Real Estate Land Title & Trust Co. v. McCaughn
Decision Date | 11 September 1935 |
Docket Number | No. 5558.,5558. |
Citation | 79 F.2d 602 |
Parties | REAL ESTATE LAND TITLE & TRUST CO. et al. v. McCAUGHN. |
Court | U.S. Court of Appeals — Third Circuit |
J. Warren Brock, John F. E. Hippel, Franklin S. Edmonds, and Edmonds, Obermayer & Rebmann, all of Philadelphia, Pa., for appellants.
Charles D. McAvoy, U. S. Atty., and Thomas J. Curtin, Asst. U. S. Atty., both of Philadelphia, Pa. (Frank J. Wideman, Asst. Atty. Gen., and Sewall Key and Maurice J. Mahoney, Sp. Assts. to Atty. Gen., of counsel), for appellee.
Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.
The decisions of this court1 have uniformly held the creation of deeds of trust tax free where sound health and purposes associated with creator's life, rather than with death, led to their creation. Such cases depend on their individual facts. In United States v. Wells, 283 U. S. 102, at page 119, 51 S. Ct. 446, 452, 75 L. Ed. 867, the Supreme Court said:
In affirming the court below 39 F.(2d) 998, 69 Ct. Cl. 485 in that case — which was a much weaker case for the taxpayer than the present one — the Supreme Court, as we view it, stated the decisive question in such cases, namely, "the question, necessarily, is as to the state of mind of the donor," and then cited certain constraining things which might properly influence and evidence the mind of the donor, saying:
Referring to the finding of the court below that the transfer to the donor's children there involved was "a continuation and final consummation of such policy," the Supreme Court said "that this was the motive which actuated the decedent in making these transfers seems unquestioned," and, we may now add, affirmed the contention of the taxpayer.
Turning then to the case before us, we note that no question of the donor executing the trust in contemplation of death is here involved. The trial judge found:
Such being the case, the instrument being made by the donor in contemplation of life, not in contemplation of death, "the question" before us, as quoted above from the Wells Case, "is as to the state of mind of the donor."
The proof is that Dr. Malcolm MacFarlan was a firm-minded Scot, and that with the persistent pertinacity of an opinionated Scotchman, he had methodically husbanded the large gains arising from his profession — he was a leading physician of Philadelphia — until they amounted to nearly three quarters of a million. His life was devoted to acquisition, and coupled with his earning a fortune, was a firm determination on his part to place that fortune in trust for his children. His life was dominated by these two adhered-to lines of conduct. His acquisitions from the fifty-seven years of the practice of medicine and the interest and accretions therefrom amounted to between six and seven hundred thousand dollars. As to the disposition of his fortune, his plan and its fulfillment were in one undeviating path, namely, the creation of irrevocable trusts in favor of his children. His belief in trusts was basic, or, as testified to by his son, His experience with that estate is strikingly illustrative of the earnestness and sincerity of his dominating motive of trust.2 He urged his father-in-law to create such a trust for his children; his advice was followed and a trust was created in favor of his children. For some reason, the trust was broken and all of the father-in-law's estate, except that which was inherited by Dr. MacFarlan's wife, was dissipated. Moved by this forcible vindication of his views and evidently feeling that his own children inherited spendthrift blood, he had his children convey to him their interest in their mother's estate, whereupon he created a trust, which is still effective, giving the whole estate to his children. A son testified as to these incidents:
(Dr. MacFarlan's father-in-law) "leave a large estate? A. He had left a half a million dollars, one hundred thousand dollars of which accrued to my mother.
It will be noted that the making of this trust was solely for the benefit of the children and that Dr. MacFarlan gave up all spouse rights in his wife's estate. This...
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