Poor v. White, 5625.

• Decision Date: 07 August 1934
• Docket Number: No. 5625.,5625.
• Citation: 8 F. Supp. 995
• Parties: POOR et al. v. WHITE, Collector.
• Court: U.S. District Court — District of Massachusetts

8 F. Supp. 995

POOR et al. v. WHITE, Collector.

No. 5625.

District Court, D. Massachusetts.

August 7, 1934.

Hutchins & Wheeler, Harry LeBaron Sampson, and Edwin A. Howes, all of Boston, Mass., for plaintiffs.

Francis J. W. Ford, U. S. Atty., and J. Duke Smith, Sp. Asst. to U. S. Atty., both of Boston, Mass., for defendant.

BREWSTER, District Judge.

This action is brought to recover an alleged overassessment and overpayment of an estate tax assessed upon the transfer of the net estate of Adelaide J. Sargent, deceased. The controversy arises over the act of the Commissioner of Internal Revenue in including in the gross estate the value of certain property conveyed to trustees by the decedent. The case was heard upon an agreed statement of facts and evidence presented at the trial.

I find the facts to be as stipulated, and I further find from the evidence that the transfer was not made by the decedent in contemplation of death.

The pertinent facts may be stated as follows:

In 1907, the decedent conveyed certain property in trust, for the benefit of herself and her children. This trust was revoked in 1911, and another trust created which was also revoked in 1919. In both of the trust instruments the power of revocation was expressly reserved to the settlor. To take the place of the trust created in 1911, the decedent, on December 31, 1919, created the trust involved in the present suit. The purpose of this last trust was to more definitely fix the shares of the beneficiaries, to join as trustee a disinterested person with no beneficial interest, and to eliminate any reserved power of revocation so that the income would not be wholly taxed to the settlor.

The decedent, her son, Arthur H. Sargent, and Harry LeBaron Sampson were the trustees who joined in the declaration of trust, dated December 31, 1919, and on that date the decedent transferred to the trustees the real and personal property, the value of which the Commissioner included in the gross estate for the purpose of computing the estate tax.

At the time of this conveyance, Mrs. Sargent was 83 years old, in good health, and showed remarkable vigor of mind and body for one of her age. In 1920, she traveled abroad, and it was not until 1931 that she died, and this as a result of a fall. The evidence does not warrant a finding that when, in 1919, she conveyed the property in trust, she was transferring it in contemplation of death. She was merely carrying forward a plan which originated in 1907, without any thought or consciousness of impending death or of effecting a testamentary disposition of her property. The fact that upon the final distribution the property would go to her descendants after the death of the survivor of the beneficiaries is not enough to justify a finding that the transfer was made in contemplation of death, within the meaning of the statute imposing estate taxes.

By the terms of the trust, the trustees were to pay one-half of the net income to the decedent during her lifetime and the other one-half to her three children until her death; then all of the income was to go to the children. Upon the death of the last survivor of the decedent and the three children who were the beneficiaries, the trust was to terminate, and the trust res was to be distributed according to the terms of the trust agreement.

The declaration of trust contained no provision by which the settlor reserved any right to alter, amend, or revoke the trust, either alone or in conjunction with any other person. The instrument did contain, however, the following provision for terminating the trust: "Eighth. This trust may be terminated at any time either as to the whole or as to any part of the property held in trust hereunder, by the person or persons who shall then be trustees hereunder, such termination to be evidenced by a written declaration signed, sealed and acknowledged by them and duly recorded, * * * setting forth specifically the property as to which such termination is to take effect, and in that event the trusts declared hereunder shall as to such property be at an end and such property shall be paid over and conveyed, free and discharged of all trusts, to the said Adelaide J. Sargent, if she be then living, and if she be not then living one share shall be paid over and conveyed to each of her children who shall then be living. * * *" Then follow provisions for the payment of the shares to any child who was not then living.

There was a provision in the instrument that, in case of absence from the United States of any trustee thereunder, the other two trustees could exercise all the powers of the trustees and perform their duties. It appeared in the evidence that this provision was inserted because one of the trustees, Arthur H. Sargent, resided a considerable portion of his time in Paris, although at the time of the decedent's death, and for some substantial period prior thereto, he was in this country.

The trust also provided for the filling of vacancies by the remaining trustees, if any one of the trustees should die or resign.

In 1920, Mrs. Sargent resigned as trustee, and her daughter, Mary Adelaide Poor, was appointed by the remaining trustees to fill the vacancy. Mrs. Poor held office until November 9, 1921, when she resigned, and the decedent was duly appointed by the remaining trustees to fill the vacancy. The deceased continued to be one of the trustees until the time of her death on January 22, 1931. The other trustees, Arthur H. Sargent and Harry LeBaron Sampson, continued as trustees throughout the whole period, from the beginning of the trust until the death of Mrs. Sargent.

Parties are agreed as to the value of the property transferred by trust. It is contended that the value was properly included in the gross estate of the decedent because it fell within section 302 (c) of the Revenue Act of 1926 (26 USCA § 1094 (c). This section authorized the inclusion in the gross estate of a decedent of the value, at the time of his death, of property, "to the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for an adequate and full consideration in money or money's worth."

I have found as a fact, and I now rule as a matter of law, that the transfer by trust was not made in contemplation of death. United States v. Wells et al., Ex'rs, 283 U. S. 102, 51 S. Ct. 446, 75 L. Ed. 867. Nor can it be ruled that the transfer was one to take effect in possession or enjoyment at or after the decedent's death, in view of Reinecke, Coll. v. Northern Trust Co., 278 U. S. 339, 49 S. Ct. 123, 73 L. Ed. 410, 66 A. L. R....