Zirjacks v. Scofield
| Decision Date | 30 June 1952 |
| Docket Number | No. 13922.,13922. |
| Parties | ZIRJACKS v. SCOFIELD. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Muckleroy McDonnold, San Antonio, Tex., for appellant.
Carolyn R. Just, Sp. Asst. to Atty. Gen., Ellis N. Slack, Acting Asst. Atty. Gen., for appellee.
Before HUTCHESON, Chief Judge, and RUSSELL and STRUM, Circuit Judges.
The determinative question here is whether or not, for estate tax purposes, the corpus of a trust created August 25, 1939, by Charles C. Zirjacks and his wife for the benefit of the trustors' two children and the children of the latter, should be included, pursuant to Sec. 811(d) (1) of the Internal Revenue Code, 26 U.S.C.A. § 811(d) (1), in valuing the gross estate of Charles C. Zirjacks, now deceased.
The trust was created in Texas out of community property theretofore owned by the Zirjacks who, under the trust indenture, became trustees thereof to manage the same for the benefit of their two children and the children of the latter. The trust was irrevocable in the sense that it precluded the trustors from recapturing the trust property for themselves, or receiving any income therefrom.
The powers of the trustees were broad. Amongst other things, they were empowered "to amend, change or alter this trust and the provisions of this instrument, or any part thereof, in any way, at any time and from time to time successively, as they may deem proper," provided they neither extended the trust, changed any of the beneficiaries, nor thereby received for themselves any of the income or corpus of the trust estate.
The trustees were also given "full power and authority to use said trust estate or any part thereof at any time for any purpose they may see fit, and may engage in any sort of agricultural pursuit they may deem proper, and may engage in the business of buying and selling cattle and other livestock * * * and may engage in any mercantile or business activity they may deem proper, and use said trust estate or a part thereof." The fruits of such operation would belong, of course, to the beneficiaries.
The trustees are also empowered to determine whether or not, and when, payments from the trust estate shall be made to the beneficiaries, and the amount and nature thereof, whether corpus or income, or both, except that payments to the children of the trustors' children shall be adjusted and equalized, per stirpes, upon ultimate termination of the trust. The trustees were given full discretionary power to pay all or any part of the trust corpus or income to any beneficiary at any time, or to accumulate it, and no beneficiary was entitled to demand any payment, as a matter of right, at any time.1
The trust would ultimately terminate in due course upon the death of the survivor of the two trustees, or if the surviving or remaining sole trustee should refuse or be unable to act, at which time the corpus would vest in the beneficiaries then entitled thereto, subject to the equalization provisions already mentioned. The trust was sooner terminable, however, "at any time by the sole decision and in the sole discretion of the acting trustee or trustees."
Acting under their power to alter, amend or terminate, the trustees on June 11, 1943, amended the trust to provide that it should terminate on July 1, 1949, reserving the right to further shorten it.
Charles C. Zirjacks died April 27, 1944. Upon a redetermination of his estate tax, the Commissioner of Internal Revenue included the value of the trust property in the gross value of Zirjacks' estate under Sec. 811(d) (1) of the Internal Revenue Code. The tax attributable to this inclusion was paid under protest and this suit brought to recover it. Recovery was denied below and the taxpayer appeals.
Section 811(d) (1), supra, requires that there be included in a decedent's gross estate the value of any property transferred by the decedent after June 22, 1936, whether in trust or otherwise, "where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or * * * in conjunction with any other person * * * to alter, amend, revoke, or terminate * * *," unless such transfer was a bona fide sale for an adequate and full consideration.
In Commissioner v. Estate of Holmes, 326 U.S. 480, 66 S.Ct. 257, 90 L.Ed. 228, it was held that the word "enjoyment," as used in Sec. 811(d) (1), supra, is not a mere word of art, but connotes "substantial present economic benefit rather than technical vesting of title or estates." Though differing in detail, the trust indenture here involved is fundamentally the same as that construed in the Holmes case. Here, as there, the trustees reserved the power to pay to, or to withold from, any beneficiary any part of the trust estate and to determine the nature and extent of any payments to be made, also the power to accumulate both income and corpus, the beneficiary having no right to demand it. The right to terminate the trust at any time, and to terminate contingencies upon which the right of...
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Whited v. United States, Civ. A. No. 7023.
...of the decedent.4 The question of which properties are subject to the power of revocation is a matter of state law. Zirjacks v. Scofield, 197 F.2d 688 (5 Cir., 1952). An examination of the Louisiana jurisprudence interpreting Louisiana Civil Code Article 1749 (1870) reveals only one case wh......
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