St. Louis Union Trust Company v. Commissioner of Internal Revenue, Docket No. 47633.

• Citation: 28 BTA 107
• Decision Date: 16 May 1933
• Docket Number: Docket No. 47633.
• Parties: ST. LOUIS UNION TRUST COMPANY, AS SUCCESSOR TRUSTEE TO LIBERTY CENTRAL TRUST COMPANY, AS SOLE RESIDUARY LEGATEE AND DISTRIBUTEE OF THE AMERICAN ESTATE OF WILLIAM J. ORTHWEIN, DECEASED; JOINED BY MERCANTILE COMMERCE BANK & TRUST COMPANY, SUCCESSOR TRUSTEE TO MERCANTILE TRUST COMPANY, OF THE TRUST CREATED BY TRUST INDENTURE OF WILLIAM J. ORTHWEIN, DATED JANUARY 1, 1920, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

28 B.T.A. 107 (1933)

ST. LOUIS UNION TRUST COMPANY, AS SUCCESSOR TRUSTEE TO LIBERTY CENTRAL TRUST COMPANY, AS SOLE RESIDUARY LEGATEE AND DISTRIBUTEE OF THE AMERICAN ESTATE OF WILLIAM J. ORTHWEIN, DECEASED; JOINED BY MERCANTILE COMMERCE BANK & TRUST COMPANY, SUCCESSOR TRUSTEE TO MERCANTILE TRUST COMPANY, OF THE TRUST CREATED BY TRUST INDENTURE OF WILLIAM J. ORTHWEIN, DATED JANUARY 1, 1920, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 47633.

Board of Tax Appeals.

Promulgated May 16, 1933.

Daniel N. Kirby, Esq., for the petitioners.

Ralph F. Staubly, Esq., for the respondent.

This proceeding is for the redetermination of a deficiency in estate tax of $15,565.18. The deficiency was determined against the American estate of William J. Orthwein, who died a nonresident of the United States.

Certain issues raised by the pleadings respecting the taxability of jointly owned property, the allowance of deductions on account of administration expenses and debts of the decedent, and the allowance or credit on account of inheritance taxes paid, have been disposed of by a stipulation of facts filed. The issues presented for the determination of the Board are:

(1) Where the decedent, a nonresident, places property in trust with a domestic corporate trustee, consisting of shares of stock in domestic corporations and foreign and domestic bonds, to pay the income to his daughter for life, the remainder to be distributed according to the provisions of the trust instrument but in the event of the daughter predeceasing the decedent the property to revert to the grantor, is the value of the property in excess of the value of the life estate of the daughter subject to be included in the decedent's gross estate pursuant to the provisions of section 302 (c) of the Revenue Act of 1924?

(2) Should the value of (a) shares of stock in domestic corporations, (b) domestic bonds, and (c) foreign bonds, the symbolical evidences of which were physically located in the United States at the date of the decedent's death, be included in the gross estate of the nonresident decedent pursuant to the provisions of section 302 (a) of the Revenue Act of 1924?

FINDINGS OF FACT.

The decedent, William J. Orthwein, a citizen of the United States, died in Switzerland, September 4, 1925, then a resident of, and domiciled in, Switzerland.

The decedent left a will dated and executed at Territet, Switzerland, November 28, 1923, by which he appointed the Liberty Central Trust Co. of St. Louis, Missouri, executor of his American estate, i.e., "All that relates to my American Affairs," and "La Societe de Banque Swisse" (Swiss Bank Corporation), branch of Lausanne, executor of the rest of his estate wherever situated.

The Swiss Bank Corporation, as such foreign executor, took charge of and administered the estate outside of the United States.

The American administration was conducted in the Probate Court, City of St. Louis, Missouri, where an authenticated copy of the will was filed and Liberty Central Trust Co. was appointed executor d.b.n. on March 16, 1926.

The Liberty Central Trust Co., as executor, made final distribution of the residue of the estate to itself as trustee of the trust created by the will and was discharged as executor. Thereafter the St. Louis Union Trust Co., a trust company organized and doing business under the laws of Missouri, succeeded the Liberty Central Trust Co. as trustee of the trust and took over the trust estate. Consequently, the St. Louis Union Trust Co., as sole distributee of the residue of the probated estate, is the legal successor in title and liability to the Liberty Central Trust Co., executor, and the trust estate in the hands of the St. Louis Union Trust Co. as trustee will have to pay any additional estate tax that may be assessed, and therefore is one of the petitioners herein.

The Mercantile Commerce Bank & Trust Co. of St. Louis is successor trustee to Mercantile Trust Co. of the trust created by trust indenture made by William J. Orthwein, the decedent, dated January 1, 1920, and it joins in this proceeding because the respondent seeks to include within the estate of William J. Orthwein the assets that constituted the corpus of the last named trust estate.

The decedent left a substantial estate, hereinafter referred to as the American estate, consisting of:

(a) Personal property (choses in action, stocks and bonds), a substantial part of which was evidenced by: stock certificates located in the United States (chiefly in St. Louis, Missouri), evidencing shares of stock in corporations domestic to various of the United States; coupon bonds that were physically located in the United States, issued by the United States, by foreign governments, by corporations, public and private, which are domestic to various of the United States; and choses in action (like bank balances, etc.) owed by persons or corporations located in the United States.

As to the securities held by the Liberty Central Trust Co.: When decedent, having retired from business, moved his place of residence to Switzerland, he turned over these securities to the German Savings Institution (predecessor of the Liberty Central Trust Co.) with which he then and thereafter (until his death) conducted a deposit account. He gave no power of attorney to the bank, but told its officer with whom he made the arrangement that he had instructed or would instruct the corporations which had issued the shares of stock thus turned over and which stood in his name, to mail to the bank the dividend checks thereon, which would be payable to him, so that the bank might deposit such checks, together with the interest coupons on the bonds that were also turned over, to the credit of decedent's deposit account with the bank. Pursuant to this arrangement, the bank received the income from these securities and credited it, together with other deposits made by the decedent, to him on his deposit account with the bank. The bank neither had nor exercised any power of control, sale or management over these securities. They were held subject to the order of decedent. The same situation or relation existed between the Trust Co. and decedent, except that a year or so before decedent's death he borrowed money from the Trust Co., which was credited to his deposit account, and he gave the Trust Co. either his collateral note or its equivalent which gave the Trust Co. a lien on the securities for the payment of this debt. At decedent's death the unpaid principal of this debt was about $16,000.

The personal property thus in the keeping of the Trust Co. consisted of the items of stocks and bonds in schedule (b) of the Federal estate tax return.

As to the securities held in New York City, these stock certificates and bonds never came into the possession of the American executor, although it endeavored to obtain them. They were held in New York until under the control of the Swiss Bank Corporation at the date of decedent's death. Accordingly they were not included in the ...