Price v. Comm'r of Internal Revenue (In re Estate of Martin)

• Decision Date: 27 January 1955
• Docket Number: Docket No. 42069.
• Citation: 23 T.C. 725
• Parties: ESTATE OF SERGEANT PRICE MARTIN, DECEASED, PHILIP PRICE, ADRIAN BLOCK, REUBEN BROST, NELSON C. BROWN, AND ALICE BAKER BROWN, EXECUTORS, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

23 T.C. 725

ESTATE OF SERGEANT PRICE MARTIN, DECEASED, PHILIP PRICE, ADRIAN BLOCK, REUBEN BROST, NELSON C. BROWN, AND ALICE BAKER BROWN, EXECUTORS, PETITIONERS,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 42069.

Tax Court of the United States.

Filed January 27, 1955.

George Craven, Esq., for the petitioners.

William G. Handfield, Esq., for the respondent.

Decedent's great-grandfather created a testamentary trust. Decedent's mother had a life estate in and a testamentary power of appointment over a portion of the income and corpus of the trust. She predeceased decedent. Decedent died without issue before the end of the trust. Whether decedent's estate had any interest in income of the trust until it ended depends upon whether decedent's mother effectively exercised her power, and, also, upon construction of her appointment. Held, that decedent's mother effectively exercised her power; that she intended that upon decedent's death without issue before the end of the trust, his share of trust income should pass to her other surviving children in being at the end of the trust; and, therefore, that there should not be included in decedent's gross estate under section 811(a) the value of an interest in a share of the trust income for the period from decedent's death until the end of the trust.

The Commissioner determined a deficiency in estate tax in the amount of $222,607.99. The petitioners claim that there is no deficiency; they claim, further, that there is overpayment of estate tax in the amount of $17,503.04.

The Commissioner has receded from certain determinations. One issue remains for decision, whether the decedent had a vested interest, under the will of the settlor of a testamentary trust, in trust income (one-ninth) during the term of the trust, which is includible in his gross estate under section 811(a) of the 1939 Code.

FINDINGS OF FACT.

The stipulated facts are found according to the stipulation of the parties. The stipulation of facts and the attached exhibits, including the will of Eli K. Price, are incorporated herein by this reference.

Although certain questions are no longer at issue, extensive facts must be found which are necessary for understanding the remaining issue.

The petitioners are the duly appointed executors of the will of the decedent, Sergeant Price Martin, who died testate, a resident of the State of New York, on January 9, 1948. He was about 61 years of age at the time of his death. He died without issue. His estate tax return was timely filed with the collector of internal revenue for the twenty-eighth district of New York in Buffalo. The return reported estate tax liability of $17,503.54 which was paid.

The decedent was the great-grandson of Eli K. Price, the grandson of John Sergeant Price, and the son of Elizabeth Price Martin.

Eli K. Price, hereafter called the testator, died testate on November 15, 1884. Under his will two-thirds of his residuary estate was impressed with a trust for the benefit of his four grandchildren and their families. The trust is referred to hereafter as the Price Trust.

The testator was survived by his son, J. Sergeant Price; three grandchildren who were children of J. Sergeant Price, namely, Eli K. Price, Jr., Elizabeth C. Price (who became Elizabeth Price Martin), and J. Sergeant Price, Jr.; and by a fourth granddaughter, Anna R. Withers (who became Anna R. Withers Martin), the daughter of the testator's deceased daughter, Rebecca Price Withers. The testator's son, J. Sergeant Price, died on August 16, 1897.

By the testator's will, each grandchild was given a testamentary power to appoint one-tenth of his or her share of the trust income to his or her surviving spouse for life, and ‘all the rest of his or her share of share income, under and during the trust, and his or her proportionate share * * * of the reversionary estate * * * to and among his or her children or their child or children, as they may respectively think proper, as to proportion, limitations and estates, and as the law will permit, or wholly omitting some as he or she may think there is occasion.’ The testator's will provided, also, as follows:

But, if he or she should make no appointment, and leave a child or children to survive, or their issue, these so living shall take said share of the income and of the reversion * * *, as they would take the real and personal estate of the decedent by the intestate laws of Pennsylvania, but subject to said trust while it shall endure. But, should any such grandchild of mine leave no child or issue living at his or her death, the said other children or child of my son (and daughter) shall take the share of the decedent, equally, under this section of my Will, and the surviving issue of any then deceased child shall take the share the deceased would have taken, if then living, in the shares they would take his or her intestate estate, but subject to said trust during its assigned limitation: * * *

Under the will of Eli K. Price, the trust was to exist during the lives of his son and grandchildren and of their children in being during the life of Eli K. Price, and also during the minority of their children coming into being after the death of Eli K. Price; or during the life of the survivor of those in being during the life of Eli K. Price, or the majority of those coming into being after his death, whichever shall be the latest in time. The settlor expressed in his will his intention not to violate the rule against perpetuities.

The last surviving life measuring the term of the trust was that of the decedent's uncle, J. Sergeant Price, Jr. At the time of our decedent's death he was unmarried; he was 74 years old. J. Sergeant Price, Jr., died on June 16, 1948, about 5 months after the death of our decedent. At the time of his death he was unmarried and without issue. The trust terminated upon the death of J. Sergeant Price, Jr.

Elizabeth Price Martin, our decedent's mother, died on April 5, 1932. Eli K. Price, Jr., died on January 24, 1933. Anna R. Withers Martin died on November 9, 1937, and her husband, Edward Martin, died on March 17, 1938.

Elizabeth Price Martin was survived by three children (including our decedent), and five grandchildren, all being the children of one of her daughters, Marion W. Rivinus. At the time of her death, the ages of her survivors ranged from 3 to 45 years.

Eli K. Price, Jr., was survived by four children, all of whom survived Elizabeth Price Martin, and all of whom were living upon the termination of the trust.

No children survived Anna Martin. Therefore, under the will of Eli K. Price, Anna Martin's proportional share of the trust and of the trust income merged with and became part of the shares of the children of John Sergeant Price, namely, Eli K. Price, Jr., Elizabeth Price Martin, and J. Sergeant Price, Jr. ¹

Elizabeth P. Martin, in her last will, exercised her power of appointment over her interest in the income and corpus of the Price Trust in the following terms:

Having disposed as aforesaid of my entire estate, I appoint in exercise of the power conferred upon me by the will of my grandfather, Eli Kirk Price, all my share of the income of his estate under and during the continuation of the trust created by his will and my proportionate share of the reversion of his estate under said will to and among my children living at the date of the termination of the trust and the issue of any of them then deceased in equal shares per stirpes.

The survivors of our decedent, in addition to his uncle, J. Sergeant Price, Jr., were the four children of Eli K. Price, Jr., deceased, namely, Philip Price, Eli K. Price, III, Evelyn Hamilton, and Rachel P. Williamson; his two sisters, E. Gwen Martin and Marion W. Rivinus; and five children and eight grandchildren of Marion W. Rivinus. All of these individuals were alive when the Price Trust ended. When our decedent died, the ages of the surviving issue of Elizabeth Price Martin ranged from 1 to 58 years.

Our decedent was survived by 20 descendants of the testator, Eli K. Price, of whom 15 were descendants of Elizabeth Price Martin.

Eli K. Price, the testator, expressed the intention in his will that his children and their grandchildren should share in the trust ‘as nearly equally as practicable.’ His will provide, inter alia, in paragraph 22, as follows:

But, if he or she (a grandchild) should make no such appointment, and leave a child or children to survive, or their issue, these so living shall take said share of the income and of the reversion of my residuary estate, as they would take the real and personal estate of the decedent by the intestate laws of Pennsylvania, but subject to said trust while it shall endure. But, should any such grandchild of mine leave no child or issue living at his or her death, the said other children or child of my said son (John Sergeant Price) shall take the share of the decedent, equally, under this section of my Will, and the surviving issue of any then deceased child shall take the share the deceased would have taken, if then living, in the shares they would take his or her intestate estate but subject to said trust during its assigned limitation: * * * After the death of Elizabeth P. Martin, the trustees of the Price Trust were unwilling to accumulate any of the income of her share of the trust principal for fear of making an unlawful accumulation of income. Therefore, they distributed the income of her share of the trust equally among her three surviving children, including the decedent, even though Elizabeth had appointed in her will, under her exercise of her power of appointment, all of her share of the income of the trust to her children ‘living at the date of the termination of the trust and the issue of any of them then deceased.’ Accordingly, our decedent received a share of the trust income during the remainder of his life.

Prior to the death of our decedent, the proportionate share of...