Wisotzkey v. Commissioner of Internal Revenue
| Citation | 144 F.2d 632 |
| Decision Date | 10 August 1944 |
| Docket Number | No. 8599.,8599. |
| Parties | WISOTZKEY v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Howe P. Cochran, of Washington, D. C. (Margaret F. Luers and Betty Cochran Stockvis, both of Washington, D. C., on the brief), for petitioner.
Louise Foster, of Washington, D. C. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Helen R. Carloss, Sp. Assts. to the Atty. Gen., on the brief), for respondent.
Before DOBIE and McLAUGHLIN, Circuit Judges, and KALODNER, District Judge.
This is an appeal from a decision of the Tax Court of the United States, affirming the imposition of certain gift taxes by the Commissioner of Internal Revenue.
Petitioner, H. A. Wisotzkey, (hereinafter called Wisotzkey) made direct gifts, in the year 1938, of stock of the Maple Press Company (hereinafter called Maple) to each of his five children; each child receiving Maple stock of the value of $3,000. In his gift tax return for 1938, Wisotzkey excluded all of these gifts on the ground that each gift was less than $5,000 in value. He had made no other direct gifts to these persons in that year.
On December 30, 1938, Wisotzkey executed three groups of trust indentures, (herein designated as Group I, Group II, and Group III), by which he conveyed the entire title in certain property to himself and two sons as trustees, for the benefit of certain named beneficiaries.
The corpora of the Group I trusts consisted of Maple stock. The names of Wisotzkey's children, the beneficiaries, and the value of the corpus of each trust are:
Value
of Exclusion
Beneficiaries Corpus Claimed
Edna Margaret Gartman $21,000 $5,000
Edith Campbell Hummel 9,000 5,000
John Utz Wisotzkey 9,000 5,000
Bradley Wisotzkey 21,000 5,000
Harry Albert Wisotzkey
Jr. 3,000 3,000
The Group I indentures are substantially alike. We set out, ipsissimis verbis, certain pertinent excerpts found in all the indentures:
The corpora of the Group II trusts were made up of Maple stock. Group II consisted of twelve separate indentures. Each instrument named one of Wisotzkey's grandchildren as beneficiary, and the value of each gift was $3,000.
The pertinent provisions found in all the Group II indentures are:
On the same day, Wisotzkey executed twelve additional trust instruments, herein referred to as Group III, of which Maple stock constituted the corpora. He named one of the same twelve grandchildren as beneficiary in each instrument. As in Group II, the value of the corpus of each trust was $3,000. The following excerpts from each indenture we consider the pertinent ones:
By the terms of the trust indentures, each trust was made irrevocable, and it was further provided that any trustee might resign upon thirty days written notice to the other trustees. In addition, each indenture contained a spendthrift clause.
Wisotzkey claimed an exclusion of $3,000 on each of the direct gifts to his children, and this the Commissioner allowed. He claimed a $5,000 exclusion as to the trust gifts in Group I, except as to the gift to Harry Wisotzkey, Jr. On this gift, he claimed an exclusion of the full $3,000. The Commissioner allowed an exclusion of $2,000 to each of the children, except to Harry Wisotzkey, Jr., and allowed an exclusion of $973.31 as to his gift.
Wisotzkey claimed an exclusion of $3,000 on each of the trusts for the grandchildren, but the Commissioner allowed no exclusion on those trusts where the income was to be accumulated until the beneficiary reached the age of 21 (Group III). The Commissioner, however, did allow certain exclusions on those trusts where the income was to be used currently for the support and maintenance of the beneficiaries.
The Commissioner disallowed an exclusion of $3,000 as to Harry Wisotzkey, Jr., on the ground that the trust was in reality a gift of two estates; namely, a present gift of a life interest, plus a future interest in the remainder.
The Commissioner refused to allow the full exclusion of $3,000 on the Group II trusts. He held the trusts to be gifts of two estates (1) a gift of the income, conceded to be a present gift and entitled to exclusion, and (2) a gift of the corpus, which he held to be a gift of a future interest.
Exclusion on all the Group III trusts for the grandchildren was disallowed. The Commissioner ruled that they were gifts of future interests, and as such came within the express terms of the statute.
Before the Tax Court Wisotzkey contended that all the gifts were of a present nature and that all the exclusions which he claimed should be allowed. The Tax Court sustained the findings of the Commissioner, and Wisotzkey has duly appealed.
The gift tax to which Wisotzkey objects was imposed under the Revenue Act of 1932, c. 209, 47 Stat. 169. The controlling section, 26 U.S.C.A. Int.Rev.Acts, page 585, § 504, reads as follows:
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