ESTATE TAX-Continued. 8. Id. Reconsidered and reversed. Estate of William F. Hofford... 9. Id. Reservation of Rights To Invade Trust Corpus or To Change Remainder Interests renders transfers effective at death. Estate of Margaret P. Gallois Estate of Albert E. Nettleton 10. Id. Contention that right had been orally relinquished not established by evidence. Estate of Margaret P. Gallois 11. Id. Where right had been exercised and exhausted, remaining corpus is not includible in gross estate. Estate of I. H. Burney-. 12. Id. Vesting of Remainders of Trust was suspended during lives of life income beneficiaries. Held, not dependent upon grantor's death and transfer was not one effective at death. Estate of Harris Fahnestock_____ 13. Id. Remainders vested in grantor's children provided they survived him and attained the age of 30 years. Otherwise corpus reverted to grantor or his testamentary appointees. Held, transfer was one effective at grantor's death. Estate of Charles Curie.... (3) Trusts; Reserved Income or Powers. 14. Prior to March 3, 1931. Income beneficiaries surrendered to their trustee prior to above date right to certain stock dividends, transfer to become void unless all minor beneficiaries signed agreement as they reached majority, a fact not ascertainable until after March 3, 1931. Held, transfer vested property rights in trustee immediately, subject to later defeasance, and decedent's share is not includible in gross estate. Estate of Sallie Houston Henry--- 15. Id. Condition as to voidability was not the reservation of a revocative power by transferors. Id. 16. Id. Additional corpus was transferred after March 3, 1931, to trust created prior thereto, in which grantor had reserved right to income as secondary beneficiary. Held, right reserved was not a retained estate within sec. 803 (a), Act 1932, and corpus transferred subsequent to basic date is not includible in gross estate. Estate of Charles Curie-... 17. Daughter-Grantor; Corpus Supplied by Decedent. Corpus of trust of which decedent was life beneficiary, created by daughter with property delivered to her by decedent for that purpose, is includible in his gross estate. Estate of George W. Sweeney- 18. Possibility of Reverter. In absence of an expressed retention of a reversionary right mere possibility is not sufficient to require inclusion of trust corpus in grantor's estate. Estate of I. H. Burney.. 19. Id. Possibilities depending upon deaths of grandchildren, or of a wife many years younger, or of two groups of life tenants, are too remote. Estate of Sallie Houston Henry_ Estate of William F. Hofford Estate of Harris Fahnestock.. Estate of Mary B. Hunnewell.... 20. Id. Possibility depending upon deaths of two grandchildren before attaining majority, which possibility included reversion to grantor or his estate, held not too remote. (4) Joint Tenants. Estate of William Walker_ 21. Nonresident Domiciled in France. Under French statute movable property, in absence of prenuptial agreement, owned at, or acquired after, marriage is community property and form of tenure may not be altered. Held, stock registered jointly with wife is not to be included in gross estate as a joint interest under sec. 811 (e), I. R. C. Estate of Paul M. Vandenhoeck (5) Life Insurance. 22. Assignment to Irrevocable Trust. Proceeds paid to trustees upon death of insured are not a part of taxable estate, where no property rights or power to change beneficiaries were reserved in creating trust. Estate of Louis J. Dorson___ (6) Community Property. 23. Nonresident; Domiciled in France. Under community property law of France, stock registered by decedent and wife as joint owners is community property, one-half of which only is includible in gross estate. Estate of Paul M. Vandenhoeck.... Page 790 840 987 840 449 1096 1175 423 1175 265 449 423 542 1096 1128 390 125 463 125 ESTATE TAX-Continued. II. DEDUCTIONS FROM GROSS ESTATE. 1. Charitable Bequests. The condition precedent to the deduction is that gift shall have been the act of decedent. Estate of Frederick F. Dumont.. 2. Id. Under state law gift made by will executed less than 30 days before date of death was void. Held, where donee, in order to take gift despite state law, paid a consideration to heirs, donee is not a legatee, but a purchaser for value, and estate may not claim the deduction. id. 3. Id. There was no "disclaimer" within the purview of sec. 812 (d), I. R. C., as retroactively amended by secs. 408, Act 1942 and 511, Act 1943. Id. 4. Id. The words "hospitals that need them" used by testator, held to mean public, not private, hospitals and bequest is deductible. Estate of Blanche B. Gilbert__ 5. Id. Will was contested but by compromise agreement heirs accepted one-fourth. Held, executor took under the will, not by purchase, and deduction is allowable. Id. 6. Id. Distinction is drawn between valid bequests contested on the grounds of testator's mental capacity and bequests void under state law. Id. Page 158 1006 7. Id. The words "civic purposes" held to exclude the concept of propaganda activities and to include benefits to an indefinite number of persons. Held, bequest is deductible. Estate of Lucy Latham Boyles 1092 8. Id. It is not material that testator did not designate gift as charitable, or that gift was also a memorial to her father. Id. 9. Id. Remainder of Trust Fund. Right to invade corpus for maintenance of widow, life beneficiary of income, on same standard as existed before creating trust does not render valuation of charitable remainder impossible of calculation, and deduction is allowable. Estate of Horace G. Wetherill__ 10. Id. Such trusts fall into two classes: (1) those in which beneficiary's right to corpus is limited to a determinable standard, and (2) those in which right is without restriction, or standard is susceptible to increase upon beneficiary's request. Id. 11. Id. Age of beneficiary and amount of any separate income or estate are factors to be considered. Id. 12. Executors' Fees are allowable in full although one executor refused to accept payment. Estate of I. H. Burney_ . 13. Id. Estimated executor and attorney fees for later services, not yet paid, held reasonable and deduction is allowed. Id. 14. Claims Against Estate. Owner of claim against decedent as guarantor relinquished his right, reserving claim against co-guarantor. Facts show both maker and co-guarantor to have been solvent. Held, estate will not be required to pay claim and it is not deductible. Estate of Ethel M. DuVal.. 15. Id. Fact that court having jurisdiction allowed it in final accounting does not affect this decision. Id. 16. Id. Endorsed Note. Payment of decedent's liability as endorser of note found uncollectible, is deductible. Estate of William F. Hofford 17. Id. It is not necessary that consideration referred to in the statute be received by the endorser. III. LIABILITY FOR TAX. Id. 1. Surviving Wife who takes possession of assets of husband's estate without formal administration proceedings is liable as transferee for estate tax due. Estate of Paul M. Vandenhoeck 2. Citizenship. The Nationality Act of 1940 provides the only acts by which citizenship may be lost and long residence in a foreign country or application for naturalization there, uncompleted at time of death, are not included. Held, decedent was a citizen of the United States and his estate is liable for the tax. Estate of Robert Harvey Lyons___ 678 449 722 542 125 1202 ESTATES AND TRUSTS: I. Estates, p. 1306. II. Trusts: (1) Income Taxable to Grantor, p. 1306. (3) Deductions, p. 1307. (4) Liability for Tax, p. 1307. Assignment of income by beneficiary. See ASSIGNMENTS AND Community estates. See COMMUNITY PROPERTY, 8-10. Trusts subject to estate tax. See ESTATE TAX, I, 6-20, 22. I. ESTATES. Page 1. Deceased Partner. Where provision was made for continuance of partnership for one year after death of a member, deceased partner's share of profits or losses for fractional period ending with death belongs on return filed for that period, and share for remaining portion of his accounting period belongs on return filed for his estate. Estate of Hunt Henderson___ 1001 2. Id. Unjust Enrichment Tax. Estate of deceased partner was not engaged in business of selling processed commodities, and is not liable for unjust enrichment tax assessable against surviving partners. Margaret W. Galbreath Hendrickson_. 3. Id. The tax is statutory and to be liable the person must fit the statutory concept in sec. 501 (a) (2), Act 1936. Id. 4. Deductions. Under West Virginia code title to undivided interests devised by will vests in devisees immediately, and losses sustained from sale of such interests are deductible by devisees, not by decedent's estate. Sayers F. Harman_. 5. Id. Testamentary trust directed executrix to invade corpus, if necessary, during administration period to pay on behalf of its trustee a stipulated income to beneficiary. Held, payment made was an annuity and is not deductible from estate's income. Northern Trust Co____ 6. Id. It follows that there has been no overpayment by the estate through failure to claim the deduction. Id. II. TRUSTS. (1) Income Taxable to Grantor. 1. Family Trusts. Laxity in administration such as commingling trust with personal funds held not a basis for taxing income to grantor-trustee, where audit discloses both corpus and accumulations were intact. Litta Matthaei_.. 2. Id. Husband and wife created trusts of equal value, naming each other as income beneficiary with testamentary power of appointment over corpus. Held, incomes are taxable to grantors. Edward E. Bishop_-_ 3. Id. Minor Children. Permission to use trust income for their support is insufficient, where none was in fact so used. Alex McCutchin_____ 4. Id. Where trust was for a long term and irrevocable and corpus was distributable when minors reached a stated age, retention of broad powers of management and control does not justify taxing income to grantor. Alice Ogden Smith_. Alex McCutchin_. J. M. Leonard....... 5. Id. Power to Amend Granted Wife-Trustee. Sec. 167, Act 1938, presupposes that trustees will be amenable to the wishes of grantors. Held, income is taxable to grantor. Clair R. Savage - 6. Id. Fact that upon death of minor beneficiaries and their issue corpus would pass to wife having the power, held too remote a possibility to establish in her the necessary adverse interest. Id. 7. Id. Where income was used for maintenance of children and to pay premiums on grantor's insurance contracts, not transferred to trust, he is taxable on trust income. George Beggs.- - 8. Id. Income Reserved. Transfer of securities to trust previously created by transferor's husband for benefit of minor children, reserving income to herself, does not relieve wife from tax liability. Dorothy K. Sunderland. - . 231 335 529 1132 862 1242 573 1242 1271 286 1053 88 ESTATES AND TRUSTS-Continued. 9. Id. Reserved Powers Equivalent to Ownership. Right to change beneficiaries, control over corpus or distribution of income, right to invade corpus for emergencies, or to borrow trust funds for grantor's purposes, are all bases for taxing income to grantor. Louis Stockstrom__ Estate of O. M. Banfield Joel E. Hall.. Lewis A. Cushman, Jr.- George Beggs Stanley J. Klein_. Alex McCutchin 10. Id. Surrender of retained rights to deal with trust property as though it were his own relieves grantor of liability for tax on income arising thereafter. Estate of O. M. Banfield.. (2) Income Taxable to Beneficiary. 11. Testamentary Trusts; Improper Distribution; Refund by Beneficiary. State law provided that interest be paid from income, unless will provided otherwise. Held, beneficiary who reimburses trustee after having received all income is taxable only on amount legally retained. Forrest G. Pearson_ 12. Id. Interest on income tax deficiency is not a part of the tax and provision by will that all taxes be paid from corpus does not apply to interest. Id. 13. Beneficiary-Trustee. Taxpayers, brothers, named each other as trustees and income beneficiaries. As trustees they were empowered to distribute income to one or all of their sons, which was done during tax years. Held, mutual agreement was equivalent to assignment of future income, while retaining beneficial interest, and primary beneficiaries are taxable on distributions under sec. 22 (a). Edgar R. Stix....... 14. Reciprocal Trusts; Husband and Wife. Each named other as beneficiary with right to change trustee, who had uncontrolled discretion as to distribution of income, but had orally agreed to pay income upon request of beneficiary. Held, undistributed income is taxable to beneficiaries. Edward E. Bishop_ (3) Deductions. 15. Testamentary Trusts. Trustees' Fees, payable under New York statute, although designated "paying out" and "receiving" fees, are paid for services rendered or to be rendered, not for the mere act of accepting the trust, as claimed by Commissioner, and are deductible. James H. Knox Trust___ 16. Losses; Trustee or Beneficiary. Loss sustained when trust property was sold for tax delinquency is deductible by trust, not by income beneficiary. A. M. Standish__ 17. Distributable Income. Trust directed payment of a stipulated income granting trustee right to invade corpus for 50% thereof if income insufficient. Held, one-half of amount distributed was an annuity and is not deductible. Northern Trust Co.___. (4) Liability for Tax. 18. Trustees. Income from an alimony trust created for benefit of American wife and children by a nonresident alien, administered under the jurisdiction of a United States court, and no part of which, corpus or income, was payable to alien trustor, held not taxable to him, and there is no liability against trustee as grantor's agent under sec. 3467, R. S. G. P. Fitzgerald... ESTOPPEL: 1. Plea Denied. Issue in prior decision was the character of business entity, whether a corporation or partnership, and tax liability involved was that of its owners. Held, instant proceeding involves the tax of the corporation and plea is denied. Chilhowee Mills, Inc.. 2. Id. Change of position by Commissioner, in absence of a showing that taxpayer suffered some detriment thereby, will not support the plea. Okonite Co.- ESTATES AND TRUSTS: I. Estates, p. 1306. II. Trusts: INDEX (1) Income Taxable to Grantor, p. 1306. (4) Liability for Tax, p. 1307. See ASSIGNME! Assignment of income by beneficiary. I. ESTATES. 1. Deceased Partner. Where provision was made for cc partnership for one year after death of a member, deceased r of profits or losses for fractional period ending with death be filed for that period, and share for remaining portion of period belongs on return filed for his estate. Estate of Hu 2. Id. Unjust Enrichment Tax. Estate of deceased engaged in business of selling processed commodities, ar unjust enrichment tax assessable against surviving partr Galbreath Hendrickson.. 3. Id. The tax is statutory and to be liable the statutory concept in sec. 501 (a) (2), Act 1936. Id. 4. Deductions. Under West Virginia code title t devised by will vests in devisees immediately, and sale of such interests are deductible by devisees, no Sayers F. Harman_. 5. Id. Testamentary trust directed executrix t sary, during administration period to pay on bel lated income to beneficiary. Held, payment me not deductible from estate's income. Northern 6. Id. It follows that there has been no through failure to claim the deduction. II. TRUSTS. (1) Income Taxable to Grantor. Id. 1. Family Trusts. Laxity in administra with personal funds held not a basis for tr where audit discloses both corpus and a Matthaei_. 2. Id. Husband and wife created tr other as income beneficiary with testan corpus. Held, incomes are taxable to 3. Id. Minor Children. Permissic port is insufficient, where none was i 4. Id. Where trust was for a lon distributable when minors reached of management and control does Alice Ogden Smith_. 1158 us ions 634 I return, rst return ection, was le. Burford ment of the prole to the Commison on this Court to the Court before legisCommissioner's rejection presented to Commissioner. king office after passage of statute 613 27 795 Wil 307 out United States. Compensation for agent to sell German securities owned by held (1) to constitute earned income within excludable from gross inccme under sec. 116 og resided without the United States the required that payment is made within the United States will not bere services are performed is controlling as to source ng the year earned. Herman A. Kollmar... 727 |