#### BENJAMIN FRANKLIN DEFORD AND THOMAS DEFORD, EXECUTORS AND TRUSTEES UNDER THE LAST WILL AND TESTAMENT OF THOMAS DEFORD, DECEASED, v. THE UNITED STATES.

[No. 32459.

Decided February 19, 1917.]

*On the Proofs.*

*Inheritance tace; statutes; wills.*— The fact that the beneficiaries under a will absolutely bequeathing property to them were minors on July 1, 1902, the time of taking effect of the act of June 27, 1902, 32 Stat., 406, does not render inheritance taxes assessed and collected under the provisions of the war-revenue act of June 13, 1898, 30 Stat., 448, illegally collected within the provisions of the said refunding act of June 27, 1902.

*The BefortePs*statement of the case:

The facts of the case are sufficiently set forth in the opinion of the court.

*Mr. R. B. H. Lyon*for the plaintiffs. *Lyon <£t Lyon*were on the briefs.

The legacies bequeathed for the ultimate benefit of Robert Bell Deford and John Edward Deford, the two infant sons of Thomas Deford, the deceased testator, are clearly contin*221gent beneficial interests, the right to which could not vest in absolute possession or enjoyment prior to July 1, 1902, except that part of the income in the sums of $6,195.58 and $4,555.16, respectively, expended by their guardians, in their discretion, for their education, maintenance, and support; and as said sums did not exceed $10,000 each prior to July 1, 1902, they also are not taxable, *Knowlton*v. *Moore,*178 IT. S., 41, neither of these infant children having reached the age of twenty-one years on the last mentioned date. This contention is sustained in the following cases:

In the case of *Vanderbilt*v. *Eidman,*196 U. S., 480-500, it was held:

“ It will be observed that the duties imposed in section 29 have relation to two classes: First, legacies or distributive shares passing by death and arising from personal property; and, second, any personal property or interest therein transferred by deed, grant, bargain, sale, or gift, to take effect in possession or enjoyment after the death of the grantor or bargainer, in favor of any person or persons or to any body or bodies, politic or corporate, in trust or otherwise. As to the second class, the statute specifically makes the liability for taxation *not upon the mere vesting in a technical sense of the title to the gift, but upon the actual possession or enjoyment thereof.*By any fair construction the limitation as to possession or enjoyment expressed as to one class must be applied to the other, unless it be found that the statute, whilst treating the two as one and the same for the purpose of the imposition of the death duty, has yet subjected them to different rules. A consideration of the subsequent provisions of the section leaves no room for such contention * * (Italics ours.)

Mr. Justice Holmes, in speaking for the court in the case of the *United States*v. *Fidelity Trust Company,*222 U. S., 158-180, said:

“ The words, £ which shall not have become vested,’ above, mean the same as 4 absolutely vested in possession or enjoyment ’ in the later clause ending the tax on contingent interests unless so vested before July 1,1902.”

The doctrine set up in the Vanderbilt case is not alone approved by the Supreme Court of the United States in the Fidelity Trust Company case, *supra,*but in addition thereto was very recently approved by that court in the cases of *222
      *Jones, administrator,*v. *United States,*236 U. S., 106; and *McGoach, collector,*v. *Pratt et al.,*236 U. S., 562.

In the very recent cases of *Arthur and Earnest Ryle, Trustees,*v. *United States,*239 U. S., 658, and *Henry A. Uterhart et al., Tmistees,*v. *United States,*240 U. S., 598, that court not only again approved the doctrine laid down in the Vanderbilt case, *supra,*but in the Stein and Ryle cases they held that the Internal Revenue tax collected under the war-revenue act of June 13, 1898, on estates for years where the discretion as to when or as to the amount of income to be paid the *cestuis que trustent*was lodged in the executor or trustee, that such taxes were illegal as being imposed and collected on contingent beneficial interests which did not vest in absolute possession or enjoyment prior to July 1, 1902, within the meaning of the refunding act of June 27, 1902, and the only part of such legacies that was taxable was the income that was actually paid out for the education, maintenance, and support of the *cestuis que trustent*prior to July 1, 1902, provided such payments exceeded the sum of ten thousand dollars for each *cestui que*trust prior to July 1, 1902, and therefore such tax was refundable under section 3 of the i'e-funding act of June 27, 1902.

The Supreme Court of the State of New York construed the Stein will and held that the above residuary estate related to the personal property and that such residuary estate of real and personal property was constituted a trust fund for the maintenance, education, and support of the children of the deceased testator until the youngest arrived at the age of twenty-one years, the amount of such income to be paid to be determined by the executors under the will who were constituted trustees of said fund, although such executors Avere not specifically named as trustees.

Surely if the Supreme Court held as it did in the Stein and Ryle cases that the legacies taken by the children in the residuary estate were contingent beneficial interests which did not vest prior to July 1, 1902, within the meaning of the refunding act of June 27, 1902, we think it must be held here that the two infant sons of the deceased testator only *223took contingent beneficial interests which did not vest in possession or enjoyment prior to July 1,1902, within the meaning of the refunding act of June 27,1902, because if anything the interests bequeathed to the two infant sons in the case at bar are more contingent within the meaning of the tax law than those bequeathed in the Stein and Ryle cases, and therefore could not vest in absolute possession or enjoyment to July 1, 1902, and the tax collected thereon refundable under the refunding act aforesaid. The only personal estate bequeathed to said two infants that could be taxed was the income expended by the trustees for their maintenance, education, and support *according to the discretion of the said trustees,*but as such income expended did not exceed ten thousand dollars in either case, on or before July 1, 1902, the same is not, and can not, be taxable. *(Knowlton*v. Moore, 178 U. S., 41.)

*Mr. Charles H. Bradley,*with whom was *Mr. Assistant Attorney General Huston Thompson,*for the defendants.

BakNey, *Judge,*

delivered the opinion of the court:

This is a suit for the recovery of taxes collected under the act of June 18, 1898, 30 Stat., 448, on legacies to two of the testator’s sons, Robert Bell Deford and John Edward Deford, both of whom were minors on July 1, 1902, at which time the refunding act of June 27, 1902, 32 Stat., 406, took effect.

The said decedent died June 2, 1901, leaving a last will and testament, which was duly admitted to probate on the 6th day of June, 1901, by the Orphans’ Court of Baltimore City, Md., the place of residence of the deceased, and the petitioners herein were named as the executors of said will and duly qualified as such. The legacies bequeathed to said minors were subsequently taxed under the provisions of said Avar-revenue act of June 13,1898, and it is for the refunding of said tax so collected that this suit is brought.

*224The question thus presented to the court is whether such tax was legally collectible under the provisions of said act of June 13, 1898, as the Supreme Court has decided that the refunding act of June 27,1902, is only a legislative construction of the prior act. *Vanderbilt*v. Eidman, 196 U. S., 480, 500.

The legacy in question to these minor children was received by virtue of the following provisions of the last will of said deceased:

> “ Eighth. I give and bequeath four thousand shares of my stock in the Deford Company of West Virginia, as follows, to wit: * * * Six hundred and sixty-six shares thereof to my son Eobert Bell Deford, and six hundred and sixty-six shares thereof to my son John Edward Deford, and I hereby appoint my sons Benjamin Franklin Deford and Thomas Deford guardians of my above-named infant sons, Eobert Bell Deford and John Edward Deford, to hold the above shares of stock of the Deford Company of West Virginia left to my said infant sons, respectively, until they shall, respectively, arrive at the age of twenty-one years; and when, as they, respectively, arrive at said age of twenty-one years to transfer their respective shares of said stock to my said sons Eobert Bell Deford and John Edward Deford, respectively; said guardians in the meantime collecting the dividends on said stock and applying the same, or so much thereof as may be necessary, to the support, maintenance, and education of my said infant sons, respectively, the balance, if any, to be invested by said guardians for their said wards, respectively, as they may deem most to the interest and advantage of their said wards. * * *

> “Ninth. All the rest and residue of my estate, real and personal, of every kind and wheresoever situated, I direct to be divided by my executors, hereinafter named, into six equal parts. One of said parts I give, devise, and bequeath to my son Benjamin Franklin Deford; one of said parts 1 give, devise, and bequeath to my son Thomas Deford; one of said parts I give, devise, and bequeath to my son Eobert Bell Derord; and another part I give, devise, and bequeath to my son John Edward Deford. I do hereby appoint my sons Benjamin Franklin Deford and Thomas Deford the guardians of my two minor sons Eobert Bell Deford and John Edward Deford, and desire that they shall be excused by the orphans’ court from giving bond.”

*225The refunding act of June 27, 1902, provided for the refunding of any taxes collected under the war-revenue act of June 13, 1898, “ as may have been collected on contingent beneficial interests which shall not have become vested prior to July first, nineteen hundred and two, and no tax shall hereafter be assessed or imposed under said act * * * upon or in respect of any contingent or beneficial interest which shall not become absolutely vested in possession or enjoyment prior to said July first, nineteen hundred and two.”

Now, it is contended by the plaintiffs that the said legacies coming to the said minor children by said provision of the last will of said deceased was a contingent beneficial interest which never became vested in the possession or enjoyment of said minors prior to July 1, 1902, at which time neither of them was of age. We see no ground whatever for this contention. When the last will and testament of said deceased was admitted to probate, the title of said minors in and to the shares of stock so bequeathed to them became absolute, subject to no contingency whatever. To be sure, their disability as minors made it necessary for the appointment of a guardian for them to take the possession of such stock and to manage it for them, and this would have been necessary if the will had made no provision for such guardianship. In fact, their title to these shares so given them under the will was exactly the same as it would have been if no provision for guardianship for them had been made. The law would have given the usufruct arising from these shares of stock. The will gives them the same.

If the decedent had died intestate and these minors had received this property upon a final distribution of the estate left by him, their right and title to the same would be exactly what it is under the will, a guardian for them would have been appointed by the court, and they would have received the income from the same during their minority, and upon their becoming of age would have come into possession of the corpus as the will provides.

It is ordered by the court that the petition in this cause be and the same is dismissed, and judgment is rendered in *226fayor of the United States against the claimants for the cost of printing the record in this cause in the sum of nine dollars and sixty-two cents ($9.62), to be collected by the clerk as provided by law.

All the judges concur.