Phillips v. Commissioner , 7 B.T.A. 1054 ( 1927 )

OPINION.

Littleton:

The question presented is whether the conveyances made by the decedent to his children on August 30, 1919, were made in contemplation of death, within the meaning of section 402 (c) of the Revenue Act of 1921, which provides that the value of the gross estate shall be determined by including the value at the time of the death of all property of the decedent to the extent of any interest therein of which the decedent has at any time made a transfer, or with respect to which he has at any time created a trust, in contemplation of death, except in the case of a bona fide sale for a fair consideration in money or money’s worth.

No general rule can be formulated which will fit all cases, but each ease must be examined and determined on its own facts and circumstances in the light of the experience which the courts have gained in dealing with such matters. For this purpose the donor’s age, physical condition, and any action contemplated to be taken by him with respect to his health, as well as the length of time he survives the making of the transfers, are all proper matters to be considered in determining whether or not the act was done in contemplation of death. (People v. Danks, 289 Ill. 535; 124 N. E. 627.)

The evidence shows that the decedent was vigorous and active for one of his age; that he had no ailments prior to making the conveyances to his children, nor afterwards, until within a few months of his death, that interfered with his usual and customary activities.

Prior to making the conveyances and afterwards, up to his last illness, his mind was clear and he was competent to transact and did transact business. The doctor, the only one who — so far as the evidence shows — ever prescribed or treated him for any ailment, testified that at the date the deeds were executed there was nothing in the decedent’s physical condition that would lead him to believe he was in danger of a sudden or early death, and that he considered the decedent a vigorous man for his age. The doctor further testified he did not see decedent for possibly ten days prior to his. death and gives it as his opinion that death was due to hypostatic pneumonia, saying: “ Because two or three months prior to his death I observed an organic heart lesion, the circulation became poor and that is what we would expect, and that is what usually happens as a terminate and immediate cause of death.” The doctor, however, explains that in making out a certificate of death as a matter of form, he gave as the cause of death “ senile cerebral atrophy,” knowing that the decedent had had that for some years and he wished to state something that the state board of health would accept as a cause of death. He then further states that “The cerebral senile atrophy is a slow progressive affair and is not alarming as to any man’s death, and the fact that the man would develop a heart lesion and then had the other would not contribute to the possibility of an early death particularly.” The physician further testified that if a man lives temperately as the decedent did and his general condition of health otherwise is good, as was true in this case, heart lesion is not likely to result fatally; that the habits of life of decedent were just what a physician would want and expect so as not to be alarmed about heart lesion, and that he never at any time said anything to the decedent about any heart lesion and the decedent “ never seemed to think he was sick at any time.”

It may be well that when the conveyances in question were made Joseph N. Phillips contemplated death at some time in the future, but men perform acts daily with the knowledge that death may overtake them any moment. Men all wish to accomplish certain things before that fateful day and in that sense things may be done in contemplation of death, but this general and certain knowledge that to all death cometh soon or late is not what is meant by the phrase “ in contemplation of death ” as used in the Revenue Act.

In Meyer v. United States, 60 Ct. Cls. 474, it is said:

A review of the authorities is scarcely necessary to sustain the proposition that the contemplation of death referred to in the statute is not that contemplation of death which must he present with all of us, mindful of its certainty at some time, we know not when, but it is that state of mind which by reason of advanced age, serious illness, or other producing cause induces the conviction that death in the near future is to be anticipated. If it be said that there need not be a conviction that death is imminent, there must at least be a belief that it is to be expected in the very near future rather than in the usual course of events; and in this state of mind, in this belief in the near approach of death, must be found the motive for the conveyance if it is properly to be characterized as made in contemplation of death.

In the case of Rea v. Heiner, 6 Fed. (2d) 389, the District Court of the Western District of Pennsylvania stated:

There is a common agreement that the words “ contemplation of death ” mean not the general knowledge of all men that they must die; that it must be a present apprehension, from some existing bodily or mental condition or impending peril, creating a reasonable fear that death is near at hand; and that, so arising, it must be the direct and animating cause, and the only cause, of the transfer. If this apprehension, so arising, is absent, there is not that contemplation of death intended by the statute, especially when another adequate motive actuating the gift is shown.

As stated in Rosenthal v. People, 211 Ill. 306; 71 N. E. 1121:

A gift is made in contemjdation of death when it is made in expectation of that event, or with that event in view.

To the same effect are People v. Burkhalter, 247 Ill. 600; 93 N. E. 379; People v. Carpenter, 264 Ill. 400; 106 N. E. 302; People v. Porter, 287 Ill. 401; 123 N. E. 59; People v. Shaffer, 291 Ill. 142; 125 N. E. 887.

By the term “ in contemplation of death ” is not meant on the one hand the general expectancy of death which is entertained by all persons for every person knows that he must die. * * ® But a transfer may be said to be made “ in contemplation of death ” if the expectation or anticipation of death in either the immediate or reasonably distant future is the moving cause of the transfer. (Shwab v. Doyle, 269 Fed. 328; Gaither v. Miles, 268 Fed. 692.)

This court has held that the words “ in contemplation of death,” as used in general tax laws imposing a transfer tax, is of property made in contemplation of death of the grantor or vendor, do not refer to that general expectation which every mortal entertains but rather an apprehension which arises from some existing condition of body or some impending peril. (Bakers Estate, 163 N. Y. 607.)

In Spreckels v. State, 30 Cal. App. 363, the court said:

A reasonable and just view of the law in question is that it is only where the transfer of property by gift is immediately and directly prompted by the expectation of death that the property so transferred becomes amenable to the burden; or, as counsel for the respondents with singular aptness states the proposition: “ It is only when contemplation of death is the motive without which the conveyance would not be made that a transfer may be subjected to the tax.” That is, the expectation of death must be the' direct, specific, and immediate animating cause of the transfer.

Applying these principles to the facts in this proceeding, the Board has no difficulty in reaching the conclusion that the decedent did not make the conveyances of real estate to his children in contemplation of death within the meaning of the Revenue Act of 1921.

The State of Illinois instituted proceedings to collect a succession or inheritance tax from the estate of this decedent, which was resisted by these same petitioners.

The Illinois statute imposing the tax, provides:

When the transfer is of property made by a resident * * * by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor, or intended to take effect in possession or enjoyment at or after such death.

On January 7, 1927, the County Court of Tazewell County Illinois, by final decree, unappealed from and the time for praying an appeal having now expired, held upon substantially the same facts as we have before us that the deeds in controversy were not made in contemplation of death and that no inheritance tax on said estate was due the State of Illinois. While such finding is not conclusive upon this Board, it is entitled to weight, especially in view of the similarity of the Illinois statute to the Federal statute on the same subject of taxing gifts, transfers, etc., made in contemplation of death.

The transfers made by decedent on August 30, 1919, were not, in the opinion of the Board, made in contemplation of death within the meaning of the statute. Philip T. Starck, Executor, 3 B. T. A. 514.

The evidence shows that the decedent was strong and active, physically and mentally, at the time he made the conveyances to his children, and so remained, for one of his age, until a few months prior to his death, and never seemed to think he was sick at any time.

Judgment wül be entered for the petitioners on 15 days' notice, under Bule 50.

Considered by Smith.