Lapas attēli
PDF
ePub

308

Syllabus

In accordance with the above opinion and upon report from the General Accounting Office showing the amount due thereunder to be $1,458.80, and upon plaintiff's motion for judgment, it was ordered December 6, 1943, that judgment for the plaintiff be entered in the sum of $1,458.80.

THE NEW YORK TRUST COMPANY AND PERCY H.
JENNINGS, EXECUTORS OF THE ESTATE OF
LAURA H. JENNINGS v. THE UNITED STATES

[No. 45691. Decided October 4, 1943]
On the Proofs

Estate tax; irrevocable trust, income retained by settlor during lifetime, created prior to March 3, 1931.-No part of the value of an irrevocable trust fund created prior to the approval of the Joint Resolution of March 3, 1931, amending Section 302 (c) of the Revenue Act of 1926, is subject to an estate tax because of the retention by the settlor of the income therefrom for his lifetime. Hassett v. Welch, et al., and Helvering v. Marshall, Administrator, 303 U. S. 303, 307, cited. Helvering v. Hallock et al., Trustees, 309 U. S. 106, distinguished.

Same; Joint Resolution of March 3, 1931, not retroactive.-The Joint Resolution of March 3, 1931, amending Section 302 (c) of the Revenue Act of 1926, was not retroactive and did not apply to property transferred by an irrevocable trust created prior to date of approval of the Joint Resolution. (46 Stat. 1516.) Same; corpus of trust created prior to approval of Joint Resolution of March 3, 1931, not includable in gross estate where income is retained by settlor.-Where on February 13, 1924, decedent executed an irrevocable trust instrument under the terms of which the income from the trust fund was to be paid to settlor for her lifetime, and at her death the corpus of the trust was to be divided into shares, the income to be paid to her three children, if then living, and the principal to go ultimately to persons appointed by them or their children or heirs; it is held that the retention by the settlor-decedent during her lifetime of the income from the 1924 trust did not require the value of the corpus of the trust fund to be included in decedent's gross estate upon her death on July 8, 1939, for the purpose of determining the value of the net estate subject to tax as a "transfer to take effect in possession or enjoyment at or after death" under Section 811 (c), Internal Revenue Code, and plaintiffs, executors, are entitled to recover.

Reporter's Statement of the Case

The Reporter's statement of the case:

100 C. Cls.

Mr. Charles C. Parlin for plaintiffs. Mr. John A. Reed and Wright, Gordon, Zachry, Parlin & Cahill were on the brief.

Mrs. Elizabeth B. Davis, with whom was Mr. Assistant Attorney General Samuel O. Clark, Jr., for defendant. Mr. Robert N. Anderson and Mr. Fred K. Dyar were on the brief.

Plaintiffs seek to recover $399,281.49, alleged overpayment of estate tax and interest thereon collected February 12, 1942, together with interest from date of payment, on the ground that no part of the value of a trust fund under an irrevocable trust created in February 1924 was includable in the gross estate of decedent under section 811 (c) of the Internal Revenue Code upon decedent's death July 8, 1939.

The court having made the foregoing introductory statement, entered special findings of fact as follows:

1. Laura H. Jennings died July 8, 1939, a citizen and resident of Oyster Bay, New York.

2. July 27, 1939, her last will and testament was duly admitted to probate by the Surrogate's Court of the State of New York, Nassau County, and letters testamentary thereon were issued to The New York Trust Company and Percy H. Jennings, both of whom are now acting as executors of the estate.

3. October 8, 1940, the executors filed a federal estate-tax return for the estate of Laura H. Jennings reporting a net estate of $2,338,702.89 on which a tax of $557,210.87 was shown to be payable, which amount was computed by deduction of the full eighty percent credit for state inheritance taxes allowed by section 813 (b) of the Internal Revenue Code.

4. The executors paid $557,210.87 to the collector of internal revenue on October 8, 1940, on account of tax due on the return as filed.

5. Upon audit of the return the Commissioner of Internal Revenue asserted a net deficiency in estate tax, after provisional allowance of the full 80% credit for state inheritance

311

Reporter's Statement of the Case

taxes provided for by section 813 (b) of the Internal Revenue Code, of $357,048.62, and in due course payment of this amount, together with interest thereon, was demanded by the collector.

6. In computing the deficiency the Commissioner included as part of the gross estate of decedent the amount of $1,132,334.16, representing the value of the trust fund created by a certain agreement and deed of trust between Laura H. Jennings, as grantor, and Percy H. Jennings and George S. Franklin, as trustees, dated as of February 13, 1924, this amount having been included by the Commissioner as part of the gross estate as a transfer intended to take effect in possession or enjoyment at or after death because under the terms of the agreement and deed of trust Laura H. Jennings, the grantor, had reserved to herself the right to the income of the trust fund during her lifetime. The Commissioner made no claim that transfer was made in contemplation of death. A true copy of the aforementioned agreement and deed of trust is attached to the petition herein as exhibit B. There has been no addition to the trust fund since its original establishment in 1924.

7. February 12, 1942, the executors paid the collector the amount of the net deficiency of $357,048.62, together with interest thereon of $28,857.35, making a total of $385,905.97.

8. March 9, 1942, the executors filed with the collector a claim for refund of $399,281.49 based on the ground that no part of the value of the aforementioned trust fund was includable in the gross estate of decedent under the Internal Revenue Code. A true copy of such claim for refund is attached to the petition herein as exhibit C.

9. Notice of disallowance of the claim for refund was given by letter from the Commissioner May 18, 1942. A true copy of this letter is attached to the petition herein as exhibit D.

No part of the amount of $399,281.49 claimed in the petition has been refunded.

10. Laura H. Jennings was born September 8, 1858. The names and ages (taken from the nearest birthday) of all the children, grandchildren, great-grandchildren and other

Opinion of the Court

100 C. Cls.

issue of Laura H. Jennings living on February 13, 1924, and July 8, 1939 (there being then living no legally adopted children of Frederic B. Jennings, Jr.), were as follows:

[blocks in formation]

Name and Relationship to Laura H. Jennings:
Frederic B. Jennings, Jr. (son of Laura H.

Jennings)

33

Edward P. Jennings (son of Laura H.
Jennings).

[blocks in formation]

Percy H. Jennings (son of Laura H. Jennings) __
Elizabeth J. Franklin (daughter of Laura

[blocks in formation]

H. Jennings) –

Percy H. Jennings, Jr. (child of Percy H.
Jennings and grandchild of Laura H.
Jennings).

Joanna Russell Jennings (Hadden) (child of
Percy H. Jennings and grandchild of Laura
H. Jennings) –

Elizabeth A. Jennings (Truslow) (child of
Percy H. Jennings and grandchild of Laura
H. Jennings)

Frederic B. Jennings, 2nd (child of Percy
H. Jennings and grandchild of Laura
H. Jennings) ‒‒‒‒

Laura H. Jennings, 2nd (child of Percy
H. Jennings and grandchild of Laura
H. Jennings)‒‒‒‒

George S. Franklin, Jr. (child of Elizabeth J.
Franklin and grandchild of Laura H.
Jennings).

Lila H. Franklin (child of Elizabeth J.
Franklin and grandchild of Laura H.
Jennings) _

[blocks in formation]

11. Frederic B. Jennings, Jr., died March 29, 1932, without issue. Upon the death of Laura H. Jennings that part of the trust corpus which Frederic B. Jennings, Jr., would have received, had he then been living, passed to Percy H. Jennings and Elizabeth J. Franklin, children of Laura H. Jennings, the beneficiaries in default of appointment.

The court decided that plaintiffs, executors, are entitled to recover, entry of judgment to be suspended until the filing by the parties of a stipulation showing the amount of the

311

Opinion of the Court

overpayment to be refunded, after allowance of the eighty (80) percent credit for New York estate and inheritance taxes provided for by section 813 (b) of the Internal Revenue Code.

LITTLETON, Judge, delivered the opinion of the court:

Laura H. Jennings died July 8, 1939. February 13, 1924, she executed an irrevocable trust instrument under the terms of which the income from the trust was to be paid to her for life. At her death the principal or corpus of the trust was to be divided into shares, the income paid to her three children if then living and the principal to go ultimately to persons appointed by them or their children or their heirs.

The Commissioner of Internal Revenue held that the value of the trust property so transferred in this irrevocable trust of 1924 was includable in the decedent's gross estate for the purpose of determining the value of the net estate subject to tax as a "transfer to take effect in possession or enjoyment at or after death," under section 811 (c), Internal Revenue Code.

The sole question presented here is whether the retention by the settlor-decedent during her life of the income of the 1924 trust requires the value of the corpus of the trust fund to be included in the gross estate upon her death July 8, 1939, as an interest intended to take effect in possession or enjoyment at or after death within the meaning of the applicable provisions of the estate-tax provisions of the pertinent taxing acts.

At the time the decedent created the trust in question on February 13, 1924, the Revenue Act of 19211 was in effect and section 402 (c) thereof provided "That 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-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 or intended to take effect in possession or enjoyment at or after his death (whether such transfer or trust is made or created before or after the passage of this Act), except in case of a bona fide sale for a fair consideration in money or money's worth." This provision was reenacted in section 302 (c) of the Revenue Act

[blocks in formation]
« iepriekšējāTurpināt »