DocketNumber： Docket No. 109972
Citation Numbers： 1944 U.S. Tax Ct. LEXIS 11, 4 T.C. 423
Judges： Mellott,Smith,Opper
Filed Date： 12/7/1944
Status： Precedential
Modified Date： 1/13/2023
1944 U.S. Tax Ct. LEXIS 11">*11
1. Stock dividends on Standard Oil securities, held by a testamentary trust, were retained by the trustees in the trust corpus notwithstanding the fact that some (or all) of them constituted distributable income. Years later, in 1915, following the death of decedent's mother, who was one of the income beneficiaries under the trust, decedent and her brother and sister, the other income beneficiaries under the trust, executed a deed of family settlement, formally transferring to the trustees their interest in the stock dividends and stock rights, retaining the income from such property during their lives. Because of the interest of the grandchildren of the settlor and his wife in the securities thus transferred it was provided that they should sign the deed. The rights to be acquired by the grandchildren upon becoming signatories were substantially greater than those which they had if they refrained from doing so. The grandchildren who had then attained their majorities signed the deed in 1915 and others signed shortly after becoming of age. The youngest became of age and signed the deed in July 1931, after the Joint Resolution of March1944 U.S. Tax Ct. LEXIS 11">*12 3, 1931, had become effective. The resolution requires the inclusion in gross estate of property transferred thereafter if the income from the property is retained by the transferor. The deed, construed in the light of all the circumstances and the obvious intention of the parties, is
2. Stock dividends on securities other than Standard Oil stock were received and treated by the trustees as outlined in the preceding headnote. Decedent and the other income beneficiaries signed annual approvals of the accounts of the trustees, specifically waiving the right to have the income arising from such distributions paid over to them. Following the death of decedent the Orphans' Court, in a contested proceeding, found that the life tenants, by oral agreements and the repeated affirmation of such agreements found in the approval of the various accounts, had released the distributions on these securities to the principal of the trust1944 U.S. Tax Ct. LEXIS 11">*13 created by their father.
3. In 1916 decedent transferred securities having a substantial value to an irrevocable trust created by her for the benefit of her children and grandchildren. Respondent, by answer, seeks to include in gross estate, under section 302 (a) and (c) of the appropriate revenue act, the difference between the fair market value of the securities and the value of the life estates of the settlor's children.
4. Fair market value of decedent's interest in twenty parcels of real estate owned jointly by her and her sister and brother determined.
5. No determination of overpayment, which may be the basis of a refund, can be made where no claim for refund has been1944 U.S. Tax Ct. LEXIS 11">*14 filed and the overpayment results from errors set out in an amended petition filed more than three years after the tax was paid, the errors not having been assigned in the petition filed within three years after the payment of the tax.
4 T.C. 423">*425 The Commissioner determined a deficiency in estate tax in the amount of $ 4,508,229. In his answer to the amended petition claim is made for a substantially larger amount. (The precise amount has not been computed.) Petitioners allege they are entitled to a refund.
Joint motion to limit the hearing in the first instance was granted. Under the conclusions, which have been reached on the issues submitted, the question reserved -- i. e., the valuation of stock dividends, stock and stock rights -- has become moot. The issues are:
What amount, if any, is to be included in gross estate on account of the receipt and disposition, as1944 U.S. Tax Ct. LEXIS 11">*15 hereinafter set out, of stock dividends, stock rights, etc., by the trustees of a trust, created by decedent's father, of which she was one of the beneficiaries?
What amount, if any, is to be included in decedent's gross estate as property owned by her, which had been acquired as an heir, legatee, or devisee of her mother.
What portion of the corpus of a trust, created by decedent in 1916, is to be included in her gross estate?
Is the fair market value of decedent's undivided one-third interest in twenty parcels of real estate, one-third of the total value of the fee or a lesser amount?
Is a claim for refund, not made in the original petition but asserted in an amended petition filed more than three years after payment of the tax, timely?
All of the basic facts have been stipulated and are found accordingly. The evidence adduced at the hearing was directed to two issues. One arose from respondent's disallowance of deductions claimed on account of the payment by decedent's executors of substantial amounts to the University of Pennsylvania and to the Philadelphia United Campaign. Counsel for respondent has now agreed that the claimed deductions should be allowed. 1944 U.S. Tax Ct. LEXIS 11">*16 It is therefore unnecessary to make any findings on this issue. The other is outlined above as issue IV. Several other issues have been adjusted by the parties by stipulation, by admissions in the pleadings, by concessions at the hearing, or by specific waivers upon brief. Effect will be given thereto in the recomputation under Rule 50.
4 T.C. 423">*426 FINDINGS OF FACT.
1. Charles J. Biddle and Gerald Ronon, hereinafter sometimes referred to as petitioners, are the executors under the will of Sallie H. Henry, sometimes hereinafter referred to as decedent. Decedent died testate June 6, 1938, and the register of wills for the city and county of Philadelphia, Pennsylvania, issued letters testamentary to petitioners.
2. Estate tax return was filed with the collector of internal revenue for the first district of Pennsylvania on September 5, 1939. Copy of the return and copy of the last will and testament of the decedent are attached to the stipulation.
3. Notice of deficiency was mailed to petitioners on November 19, 1941. Petition was filed herein February 16, 1942, and amended petition was filed October 12, 1943. Petitioners paid $ 113,565.04, being the estate tax shown to be due by1944 U.S. Tax Ct. LEXIS 11">*17 the return on September 5, 1939, within three years before the filing of the original petition.
4. Decedent was one of four children of Henry H. Houston, hereinafter referred to as Houston, who died in 1895, and Sallie S. Houston, hereinafter referred to as Sallie, who died in 1913. One of the children, Henry H. Houston II, died prior to 1895, unmarried and without issue. The other two, Samuel F. Houston and Gertrude H. Woodward, sometimes hereinafter referred to as Samuel and Gertrude, were still living at the date of the hearing.
5. Samuel's first wife died prior to 1915 and his second wife survived this decedent but died in 1940. He had three children by his first wife, two of whom were living at the time of the hearing, one having been killed in action in 1918. By his second wife he had one child, Eleanor H. Smith, who was born July 21, 1910, and came of age July 21, 1931. She, also, was living at the time of the hearing.
6. Gertrude had five children, one of whom was killed in action in 1918. Another died in 1934 at the age of 24 years. The other three children and George Woodward, husband of Gertrude, were living at the time of the hearing.
7. Decedent's husband died 1944 U.S. Tax Ct. LEXIS 11">*18 prior to 1915. Of her three children, T. Charlton Henry died in 1936 at the age of 49 years. Elizabeth W. Henry Chatfield and Gertrude Henry Dodge were living at the time of the hearing. Her deceased son, T. Charlton Henry, left surviving him his widow, Julia Biddle Henry, and two daughters, Julia B. Henry Armour and Isabelle Henry Ames, all of whom were living at the date of the hearing. At her death decedent's living lineal descendants, in addition to Elizabeth Chatfield and Gertrude Dodge, consisted of twelve grandchildren and great-grandchildren whose ages ranged from 1 year to 20 years.
4 T.C. 423">*427 8. Houston (decedent's father) died in 1895, a resident of Philadelphia, leaving a substantial estate consisting principally of real estate, securities in several companies which had grown out of the Standard Oil trust, and various other securities. Under the terms of subparagraph 22 of item 59 of his will 1 the residue of his estate was left in trust. Until the death of his wife, Sallie, the income was to be divided into four equal shares, one of which was to be paid and distributed to his wife and one to each of his three surviving children, viz., decedent, Samuel, and Gertrude. 1944 U.S. Tax Ct. LEXIS 11">*19 After the death of his wife the income payable to her was to be divided into three equal shares, one to be paid to each of his surviving children or their descendants until the death of the last survivor of the three children, when the principal of the residuary estate was to be divided among the grandchildren, the children of a deceased grandchild to take their parent's share.
9. During the period between Houston's death in 1895 and the death of his wife in 1913, the trustees under his will received a large number of extraordinary distributions 2 on the Standard Oil securities in the principal of the trust estate. Under the law of Pennsylvania some part of the extraordinary distributions constituted distributable income of the trust estate. The facts to which Houston's trustees would have been obliged to apply the rules laid down by the Pennsylvania Supreme Court were complex, especially in connection with1944 U.S. Tax Ct. LEXIS 11">*20 the securities received from the Standard Oil trust. The trustees followed the practice of adding all of the distributions to the principal of the trust estate and all have been treated by them as principal at all times material to this proceeding. There has never been any adjudication by the Orphans' Court in respect of the estate of Henry H. Houston except as hereinafter shown in connection with an accounting filed in 1940.
10. When Sallie S. Houston died in 1913 several problems arose. One-quarter share of such extraordinary distributions as had constituted income to the trust created by her deceased husband's will belonged to her. By the terms of her will specific bequests aggregating approximately $ 540,000 were made. The residue was to be divided into 21 equal parts to be held in trust -- 3 parts for the children of this decedent and 1944 U.S. Tax Ct. LEXIS 11">*21 18 parts for the children of Samuel and Gertrude. The description of the grandchildren of the testatrix --
11. Sallie, at the time her will was drawn, apparently had believed that the sum to pass under and be controlled by the residuary clause of her will would approximate $ 630,000. It actually amounted to $ 1,700,000, exclusive of her share in the extraordinary distributions.
12. Counsel consulted by the interested parties following Sallie's death expressed the opinion the provisions of her will violated the rule against perpetuities. If so, the residue of her estate, including her share in the extraordinary distributions, would have gone, not to her grandchildren as she expected, but to her three children. Several of the grandchildren were then of age. They and their parents believed that if all of the facts1944 U.S. Tax Ct. LEXIS 11">*22 had been known to the testatrix at the time her will was executed the disposition of her residuary estate would "have been a materially different one." "Guided by such facts," they undertook, through the execution of a "deed of Family Settlement and Trust," to fulfill what they conceived to be her wishes, as expressed in her will, as to the $ 630,000, which was to be "divisible according to the exact terms of her will," but as to the remainder they agreed that it should "be held for, divided among, and paid to and be represented by such grandchildren not in twenty-first parts, * * * but in even portions among them * * *."
13. A "Deed of Family Settlement and Trust" was executed in 1915 by the three surviving children of Sallie (decedent, Samuel, and Gertrude) and by their respective spouses, by all of the then living grandchildren of Sallie who were then of age and by their spouses, by the corporate trustee under Houston's will, and by the executor and trustee under Sallie's will. It provided, following a lengthy recital of the reasons for its execution, that the parties of the first part, "in consideration of natural love and affection one for the other as well as that of respect1944 U.S. Tax Ct. LEXIS 11">*23 for the expressed wishes of their * * * progenitors and desire to fulfil the same, * * * have, as a final and complete compromise and settlement among the children and grandchildren of Henry H. Houston and Sallie S. Houston agreed as to the present and future holding and disposition of * * * securities [having a value of approximately $ 14,000,000] now in the hands of the Trustees of the Estate of Henry H. Houston deceased set forth in" attached schedules.
14. Briefly summarizing the "Deed of Family Settlement and Trust," the three children of Sallie (decedent, Samuel, and Gertrude) agreed to indemnify and hold harmless the corporate trustees of the trust created by their father against any loss or damage which might arise from its assenting to and carrying out the terms of the "Family Settlement." It was agreed that the trustees were to continue to hold 4 T.C. 423">*429 the securities (the extraordinary distributions) "until the final determination of this Deed * * * by the distribution of the last thereof * * * in accordance with the terms of same; and in the meantime to dispose of the income and to finally distribute the principal thereof as follows:"
1. So long as Samuel, Gertrude or1944 U.S. Tax Ct. LEXIS 11">*24 this decedent or any of them remain alive, to deliver and pay to each of them one-third part of the net income received from the securities, the receipts of each to act as full acquittances and discharges of the Trustees;
2. During the life-time of a surviving spouse of any of the three to pay him or her $ 50,000 per annum "to be specifically charged against and deducted from the share of the income of the Estate of * * * Houston which had been represented and theretofore received by" the husband or wife of the recipient.
3. Subject to the payments to the surviving spouses the entire income which had been represented and paid to the three was to be "paid and distributed by the Trustees [of Houston's Estate] * * * to and among such persons and in such manner as is provided by * * * [his] Will * * * as though the questions heretofore settled and determined had never been raised, and the securities which were producing such income had formed part of the unquestioned principal of his estate. * * *."
4. "For so long a time as this present Deed * * * remains in operation and its provisions are being carried out without question * * * [the three named children of Houston and Sallie] and 1944 U.S. Tax Ct. LEXIS 11">*25 the other signatories * * * expressly authorize * * * the Trustee under the Will of Sallie * * * to continue to hold the residuary principal of such Estate as is now in its possession * * *", to distribute the income from $ 630,000 in accordance with the provisions of the Will and to distribute the remaining income equally among the grandchildren. The three children, however, reserved "all of their respective rights to claim the remaining principal * * * and the future income therefrom in case the settlement and compromise agreed upon by this present Deed is at any time hereafter questioned."
5. It was agreed "by all of the parties presently executing this Instrument and those who may become signatories thereto hereafter" that no person should have any rights under it unless he or the one under whom he shall claim "shall have been bound and concluded by having become a party signatory * * *."
6. "It is the express understanding and agreement of all of the parties hereto, both the present signatories or those who may hereafter become parties hereto, that the willingness, as expressed herein, of the three children of Henry H. Houston, deceased, to wit: Sallie H. Henry, Samuel F. Houston1944 U.S. Tax Ct. LEXIS 11">*26 and Gertrude H. Woodward, to forego the enforcement of their present right to the distribution and delivery to them by the said respective Executors and Trustees of the securities and assets which are the special objects of this Trust, as hereinbefore mentioned, is predicated and based upon the desire of such parties as hereinbefore expressed in this Instrument, to finally and forever settle the questions which have heretofore been attempted to be settled by this Instrument. But if at any time in the future any one or more of the descendants of Henry H. Houston or Sallie S. Houston are not satisfied with this Deed of Family Settlement and Trust and not willing to become signatories thereto and acquiesce in this disposition of the Standard Oil securities, hereinbefore referred to, and also the disposition of the assets of the residuary estate of Sallie S. Houston, deceased, as hereinbefore provided, then, in such case, it is distinctly understood and 4 T.C. 423">*430 agreed by all of the parties hereto that the said three children of Henry H. Houston, deceased, and the other signatories hereto, shall be restored in their rights, whatever they may be, to such legal situation as existed with1944 U.S. Tax Ct. LEXIS 11">*27 reference to such Standard Oil securities and the assets of the Estate of Sallie S. Houston, deceased, as though this instrument had never been executed, with the right to require from the Executors and Trustees of both Estates a legal accounting for such securities and assets, subject to such interim distribution of income or principal as may have been made by such Executors and Trustees as authorized hereunder and they shall be entitled to receive the benefit of the distribution according to law of such securities and assets as though this Instrument had never been executed."
7 and 8. Nothing contained in the Deed was to be considered as in any way interfering with the ordinary trust management and the instrument was to be binding upon the heirs, executors, administrators, successors and assigns of the signatories.
15. The three life tenants of the residuary estate of Houston (decedent, Samuel, and Gertrude), in 1922, executed a "deed of Confirmation" under which they confirmed the deed of 1915 and released and quitclaimed to the trustees of the trust created by their father, "any and all right, title, interest or claim which they might now or might at any time hereafter have to1944 U.S. Tax Ct. LEXIS 11">*28 any shares or securities which have heretofore or which may hereafter come into the hands of said Trustees as a result of any stock dividends, corporate distributions or otherwise howsoever, because of the holding by said Trustees of any of the shares or securities set forth in said deed of family settlement; * * *"
16. After 1915, as each grandchild of Houston and Sallie came of age he or she signed the deed of trust of 1915. The son of Samuel, who was killed in the last war, had signed before entering the service. The son of Gertrude entered the military service before reaching 21 years of age and was killed after attaining his majority, but before he had an opportunity to sign the agreement. He died intestate, unmarried and without issue. Gertrude H. Woodward, II, the next to the youngest of the grandchildren, signed the deed of trust in 1930 shortly after she came of age and before her death in 1934. At that time (1930) all of the then living grandchildren had signed the deed except Eleanor Houston Smith. She came of age on July 21, 1931, and signed the deed within a few days thereafter.
17. The grandchildren, including Eleanor Houston Smith, would have been ill-advised 1944 U.S. Tax Ct. LEXIS 11">*29 not to have signed the deed, inasmuch as it gave them substantial interests in property which they would not otherwise have had.
18. The trustees of the Houston estate received from time to time extraordinary distributions on securities other than Standard Oil securities. These were invariably retained by them in the principal 4 T.C. 423">*431 of the trust. All, except those itemized in paragraph 36 of the stipulation, were received prior to January 1, 1930. 3
19. The trustees also held substantial real estate, most of which had been owned by Houston at the time of his death, but some of which had been acquired by the trustees upon foreclosure of mortgages. On some parcels of this real estate the carrying charges, principally taxes, exceeded the current income. The trustees invariably1944 U.S. Tax Ct. LEXIS 11">*30 charged all such carrying charges against the distributable income of the trust.
20. The trustees of the Houston estate regularly submitted statements of the transactions of the trust to decedent, her brother, and her sister, and all such statements showed all of the extraordinary distributions (both Standard Oil and others) retained in principal and the carrying charges on real estate charged against income. In 1929 the life tenants (including decedent) signed an approval of all these accounts from 1895 through 1928. In January 1931 they signed approvals covering all the transactions of the trust through December 31, 1929. Annual approvals were regularly signed thereafter and decedent, prior to her death, had signed an approval of all the transactions of the trust through December 31, 1936.
21. After decedent's death in 1938 an accounting of the transactions of the Houston estate from 1902 until 1940 was filed with the Orphans' Court of Philadelphia County, which has always had jurisdiction of that estate. Due notice of the audit of the account was given to representatives of the Commissioner of Internal Revenue. At the audit by the court decedent's executors presented a formal1944 U.S. Tax Ct. LEXIS 11">*31 claim that there should be distributed to her estate from the estate of her father:
(a) Decedent's share, as an income beneficiary of the Houston estate, of all the extraordinary distributions (on both Standard Oil and non-Standard Oil securities) which had been retained in principal by the trustees;
(b) decedent's share as an intestate heir of Sallie S. Houston in the extraordinary distributions;
(c) decedent's share of the amount by which the distributable income of the trust would have been increased if the carrying charges on unproductive real estate had been charged against the principal of the trust.
22. The claim above referred to was contested by other parties in interest. On October 8, 1941, the Orphans' Court handed down its adjudication denying all the claims of decedent's executors, petitioners herein. This adjudication became final on October 24, 1941.
23. The adjudication above referred to recited many of the facts hereinbefore set out. The court concluded that "great grandchildren 4 T.C. 423">*432 are not included in terms among those who may become signatories." The court held (since under the will of Sallie S. Houston her estate was held in trust for the benefit of her1944 U.S. Tax Ct. LEXIS 11">*32 grandchildren) that "the class of grandchildren entitled to take the principal * * * was closed when the first grandchild reached the age of thirty years, that is, when T. Charlton Henry became thirty on March 25, 1917. The youngest one of the class of grandchildren entitled to become a signatory to the agreement, Eleanor Houston, now Eleanor Houston Smith, attained her majority on July 21, 1931, and became a signatory shortly thereafter, -- more than six years before the death of Mrs. Henry. * * * When Eleanor Houston Smith signed the family agreement in 1931, all parties entitled to become signatories had signed the agreement and had surrendered their rights to revoke it. At that time the agreement became forever final and binding, and thereafter the assets covered by the agreement must be held by the trustees of the Estate of Henry H. Houston as a part of the principal of the trust and be distributed only in accordance with the terms of the will."
24. The adjudication of the Orphans' Court was before this tribunal in
25. On June 23, 1916, this1944 U.S. Tax Ct. LEXIS 11">*34 decedent executed an irrevocable deed of trust naming Girard Trust Co., her son, T. Charlton Henry, and herself as trustees. The trust instrument provides that the income shall be paid to her three children, T. Charlton Henry, Gertrude Henry Dodge, and Elizabeth Henry Chatfield, for their respective lives.
4 T.C. 423">*433 26. Under the provisions of the above trust, upon the death of any of the named children of the grantor the income from such child's share is to be distributed
27. T. Charlton Henry exercised the power of appointment under the trust in favor of his wife, Julia Biddle Henry.
28. The probability that decedent would survive her two daughters and the twelve grandchildren and great-grandchildren who were living on the date of her death was .0000105929. The value on June 6, 1938, of $ 1 payable on the death of the survivor of her two daughters in the event that no descendants of their mother, the settlor, survived them, was $ .0000016039.
29. In the answer to the amended petition it is alleged that at the date of the death of the decedent the fair market value of the assets then constituting the corpus of the trust was $ 5,110,710.82. The valuation of the items comprising the principal of this trust "is not now before this Court for determination." (This was one of the issues reserved under the joint motion of the parties.)
30. At her death on June 6, 1938, decedent owned a one-third undivided interest in twenty parcels of real estate. The aggregate fair market value of the fee was $ 417,610.
31. The properties are located in the Chestnut Hill area, 1944 U.S. Tax Ct. LEXIS 11">*36 which is in the northwest section of the city of Philadelphia. Ten of the parcels are vacant land, four are virtually vacant, having only old farm buildings upon them, five are improved with dwellings and outbuildings, and one constitutes the Philadelphia Cricket Club.
32. The decedent's brother and sister each owned a one-third interest in the real estate. In the estate tax return petitioners reported the value of decedent's one-third undivided interest in each of the parcels at one-third of the entire value of each, less 20 percent thereof. The respondent determined the value of decedent's one-third interest to be one-third of the value of each parcel.
33. The fair market value of the decedent's undivided one-third interest in the twenty parcels of real estate at the time of her death was $ 125,000.
4 T.C. 423">*434 34. In determining the deficiency in tax respondent increased "Miscellaneous Property" by $ 3,076,333.31, $ 3,073,433.11 of which is in issue. The latter amount is comprised of:
| (a) Decedent's share of stock rights proceeds, stock | |
| dividends (exclusive of Standard Oil Companies) and | |
| stock rights exercised by the Estate of Henry H. Houston, | |
| designated in the deficiency notice as "Undistributed | |
| Income, Estate of Henry H. Houston" | * $ 1,155,673.75 |
| (b) A one-third interest in the residue of the estate of | |
| S. Houston | |
| 4 $ 3,073,469.11 |
1944 U.S. Tax Ct. LEXIS 11">*38 35. Respondent also included in gross estate, as "Transfers During Decedent's Life," taxable under section 302 (c) and 302 (d) of the Revenue Act of 1926 as amended, the value of certain securities, which the parties have designated as securities of "Standard Oil Companies," consisting of stock dividends, stock rights, and income thereon. The aggregate is stated in the notice of deficiency to be:
| Family settlement and trust under deed dated | |
| December 31, 1915 | n4 $ 5,756,183.21 |
| [The items making up this amount are shown | |
| in detail in the stipulation.] |
OPINION.
The first two issues involve essentially the same questions -- the effect, for estate tax purposes, of the deed of family settlement of 1915, the deed of confirmation of 1922, the annual approvals, the Orphans' Court proceedings, the 1935 income tax case, and especially the failure of the last grandchild (Eleanor Houston Smith) to sign the deed of family settlement prior to the effective date of the Joint Resolution of March 3, 1931.
4 T.C. 423">*435 Of these questions the most important is the effect of the deed of family settlement (sometimes hereinafter referred to as the deed of 1915). The deed of confirmation of1944 U.S. Tax Ct. LEXIS 11">*39 1922 (sometimes referred to hereinafter as the deed of 1922) was largely confirmatory of the deed of 1915 and, together with the approvals signed by Samuel, Gertrude, and the decedent (hereinafter referred to as the three life tenants), brought within the terms of the deed of 1915 the Standard Oil stock dividends and stock rights distributed after December 31, 1915. The non-Standard Oil securities were held in principal by Houston's trustees by reason of the approvals of the three life tenants -- possibly also by reason of oral agreements made by them. 5 We shall discuss first the effect of the deed of 1915, as confirmed by the deed of 1922.
1944 U.S. Tax Ct. LEXIS 11">*40 Respondent contends that under the provisions of the deed of 1915 (and also the deed of 1922) no property rights of the decedent passed to the trustees when it was signed and executed by the three life tenants and the grandchildren who had then attained their majority; that acceptance by all the grandchildren was a condition precedent to the transfer of such property rights; that the condition was not fulfilled and the property rights were not transferred until the last grandchild, Eleanor Houston Smith, signed the deed shortly after attaining her majority on July 21, 1931; that the decedent (being one of the three life tenants) retained for life the cash income to be derived from the property which she transferred; and, therefore, that the value of the property transferred by her was properly included in her gross estate under sections 302 (a) and (c) of the Revenue Act of 1926, as amended by the Joint Resolution of March 3, 1931, and subsequent revenue acts. 6 For present purposes the value determined by 4 T.C. 423">*436 the Commissioner (findings 34 and 35) will be assumed to be correct.
1944 U.S. Tax Ct. LEXIS 11">*41 Petitioners contend that the decedent's rights in the "Standard Oil Securities" were irrevocably transferred in trust prior to the Joint Resolution of March 3, 1931, subject to a condition subsequent, and, since the joint resolution was not retroactive, the value thereof is not subject of the estate tax upon decedent's death; that the rights of the decedent and her brother and sister in the "Standard Oil Securities" described in the deed of family settlement passed to the trustees of the Henry H. Houston estate upon the signing of the deed by them in 1915; and that at no time after 1915 did they have the right, either by themselves or in conjunction with anyone else, to abrogate the deed and get back the rights assigned merely because all the grandchildren who might become of age had not become of age and signed it. They argue that the phrase providing that the life tenants shall be "restored in their rights, whatever they may be," if "at any time in the future 4 T.C. 423">*437 any one or more" of the grandchildren should not be willing "to become signatories" and acquiesce in the disposition of the Standard Oil securities in the manner specified in the deed, is consistent only with a condition1944 U.S. Tax Ct. LEXIS 11">*42 subsequent; that the ultimate signature of the deed by all the minor grandchildren was not necessary to make the deed binding upon the three life tenants; that any such construction is impossible in view of the fact that all the parties to the deed have treated it as valid and binding from the date of its execution and the Orphans' Court has held it to be binding; and that the only reasonable construction of the deed is that "it was an absolute transfer and agreement, binding upon each of the parties who signed it at the moment when they respectively signed it, subject to abrogation in the event that in the future any grandchild, on coming of age, affirmatively refused to sign it."
In
It is not clear whether respondent, at the time the deficiency was determined, was relying upon the view expressed by this tribunal in
For reasons which will become apparent later the effect of the deeds upon the Standard Oil Co. securities will be considered first. There is no dispute that the decedent transferred all of her property rights in these securities to the trustees, reserving for her lifetime the income therefrom. The question is whether this transfer was completed prior to the Joint Resolution of March 3, 1931, or shortly after July 21, 1931, when the last1944 U.S. Tax Ct. LEXIS 11">*45 grandchild became of age and signed the deed of family settlement. If the latter, then the value of decedent's rights in these securities must be included in her gross estate.
It is apparent, and the parties agree, that the assignment by the life tenants, in the deed of 1915, of all their right, title, and interest in the Standard Oil distributions was coupled with a condition in the same instrument. The decision turns, therefore, largely on whether the condition was precedent or subsequent to the vesting of the property.
Estates on condition are well known to the law and an extended discussion here is not required. However, it may be helpful to note, briefly, the nature and operation of conditions precedent and conditions subsequent.
An estate on condition may be defined as an estate which is subject, as regards its commencement or possible termination, to the occurrence of an event or the doing of an act. It is an estate on "condition precedent" if it is not to commence or "vest" until the occurrence of the event or the doing of the act. If it is to terminate on the happening of a specified event or the doing of an act at the option of the creator of the estate or of his successor1944 U.S. Tax Ct. LEXIS 11">*46 in interest, before its normal time of termination, it is an estate on "condition subsequent." Tiffany, Real Property, 3d ed., vol. 1, sec. 185. While certain words are said to be appropriate for the creation of a condition, no particular words are required. The polestar for determining whether a condition exists and whether it is precedent or subsequent is the intention of the grantor as gathered from the whole instrument.
4 T.C. 423">*439 A condition precedent operates to cause an estate to come into existence or to defer the commencement of an estate until compliance therewith. There is actually no estate so long as the condition precedent exists but merely the prospect or possibility of an estate, Tiffany, Real Property, 3d ed., vol. 1, sec. 186. When the condition happens the estate arises, freed from the condition; and it is not different from a similar estate which was immediately created. In the case of a condition subsequent, however, the grantee takes an estate which is liable to termination on breach of the condition; but until such termination he has the same rights and powers as if the condition did not exist. Moreover, such an estate does not end automatically on breach of the condition, but, 1944 U.S. Tax Ct. LEXIS 11">*48 "on the contrary, it is cut short or divested, if, but only if, the person having the power chooses to exercise it." Restatement, Property, vol. 1, sec. 24 and comment b. Finally, "the courts tend to construe a condition as subsequent, rather than precedent, so as to give the grantee or devisee an estate liable to be divested, rather than to defer the vesting." Tiffany, Real Property, 3d ed., vol. 1, sec. 194.
An examination of the deed of 1915 convinces us it was the intention of the parties that the assignment of the Standard Oil distributions should become effective immediately and that all of the property rights of the assignors should then and there be transferred to the trustees of Houston's estate. Questions had arisen concerning the three life tenants' rights in the securities. The trustees of Houston's estate, from the beginning, had added to the corpus of the estate stock dividends of the Standard Oil Co. which, under the laws of Pennsylvania, were distributable to the life beneficiaries. Houston's widow, Sallie, one of the life beneficiaries, had died in 1913 leaving a will which had provided for an unequal distribution of her residuary estate among her grandchildren. 1944 U.S. Tax Ct. LEXIS 11">*49 The will had been questioned and the residuary clause pronounced void, by eminent attorneys, as violating the rule against perpetuities. If a contest had ensued and the opinion of the attorneys had been sustained, the entire residuary estate would have gone to Sallie's surviving children, thus cutting off the grandchildren. In this situation the deed of family settlement was entered into for the expressed purpose "to forever settle and determine * * * all questions of every kind and character * * * as to the present and future holding and disposition" of the Standard Oil securities and the residuary estate of Sallie.
The opening paragraph of the deed recites that it is: "By and between such of the children and grandchildren * * * of Henry H. Houston and Sallie S. Houston * * * who are signatories hereto, and such of the grandchildren * * * as have not yet attained their respective majorities and who may become signatories hereafter to this instrument, Parties of the First Part" and "The Real Estate Trust 4 T.C. 423">*440 Company of Philadelphia" as trustee under the Houston will and executor and trustee under Sallie's will, parties of the second part. Paragraph 5 specifically provides1944 U.S. Tax Ct. LEXIS 11">*50 "That no person * * * shall take any interest under this instrument, or shall have any claim, or shall have the right to make any claim under the same," unless he "become a party signatory thereto, or barred thereby." Clearly it was the intention of the parties, as expressed in the instrument, that each grandchild as he became of age should surrender, by signature, all of his rights under his grandmother's will in consideration for his rights under the deed of family agreement. The failure or refusal of any grandchild to sign would not invalidate the deed or affect it in any way. Such failure or refusal would only put it in the power of the signatories thereto to
The intention of the decedent to make a present transfer of her property in the securities is further evidenced by the disposing clause of the "First" 1944 U.S. Tax Ct. LEXIS 11">*51 paragraph of the deed, in which the life tenants and "the other signatories to this agreement" made an irrevocable assignment of all their right, title, and interest in the securities and in Sallie S. Houston's residuary estate; also by the "Second" paragraph, in which the trustee of the Houston estate is directed to hold the securities until the termination of the deed of family settlement in accordance with its terms and "in the meantime" to dispose of the income and finally to distribute the principal thereof as directed in the deed. If further evidence of intention is necessary it is found in paragraph 6, where it is provided that in the event the settlors shall be restored in their rights they may have the right to require from the executors and trustees of both estates an accounting for such securities and assets, "subject to such interim distribution of income or principal as may have been made by such executors and trustees as authorized hereunder." Moreover, the deed was always treated by the parties as being effective when signed in 1915. From that time until the death of the decedent its provisions were carried out and distributions were made according to its terms.
Finally, 1944 U.S. Tax Ct. LEXIS 11">*52 it may be pointed out that paragraph 6 of the deed of 1915 is inconsistent with the notion of a condition precedent because, upon the refusal of any grandchild to sign the deed, the settlors have an election to take advantage of such action or to ignore it. This is consistent only with a condition subsequent.
The deed was complete and irrevocable as to all signatories when signed by them. The provision requiring grandchildren on coming 4 T.C. 423">*441 of age in the future to sign the agreement in order to become beneficiaries thereunder was for their benefit and not a condition precedent to the vesting of the property. Prior to the Joint Resolution of March 3, 1931, the decedent had unconditionally disposed of all her right, title, and interest in the Standard Oil securities. She did not reserve any power, either alone or in conjunction with any person, to change, alter, or revoke such disposition, and did not have such power either on March 3, 1931, or at any time thereafter.
It is true that on March 3, 1931, there was a possibility, extremely remote, that Eleanor Houston Smith, the only living grandchild who had not signed, would (contrary to her own interest), on coming of age, refuse1944 U.S. Tax Ct. LEXIS 11">*53 to sign the agreement of 1915, thus putting it in the power of the decedent to recover the assigned rights in the Standard Oil securities. But this possibility existed, not by reason of any power reserved to the decedent-grantor, but because of an absolute and unlimited discretionary power lodged in the grandchild, the exercise of which could not be controlled by the grantor. Cf.
We are of the opinion that the provision of the deed of 1915 under which decedent might be restored to her rights in the Standard Oil securities was a condition subsequent; that decedent's property rights passed when she signed the deed; that the reservation of income did not make the transaction one to take effect in1944 U.S. Tax Ct. LEXIS 11">*54 possession and enjoyment at or after death within the provisions of the Joint Resolution of March 3, 1931,
The extraordinary distributions on securities other than those of the Standard Oil companies are in a different category. They were not referred to in, nor were they in our judgment affected by, the deed of family settlement (1915) or the deed of confirmation (1922). This was the view taken by the Orphans' Court in its adjudication, which is probably binding upon us.
The "remainder interests which were benefited" were those specified in Houston's will. They included not only the grandchildren -- the class referred to in the 1915 and 1922 deeds -- but also "children of any deceased grand-child." In that view, taken by the Orphans' Court and in our judgment correctly so, the non-Standard Oil securities irrevocably passed from the decedent at or about the time they were received and became, for all purposes, part of the trust created by her father. Since there was no reservation of "possession or enjoyment of, or the right to the income from," this property, the Joint Resolution of March 3, 1931, is1944 U.S. Tax Ct. LEXIS 11">*56 not applicable.
Respondent has assumed throughout his argument that the non-Standard Oil securities were included in and covered by the 1915 and 1922 deeds. In doing so we think he has erred. The question is important only in the event we have erred in reaching the conclusion expressed in the earlier part of this opinion. At the risk of unnecessarily extending this discussion, it may be pointed out that the 1915 deed referred only to the "'Standard Oil Securities', * * * definitely mentioned in detail, which are now held undistributed in the possession of the Trustees of the Estate of Henry H. Houston, deceased, aggregating an approximate value of $ 14,000,000." The several paragraphs comprising the "premises" of the deed of 1915 -- i. e., preceding the habendum -- and the schedules attached, refer only to the securities received about June 1, 1899, "from the Trustees of the Standard Oil Trust" and later exchanged for "Common Capital Stock of the Standard Oil Company of New Jersey," certificates of subsidiary companies of the Standard Oil Co. of New Jersey delivered to the trustees of Houston's estate on December 1, 1911, and stock dividends distributed by the Standard Oil subsidiary1944 U.S. Tax Ct. LEXIS 11">*57 companies since December 1, 1911. Opinion had been requested from the attorneys, as recited in the deed "as to what portion, if any, of the said securities so received from the Standard Oil Company * * * constitute principal of such estate * * *." These were the only securities transferred by the 1915 deed. The 1922 deed is equally explicit in referring only to "the shares or securities representing or growing out of the testator's holdings of Standard Oil Trust Certificates * * *."
From what has been said it is apparent we are of the opinion respondent erred in including in gross estate the value of the extraordinary 4 T.C. 423">*443 distributions, received by Houston's trustees, upon the non-Standard Oil securities, and we so hold.
The facts in connection with the next issue -- the amount to be included in gross estate under the trust created by decedent in 1916 -- are shown in findings 25 to 29 inclusive. Briefly, the income from the securities transferred in trust 7 is to be paid to the settlor's three children and their children until the death of all of the settlor's children, at which time the corpus is to be distributed, per capita, to the grandchildren then living, the issue1944 U.S. Tax Ct. LEXIS 11">*58 of a deceased grandchild to take its parent's share. The clause providing for the distribution of the corpus is as follows:
In Trust, upon the death of all of said children of Grantor, to pay over and distribute the corpus or principal of the Trust herein and hereby created, together with all accumulations thereon and additions thereto, absolutely, unto the grandchildren of Grantor living at that time per capita and not per stirpes; provided, however, that should any grandchildren of Grantor have died before the date set for the distribution of the corpus or principal of this trust leaving issue him or her surviving, such issue of any deceased grandchildren of Grantor shall receive the share of said corpus or principal to which his, her or their parent would have been entitled if living, such issue of any deceased grandchildren of Grantor taking per stirpes and not per capita. And Provided Further, However, that should any of the appointees of any child or children of Grantor be living at such time, there shall be retained by Trustees a portion of principal sufficient to produce such annual income as the child or children of Grantor may have made payable to such appointee or appointees. 1944 U.S. Tax Ct. LEXIS 11">*59
Respondent, claiming an increased deficiency in tax (
Petitioners concede that whatever interest the decedent had in the corpus of the trust at the time of her death is to be included in gross estate under section 302 (a). They insist it is only "the fair value of the chance that the principal might revert to her estate, in case on the death of the survivor of her two daughters all her grandchildren and great-grandchildren were deceased." That is a nominal amount.
In our judgment it is unnecessary to enter into an extended discussion of the law of vested and contingent remainders. Even if it be true that the courts of Pennsylvania, where the trust was created, would construe the interests of the grandchildren and1944 U.S. Tax Ct. LEXIS 11">*61 great-grandchildren to be contingent until the death of the life tenants, 8 it does not follow that the value of the interest of the decedent in the property at the time of her death is the difference between the total value of the corpus and the value of the life estates. Decedent, by the transfer in trust, irrevocably parted with the trust property and the income therefrom during the lives of her children. 1944 U.S. Tax Ct. LEXIS 11">*63 She also directed her trustee "to pay over and distribute the corpus * * * together with all accumulations * * *, absolutely * * *" to her grandchildren living at the time of the death of the life tenants. It can not be gainsaid that the grandchildren had a substantial interest in the corpus from their birth, which only their death prior to the death of the life tenants could terminate. The interest of the decedent at the time of her death and the present interest of her estate, whether characterized as a reverter, a possibility of reverter, or an inchoate right to become the beneficiary of a resulting trust, 9 was, realistically and practically, only to receive the corpus upon the complete failure of her whole line. We disagree with respondent's assertion that decedent1944 U.S. Tax Ct. LEXIS 11">*62 "owned at the time of her death and her estate still owns" the corpus less the life estates.
Cases arising under section 302 (c), some of which have been cited and relied upon by the respondent, have not been found to be helpful because, as the Court pointed out in
* * * Under these circumstances the estates following the life estates in the grantor and his wife would have been vested estates. The grantor would have put the corpus of the trust beyond possibility of return to himself except upon the very remote contingency that he would survive the death of his wife, his children, his grandchildren, the next of kin of his children and his own next of kin. If he had survived all of the persons named, the trust corpus would have reverted to him1944 U.S. Tax Ct. LEXIS 11">*65 upon the failure of the trust. Upon the estates set up by the indenture of the case at bar, if the grantor had survived his wife, his children, their respective spouses, and their issue, and his own next of kin, the corpus of the trust would have reverted to him likewise by reason of the failure of the trust. In either event the trust would have returned to him not by specific words contained in the indenture, but by failure of the trust. Putting to one side any dialectic questions as to how a man can outlive his next of kin, it is obvious in the case at bar that
The value of the interest of the decedent in the trust property at the time of her death is determined by ascertaining in terms of money what her interest would bring in the market.
An intelligent bidder -- "a willing buyer" -- of such interest as the decedent had in the property at the time of her death would not attempt to apply "the recondite learning of ancient property law" 10 in fixing the price to be paid. He would measure the value of decedent's interest by the probability that the corpus would be returned to her or her estate upon the termination of the life estates. This depended upon the demise 4 T.C. 423">*446 of all twelve of her grandchildren prior to the death of the survivor of her children, the life tenants. The probability that this would occur can be reasonably approximated through the use of mortality tables. They support the conclusion, which inevitably would be reached by the hypothetical buyer, that this probability was exceedingly remote and the value of decedent's interest in the trust property was nominal. Cf.
Respondent's alternative contention that section 302 (c) requires the inclusion in gross estate of the value of the corpus less the value of the life estates is controlled by such cases as
The next issue is the fair market value of decedent's undivided one-third interest in 20 parcels of real estate. Her brother and sister owned the other two thirds. Petitioners included in gross estate one-third of the presently stipulated fair market value of each tract, less 20 per centum. 11 Respondent determined that one-third of the aggregate, 1944 U.S. Tax Ct. LEXIS 11">*69 without any discount, should be included.
In
In the instant case three witnesses called by petitioners, experienced in appraising real estate in the Philadelphia area, agreed that a discount factor of 20 percent would be reasonable. They rested their conclusion upon the difficulty of marketing an undivided interest, the disadvantages of owning real1944 U.S. Tax Ct. LEXIS 11">*70 estate jointly with others, the possibility that a partition suit might be necessary with its attendant delay and expense, and the fact that some of the parcels were unproductive. Respondent points out that none of the witnesses had made any real appraisal of the parcels to be evaluated and that each was merely describing the "yard-stick" to be used. Also that no circumstances, such as disagreement between the co-owners or likelihood that a purchaser would be unable to get along with the other owners has been shown. While respondent's criticism of the testimony is partially justified, we do not agree with his contention that it should be wholly disregarded.
Valuation of real estate, like many questions of fact, can never be completely rationalized. We agree with petitioners and their witnesses that minority fractional interests in highly improved downtown property -- most of the examples given by the witnesses were of this type -- will, in forced sales, seldom bring an amount equal to an aliquot part of the value of the whole. But the real estate giving rise to the present issue is not of that type. The most valuable tract ($ 175,000) is the Philadelphia Cricket Club, comprising1944 U.S. Tax Ct. LEXIS 11">*71 18 acres bounded by Willow Grove Avenue, Hartwell Avenue, and Towanda and Huron Streets. Several of the others are vacant lots contiguous to the club property. The next most valuable ($ 50,000) is a 40-acre farm, three-quarters of a mile west of Ridge Avenue, Whitemarsh Township, adjoining other golf links. A third, having a value of $ 46,500, consists of 30.9 acres -- 457 lots -- adjoining other land owned by the Houston estate. There is no evidence that these tracts were not readily divisible in kind. The parcels containing houses, representing only a small portion of the whole value, are more subject to the infirmities described by the witnesses. All of these circumstances, as well as the testimony of the witnesses and the arguments of counsel, have been considered in fixing the value determined, i. e., $ 125,000 rather than $ 139,203.33, as determined by respondent, or $ 111,362.67, as reported by petitioners.
The last issue is not discussed by the petitioners. Respondent states the question thus: Can a refund result from a claim made for the first time in an amended petition filed more than three years after the payment of any tax?
Briefly summarizing the facts, petitioners, 1944 U.S. Tax Ct. LEXIS 11">*72 by paragraphs 4 (f) and 5 (f) of the amended petition, filed October 12, 1943 -- which is more 4 T.C. 423">*448 than three years after the payment of the tax on September 5, 1939 -- make claim for the deduction of administration expenses, including counsel fees, in addition to those claimed in the estate tax return. No contention that such amounts were deductible was made in the original petition, which was filed less than three years after the payment of the tax, and no formal claim for refund has been filed. Respondent concedes that the amounts, aggregating $ 100,522 and shown in paragraph 26 of the stipulation, are otherwise proper deductions.
The applicable statute is shown in the margin. 12 Respondent assumes, and we think correctly, that the three-year period mentioned in the parenthetical clause is the applicable period. Thus, since no claim has been filed, no refund of any portion of the tax may be made unless we determine that such portion was paid within three years before the filing of the petition.
1944 U.S. Tax Ct. LEXIS 11">*73 In
The cited authorities support respondent's contention. For good discussions of the other view, see dissenting opinions in
1. The wills, trusts, deeds and other documents hereinafter referred to are all attached to the stipulation.↩
2. The term "extraordinary distributions" includes stock dividends, stock rights, securities acquired upon the exercise of rights and the proceeds of rights which were sold.↩
3. The enumerated exceptions are 16,000 Pennsylvania Railroad rights issued by the railroad company on December 7, 1929, and sold on March 18, 1937; 259 1/4 shares of Standard Oil Co. of California; and 2,817 1/3 shares of Mission Corporation.↩
*. The items making up these amounts are shown in detail in the stipulation. They include carrying charges on real estate, which respondent has stated he does not intend to press. The second amount also includes the undistributed balance of the assets held by the Real Estate Trust Co. under the family agreement for distribution on June 6, 1938, to Eleanor Houston Smith ($ 150,705.72), which amount was distributed to her shortly after that date, and the assets distributable to other grandchildren of Sallie S. Houston, "who had each become entitled to their respective shares of the principal thereof prior to June 6, 1938, upon their respectively reaching 30 years of age", ($ 227,336.62).↩
4. "* * * Disregarding the Family Agreement [of 1915], the 1922 agreement, and the writings (Exhibits 6-F through 26-Z) [the annual approvals -- see findings 18, 19, and 20], some part of the items referred to in Paragraphs 28 and 29 [of the stipulation -- i. e., the stock dividends, stock rights, etc., on both the Standard Oil companies and non-Standard Oil companies] would have constituted distributable income of the Estate of Henry H. Houston, but the questions (a) to what extent, and (b) at what time or times, the said items would have been so distributable are agreed by the parties to be excluded by the joint motion from consideration at the present * * *." [Par. 35, stipulation.]↩
5. The Orphans' Court, in its adjudication upon the trustees' first account, filed October 8, 1941 (Ex. 29 -- A. C.), held that "oral agreements" had been made by the life tenants that the dividends on corporate securities other than those of the Standard Oil Co. should be held by the trustees of Houston's estate as principal. It said: "By the oral agreements * * * and the repeated affirmation of such agreements found in the approval of the various accounts the life tenants released to the principal of tthe trust any claims to stock dividends and other extraordinary corporate distributions to which they might be entitled as the income beneficiaries of the trust. When made, this release was irrevocable and could not be set aside or revoked without the consent of all remainder interests which were benefited by such release."↩
6. Sec. 302 [as amended by section 404 of the Revenue Act of 1934]. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside the United States --
(a) To the extent of the interest therein of the decedent at the time of his death; * * *
* * * *
(c) [as amended by Joint Resolution of March 3, 1931, Public No. 131, Seventy-first Congress, and by section 803 (a) of the Revenue Act of 1932]. To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title;
(d) [As amended by section 401 of the Revenue Act of 1934, and by section 805 (a) of the Revenue Act of 1936.] (1) To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by 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 by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke, or terminate, or where any such power is relinquished in contemplation of decedent's death.
(2) For the purposes of this subdivision the power to alter, amend, or revoke shall be considered to exist on the date of the decedent's death even though the exercise of the power is subject to a precedent giving of notice or even though the alteration, amendment, or revocation takes effect only on the expiration of a stated period after the exercise of the power, whether or not on or before the date of the decedent's death notice has been given or the power has been exercised. In such cases proper adjustment shall be made representing the interests which would have been excluded from the power if the decedent had lived, and for such purpose if the notice has not been given or the power has not been exercised on or before the date of his death, such notice shall be considered to have been given, or the power exercised, on the date of his death.
(3) The relinquishment of any such power, not admitted or shown to have been in contemplation of the decedent's death, made within two years prior to his death without such a consideration and affecting the interest or interests (whether arising from one or more transfers or the creation of one or more trusts) of any one beneficiary of a value or aggregate value, at the time of such death, in excess of $ 5,000, then, to the extent of such excess, such relinquishment or relinquishments shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this title; * * *
* * * *
(i) If any one of the transfers, trusts, interests, rights, or powers, enumerated and described in subdivisions (c), (d), and (f) of this section is made, created, exercised, or relinquished for a consideration in money or money's worth, but is not a bona fide sale for an adequate and full consideration in money or money's worth, there shall be included in the gross estate only the excess of the fair market value at the time of death of the property otherwise to be included on account of such transaction, over the value of the consideration received therefor by the decedent.↩
7. For present purposes the fair market value of the securities at the date of death is assumed to be the amount determined by the respondent, $ 5,110,710.82.↩
8.
9.
"Where the owner of property gratuitously transfers it upon a trust which is properly declared but which is fully performed without exhausting the trust estate, the trustee holds the surplus upon a resulting trust for the transferor or his estate, unless the transferor properly manifested an intention that no resulting trust of the surplus should arise."↩
10.
11. $ 417,610 divided by 3 = $ 139,203.33, 80% of which is $ 111,362.67.↩
12. Sec. 319 (c) of the Revenue Act of 1926, as amended by sec. 809 (e) of the Revenue Act of 1938:
"If the Board finds that there is no deficiency and further finds that the executor has made an overpayment of tax, the Board shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Board has become final, be credited or refunded to the executor as provided in section 3220 of the Revised Statutes as amended. No such refund shall be made of any portion of the tax unless the Board determines as part of its decision that such portion was paid within four years (or, in the case of a tax imposed by this title [i. e. by Title III of the Revenue Act of 1926, Estate Tax], within three years) before the filing of the claim or the filing of the petition, whichever is earlier, or that such portion was paid after the mailing of the notice of deficiency; * * *"↩
Powell v. Powell , 335 Ill. 533 ( 1929 )
Freuler v. Helvering , 54 S. Ct. 308 ( 1934 )
May v. Heiner , 50 S. Ct. 286 ( 1930 )
Hassett v. Welch , 58 S. Ct. 559 ( 1938 )
Blair v. Commissioner , 57 S. Ct. 330 ( 1937 )
Helvering v. Hallock , 60 S. Ct. 444 ( 1940 )
Ithaca Trust Co. v. United States , 49 S. Ct. 291 ( 1929 )
United States v. Provident Trust Co. , 54 S. Ct. 389 ( 1934 )