Reinecke v. Northern Trust Co.
| Decision Date | 12 December 1927 |
| Docket Number | No. 3928.,3928. |
| Parties | REINECKE, Collector of Internal Revenue, v. NORTHERN TRUST CO. |
| Court | U.S. Court of Appeals — Seventh Circuit |
T. H. Lewis, of Washington, D. C., for plaintiff in error.
J. F. Dammann, Jr., of Chicago, Ill., for defendant in error.
Before EVANS, PAGE, and ANDERSON, Circuit Judges.
After the collector of internal revenue, defendant (plaintiff in error), elected to abide by her demurrer to the plaintiff's (defendant in error's) declaration, the plaintiff, executor of the will of A. C. Bartlett, who died May 30, 1922, was awarded a judgment for that part of the tax collected from the executor, under the Revenue Act of 1921 (42 Stat. 227), because the government had included as a part of the gross estate of decedent the property covered by five trusts created in 1919, one in 1903 and one in 1910.
Defendant states the questions involved as follows:
(1) Were the trusts created by Adolphus C. Bartlett intended to take effect in possession or enjoyment within the meaning of section 402 (c) of the Revenue Act of 1921 (42 Stat. p. 277)?
(2) Can Congress include in a decedent's gross estate the value of property conveyed by a revocable trust instrument prior to September 8, 1916?
(3) Can Congress include in a decedent's gross estate the value of property conveyed after September 8, 1916, by a trust instrument which is revocable by the settlor, acting jointly with a majority of the beneficiaries?
Defendant contends for an affirmative answer to each. In each of the trusts there was an absolute transfer and conveyance of the property to the trustee.
Under the first of the 1919 trusts, the income was to be paid to the wife and children until the period of distribution of the corpus, after the death of the settlor. The settlor reserved the right (1) to supervise the reinvestment of the trust funds; (2) to require the trustee to execute such proxies for voting stocks transferred as he might wish; (3) to control all leases made; (4) jointly with the majority of the beneficiaries to alter, change, or modify the terms of the trust.
The other four 1919 trusts were severally made for the benefit of a child of the settlor. As drawn, they provided for the accumulation of the whole income until the period of distribution of the corpus, after the death of the settlor, except so much thereof as the settlor might, from time to time, direct to be paid to the beneficiary named. By amendments made on June 28, 1921, in the manner provided in the trust instruments, the beneficiary under each was to be paid the income. The corpus of the trust fund went to the beneficiary, or to his heirs or devisees, and, in default of such heirs or devisees, it went to the issue of the settlor. All the 1919 trusts gave very full powers to the trustee. The last four contained the same reservations as the first, as above set out.
In the 1903 trust, it was provided that the income was to be paid to the settlor for life; then to a daughter until the termination of the trust. The corpus was to be paid to the daughter, or, in the event of her death before distribution, it was to go in much the same manner as provided in the 1919 trusts. Except that another daughter is the beneficiary, the 1910 trust is identical with the 1903 trust. In each, the settlor reserved the right of revocation.
The relevant portions of the statute are as follows:
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