidney D. Rosoff, Esq., for the petitioner in Docket No. 51130.
James R. McGowan, Esq., for the respondent.
The Commissioner determined a deficiency of $254,759.76 in estate tax to be due from the estate of Mary Lois K. McIntosh. The same deficiency has been determined against the other petitioners as transferees.
The questions for decision are (1) whether the value of the corpus of a certain trust is includible in decedent's gross estate and (2) whether the full amount of $18,000 paid for the support of the decedent's husband during settlement of the estate was a proper deduction rather than the $12,000 allowed by the Commissioner.
In the event a deficiency is determined, transferee liability is conceded by petitioners in Docket Nos. 51125 and 51130.
The stipulated facts are so found and the stipulation and exhibits thereto are included herein by reference.
Mary Lois K. McIntosh (hereafter sometimes called the decedent) died on May 21, 1949, aged 63 years, 9 months. Her executors filed an estate tax return on August 21, 1950, with the collector of internal revenue for the district of Connecticut.
In 1928 the decedent was sued in an alienation of affections suit and as a result she turned over to her then husband certain negotiable securities for management. She soon became apprehensive of her husband's management of the property and sought assistance in securing its return.
These troubles worried the decedent (who was then Mary Lois K. Perry) and for the purpose of protecting her properties against herself and generally against the misapplication of her funds she arranged for the creation of a trust on February 16, 1929. On that date she conveyed certain of her properties to Thomas J. Boland, a young lawyer in the office of Paul Bakewell, Jr. Boland, as nominal settlor, on the same day conveyed the properties to the St. Louis Union Trust Company and Bakewell, as trustees, under a written trust instrument. The use of Boland as nominal settlor was made in an attempt to avoid the rule of Missouri law that a settlor cannot create a spendthrift trust for his own benefit. The trust that was created and is here involved is a spendthrift trust.
The trust instrument provided, inter alia:
said trust shall continue for the sole use and benefit of Mary Lois K. Perry, now of New York City, New York, for and during her natural life, and during said trust the Trustee shall pay the taxes on said real estate and all proper charges and expenses in connection with the management and administration thereof. After the payment of such taxes and such proper charges and expenses, the Trustees hereunder shall pay the entire net income from the trust estate as hereby created in monthly installments of as nearly an equal amount as may be conveniently possible to the said Mary Lois K. Perry.
During the continuance of the trust hereby created, the Trustees shall have and hold the trust estate, and the beneficiary thereof, Mary Lois K. Perry, from time to time, shall enjoy the same subject to the following conditions, limitations, power and discretions in addition to those hereinbefore specified, to wit:
The Trustees shall receive, manage and control the trust estate and the property thereof as the Trustees may deem best for the interests of the beneficiary: * * *
The Trustees shall, from time to time, collect the rents and profits of and from the real estate hereby conveyed, and in the event of any sale thereof, and the reinvestment of proceeds of such sale, shall collect the rent, interest, dividends or profits from any such investments made by the Trustees and shall disburse the net income as herein authorized and directed.
In the event that there shall come into the hands of the Trustees hereunder any stock in any corporation upon which distribution or disbursements of stock may be made in the manner or form of stock dividends, then all of such stock dividends that may be so received by the Trustees hereunder shall, by the Trustees hereunder, be regarded as income, and not as corpus, and any and all stock dividends shall be distributed and delivered to the beneficiary hereunder as income.
The beneficiary hereunder, Mary Lois K. Perry, shall not have power to sell, assign, pledge, encumber or anticipate any interest created by this instrument, whether that interest be in the income or the principal of the trust estate; nor shall the interest therein of the said beneficiary be liable for her debts, nor subject to any suit at law or equity, it being the purpose of this instrument to provide that no right to alienate or create a charge upon the income from the trust estate hereby created shall exist or vest in the beneficiary hereunder, Mary Lois K. Perry, until the said income shall have been actually paid over to her.
If any suit be filed, the purpose of which is to reach any interest of Mary Lois K. Perry in the trust estate, or to make same liable for her debts to any manner before the income therefrom shall have been actually transferred or paid over to her, then, until any such suit shall have been finally determined, the right of the beneficiary hereunder, Mary Lois K. Perry, to any payment from the trust estate shall stand suspended and be unenforcible.
While any such suit is pending, however, the Trustees hereunder may, in their discretion, apply such portion of the income from the trust estate as they may see fit for the maintenance and support of the said Mary Lois K. Perry.
The right of Mary Lois K. Perry as beneficiary hereunder to receive the income from the trust estate created by this instrument shall be for her sole and separate use, and free and clear of and from any claim or right, interest or control by any husband of the said Mary Lois K. Perry.
On the death of the said Mary Lois K. Perry, the trust hereby created shall end, and the entire trust estate created by this instrument, together with any and all accumulated and undistributed income therefrom, shall go to such parties and under such terms and conditions as the said Mary Lois K. Perry may, by her last will, direct. In the event that the said Mary Lois K. Perry shall die intestate, or should fail to exercise said power by her last will, then, on her death, the entire trust estate hereby created, together with any and all accumulated and undistributed income therefrom, shall go and pass to the then heirs at law of the said Mary Lois K. Parry (sic), under the statutes of descent and distribution of the State of Missouri, free of any trust whatever, provided, however, that any portion or portions which shall pass to any heirs at law of the said Mary Lois K. Perry who are then minors, shall not pass to such minors directly, but the portions of any such minor heirs at law shall continue with the said Trustees in trust for them respectively until they respectively become of legal age, then, to be transferred and paid to them free of trust. During the continuance of any such trust for minors the Trustees shall pay or apply the net income from such trust estate for the support, education and maintenance of such minor or minors.
During the continuance of any such trust for minors, the Trustees shall have the same duties and the same powers as are given them by this instrument with regard the the trust hereby created for the life of Mary Lois K. Perry.
The trust instrument also provided that on the death, resignation or incapacity of Paul Bakewell as trustee, ‘then the beneficiary hereunder, Mary Lois K. Perry, shall have the right and power to nominate and appoint a successor individual Trustee’; and further provided that ‘at any time or times during the continuance of the trust as hereby created, the beneficiary, Mary Lois K. Perry, in her sole discretion, shall have the right to appoint a successor or successors from time to time to the St. Louis Union Trust Company, ‘ with the limitation that such successor should be a corporate fiduciary located in St. Louis.
On May 27, 1929, Paul Bakewell addressed to the decedent a written resignation as co-trustee, ‘such resignation to be effective at your pleasure, whenever accepted by you.’
The decedent divorced Eugene Perry in 1931 and married Russell L. McIntosh later in that year.
On May 14, 1934, she accepted the written resignation of Paul Bakewell as co-trustee, which written resignation had been in her...
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