Wasserman v. Commissioner of Internal Revenue

• Citation: 139 F.2d 778
• Decision Date: 07 January 1944
• Docket Number: No. 3903.,3903.
• Parties: WASSERMAN v. COMMISSIONER OF INTERNAL REVENUE.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

139 F.2d 778 (1944)

WASSERMAN v. COMMISSIONER OF INTERNAL REVENUE.

No. 3903.

Circuit Court of Appeals, First Circuit.

January 7, 1944.

Frank J. Maguire, of Buffalo, N. Y. (Albrecht, Maguire & Mills, of Buffalo, N. Y., of counsel), for petitioner for review.

Homer R. Miller, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, Helen R. Carloss, and Norman S. Altman, Sp. Assts. to Atty. Gen., and J. P. Wenchel, Chief Counsel, and Ralph F. Staubly, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for Commissioner of Internal Revenue.

Before MAGRUDER, MAHONEY, and WOODBURY, Circuit Judges.

WOODBURY, Circuit Judge.

This is a petition by the executor of the estate of Eva Wasserman for review of that part of a decision of the United States Board of Tax Appeals, now the Tax Court of the United States, which sustained the Commissioner's determination that certain savings bank deposits made by the decedent during her lifetime should have been included in her gross estate for estate tax purposes.¹

The decedent, a resident of Brookline, Massachusetts, died on February 27, 1937, leaving a husband and seven children surviving. During the period from February 7, 1921, to January 7, 1937, she made twenty-five deposits in various local savings institutions which, with accrued interest, totaled $78,463.77 on the date elected by the executor for valuing the gross estate. All of the deposits were made by the decedent out of her own money and each one stood in her name "as trustee for" either her husband or some one of her children as a named beneficiary.

The Board of Tax Appeals found that the decedent had informed each of the beneficiaries of the existence of the accounts in which their names appeared, and that on various occasions she had given to each one possession of the savings bank books in which his or her name appeared, but that the beneficiaries had kept possession of their books for only brief periods of time, in every instance returning them to the decedent for safe keeping. It found that "The decedent alone had access to the accounts and had absolute control over them", and that "Withdrawals could be made only upon her demand and upon presentation of the account books". And it found that the decedent had exercised her power of withdrawal several times. It found that on two occasions she had exercised it with the beneficiary's consent, once to obtain funds to apply as part payment for a family burial ground, and at another time to defray the cost of a wedding for one of the children. But it also found that "At least one withdrawal was made without the beneficiary's consent when $4,000 was withdrawn from Jeanette's account when she was only 11 years old and loaned or given to the decedent's brother for use in his business." The Board also found that unexplained withdrawals aggregating $5,640 had been made over the period from November, 1934, to February, 1936, from her husband's account and that from 1925 to 1934 other unexplained withdrawals had been made from some of the other accounts.

On the basis of these facts the Board concluded that the decedent had not made completed, outright inter vivos gifts of the deposits to her husband and children; that although under the law of Massachusetts there was some question whether the decedent had made valid gifts of the deposits in trust for the beneficiaries, still even if she had, the transfers were intended to take effect in possession and enjoyment at or after her death within the meaning of § 302 (c) supra; and that, in consequence of the foregoing, there was no need to decide whether any of the transfers had been made in contemplation of death. We think the Board's conclusions are sound and should be affirmed.

In Massachusetts it appears to be well settled that an oral gift of a savings bank book accompanied by actual delivery thereof to the donee with intent to pass title, and acceptance by the donee, will transfer ownership. But when a savings account stands in the name of the donor as trustee for the donee, so that the donor alone controls the account and he alone can make withdrawals, it cannot be found that a mere delivery of the pass book evidencing the account to the donee was made with an intent on the donor's part to pass title to the donee and thus transfer ownership to him. This was clearly established by the Supreme Judicial Court of Massachusetts in 1941 in the case of Greeley v. Flynn, 310 Mass. 23, 36 N.E.2d 394. Thus on the undisputed findings the Board was clearly correct in concluding that under Massachusetts law the decedent had not made outright inter vivos gifts to the beneficiaries.

The question next arises whether in opening the accounts the decedent made inter vivos gifts in trust to the...