Commissioner of Internal Revenue v. Estate of Hinds , 180 F.2d 930 ( 1950 )

HUTCHESON, Chief Judge.

The commissioner, complaining of the decision of the Tax Court, presents for decision the question: whether the Tax Court erred in failing to hold that taxpayer’s entire interest in certain community property, irrevocably transferred in trust for the use and benefit of his wife and their children, was, under Sec. 811(c) of the Internal Revenue Code, 26 U.S.C.A. § 811(c), includable within taxpayer’s gross estate because taxpayer retained the possession and enjoyment of, or right to the income from the property during his life.

This is the record. On Dec. 31, 1940, decedent and his wife, who were domiciled in Texas, transferred, in New York, to a New York trust company, in trust, the income to be payable to the wife during her life and afterward to her children, certain community property owned by them.

The commissioner determined that, as to the decedent’s one-half of the property, the transfer was in contemplation of death, and, further, was a transfer under which the decedent retained the possession or enjoyment of, or the right to the income from, the property, and, therefore, must, under Sec. 811(c) of the Internal Revenue Code, be included.

The Tax Court rejected the commissioner’s determination, that the transfer was made in contemplation of death. It, however, approved his determination that, though the transfer made the property the separate property of the wife, the income from it was community property and, therefore, the decedent had, within Sec. 811(c), retained the use, possession, or enjoyment of, or the right to the income from, it.

Unlike the commissioner, however, the Tax Court, under the purported authority of Treasury Regulation 105 Sec. 81.18,¹ included only one-half of the community one-half transferred by the decedent, or one-fourth of the whole property transferred in trust, and directed recomputation of the tax accordingly.

The commissioner is here urging upon us that, while the Tax Court was right in holding that the transfer was a Sec. 811(c) transfer and includable in part, it was wrong in not holding it includable in whole.

The taxpayer, who because she thought the amount of tax imposed under the decision was too small to justify further litigation, did not appeal from it, is here urging upon us that it should be affirmed on the commissioner’s appeal, not because it is right, but because it gave the commissioner more than he was entitled to, and he cannot, therefore, complain of it.

We agree with the taxpayer. Without, therefore, at all approving the decision of the Tax Court, or deciding the point so much labored here by the commissioner and taxpayer, but unnecessary to the decision of this case, whether the income from the property was, within the decision of Commissioner of Internal Revenue v. Porter, 5 Cir., 148 F.2d 566, community property, we deny the petition for review. We do this upon the authority of the settled law of Texas,² that whether the income be regarded as separate .property of the wife or as community income from the wife’s separate property, the taxpayer retained neither “the possession or enjoyment of, or the right to the income from,” the property so as to make applicable Sec. 811(c) (1) (B), invoked by the commissioner and in part applied by the Tax Court.

The petition for review is denied, and as against that petition, the judgment is affirmed.

1 . “ * * * If such retention or reservation is of a part only of the use, possession, income, or other enjoyment of the property, then only a corresponding proportion of the value of the property should be included in determining the value of the gross estate.”

2 . Art. 4614, Tex.Rev.Stat. of 1925, Vernon’s Ann.Civ.St. art. 4614; Arnold v. Leonard, 114 Tex. 535, 273 S.W. 799; Hawkins v. Britton State Bank, 122 Tex. 69, 52 S.W.2d 243; In re Gutierrez, D.C., 33 F.2d 987; Whitney Hardware Co. v. McMahan, 111 Tex. 242, 231 S.W. 694.