Document: 335 U.S. 701 69 S.Ct. 301 93 L.Ed. 330 SPIEGEL'S ESTATE et al.v.COMMISSIONER OF INTERNAL REVENUE. No. 3. Reargued Oct. 11, 12, 1948. Decided Jan. 17, 1949. Rehearing Denied Feb. 14, See 336 915, 599. Mr. Herbert A. Friedlich, of Chicago, Ill., for petitioner. Arnold Raum, Washington, D.C., respondent. [Argument Counsel from page 702 intentionally omitted] Justice BLACK delivered the opinion Court. 1 This is a federal estate tax controversy. Here, as in Commissioner v. Church, 632, 322, we granted certiorari to consider questions dependent upon meaning and application provision § 811(c) Internal Revenue Code. 47 Stat. 169, 279, 26 U.S.C. 811(c), U.S.C.A. 811(c). The particular requires including decedent's gross value at his death all property 'To extent any interest therein which decedent has time made transfer, by trust or otherwise * intended take effect possession enjoyment after *.' 2 In 1920 Sidney M. Spiegel, resident Illinois, transfer certain stocks himself another. He died 1940. During life income was be divided among three children; if they did not survive him, their surviving children. On provided that corpus distributed same manner. But no distribution its accumulated should Spiegel children grandchildren. For this reason Government contended under controlling state law would have reverted had he surv ved designated beneficiaries. 3 included return. concluded with income, about $1,140,000 been Tax Court held an unreported opinion. Appeals Seventh Circuit reversed. 159 F.2d 257. It required inclusion rule declared Helvering Hallock, 309 106, 60 444, 84 604, 125 A.L.R. 1368, because agreement left way open revert case outlived holding rested on parties whether there right reverter depended Illinois law, court's conclusion exist.1 4 Hallock relied properties settlor's 'possession enjoyment' where agreements expressly settlor event taxpayer here, Appeals, applicable trust, chance get back express reservation settlor. contention rests part argument imposes only it can shown intent reserve contingent reversionary property. Another so small comparison total applied. A third erroneous beneficiaries while still living. Petitioners urge courts passed heirs last beneficiary. 5 We hold rightly applied accept law. 6 First. discussed relation scope need elaborate what said there. What demonstrates taxability does hinge motives, but depends nature operative transfer. Church stated transaction cannot alienate unless effects 'a bona fide settlor, absolutely, unequivocally, irrevocably, without possible reservations, parts title transferred After such made, must present legal property, title, possess enjoy then thereafter. other words immediate out out, unaffected grantor lives dies.' add t statement, conceived addition, immaterial future interest, absolute contingent, remains deliberately reserves because, considering consequences, conveys away less than ownership attributes, prospective. either parted presently existing interests transferred. therefore 'complete' kind commands prerequisite showing certainly irrevocably enjoyment.' Any requirement outlined, post-death attempt probe thoughts regard partially impair effectiveness instrument frustrate evasions. To defeat precise purpose originated prompted Congress include 7 Determination issues ownership, possession, enjoyment, transfers reach those transfers, may involve many fact. And cases determination fact finding, different facts relevant. These are decide brought before it. 8 findings decided against Government. so, however, matter require estate.2 Court's showed contained disposition outlive finding fact, accept, plus more, brings within interpreted section cases. petitioner denied opportunity relevant evidence concerning enjoyment. necessary remand further facts. Hormel Helvering, 312 552, 559, 560, 61 719, 722, 723, 85 1037. 9 Second. since monetary corpus, interest. Fidelity-Philadelphia Trust Co. Rothensies, 324 108, 112, 65 508, 510, 89 782, 227; Estate Field, 113, 116, 511, 512, 786, 230; see Goldstone United States, 325 687, 691, 1323, 132 , 1871, 1330. question how much reservation, considered potentially dangerous evasion transaction, some full complete absolutely pass until death. Smith Shaughnessy, 318 176, 181, 63 545, 547, 87 690. 10 Third. record reveals problem here easy one, decision Meredith Winter Haven, 320 228, 64 7, 88 9, difficulty involved relieve duty make decision. questioned ruling judges who constantly questions. One long lawyer Illinois. Examination court opinions pressed us leaves unable say degree certainty wrong. neither novel nor unreasonable provide when die donor. wholly unprofitable analyze point urged. sufficient think reasonable arguments based support petitioner's contention. Under these circumstances will follow our general policy leave undisturbed law.3 11 All petitioners noted find them merit. 12 Affirmed. 13 JACKSON dissents. 14 concurring REED, 337. 15 dissenting FRANKFURTER, 16 BURTON, dissenting. 17 Today's adds difficulties troubled field may, serve good leads sumultaneous consideration related fields gift taxation connection creation interests. 18 FIVE ALTERNATIVES. 19 At least five alternative proposals presented solution case. first calls reversal Reinecke Northern Co., 278 339, 49 123, 73 410, 66 397, taxpayers. second extension doctrine Clifford, 331, 554, 788, determine third, fourth fifth precedents more closely. Each recognizes that, possibility reverter1 arose favor operation us, thereby placed Code purposes. proposal finds applied, above purpose, taxpayers correct could arise. claims assumes arise It, declines apply de minimis non curat lex and, declining look urther, reaches adopted like except actual order Section applicable. concludes instant absent. proposal, therefore, existence, any, intent. I believe sound solution. two founded precedents, equitable result contributes cetainty rather uncertainty tax, pending legislative reconsideration entire subject. prefer avoids dependence state. If accepted, status acceptance third. 20 I. THE FIRST PROPOSAL IS THAT REINECKE CASE BE OVERRULED. 21 lack judicial overruling supra, late day, makes unnecessary length. been, strongly urged us. simple terms2 merely strength terms Accordingly, reargument case, asked following question: '1 Assuming retained arising inter vivos, estate-tax purposes? That is, created death, terminate surviving?' Journal Supreme Court, Term, 1947, pp. 296—297. 22 response, counsel argued affirmative negative. interpretation statute behalf Commissioner, ago rejected unanimously passing so-called 'five trusts' precedent stands, answer 'No' issue rest. 23 reasoning taxable this, come sett dead existence control reverters estate, amounting string tie Such also one transferred, cut off obliterated 24 now 811 Code, 53 120, (1940 Ed.), 811, Stone, 1929, corresponding 402 Act 1921, c. 136, 42 227, 278: 'In plan imposed contemplation measured Cf. Y.M.C.A. Davis, 264 47, 50, 44 291, 68 558; Edwards Slocum, 61, 62, 293, 564; New York Eisner, 256 345, 349, 41 506, 963, 660. gifts once 1924, 234, 43 313, repealed, 126. freely give another subjecting means equally complete, takes form remainder over donor's plain compelling language justify incongruous wanting statute.' Id., pages 347, 348, 125, 397. 25 also, 1368; Becker St. Louis Union 296 48, 53, 56 78, 80, 80 35, 39, 46, 74, 77, 29, 100 1239; Klein 283 231, 51 398, 75 996; Shukert Allen, 273 461, 71 764, 855. II. SECOND FOR APPLICATION DOCTRINE CLIFFORD CASE. 27 effect, substitute Heretofore, Clifford predecessor Sections. reserved largely appropriate presented. absence below emphasize inappropriateness introduce proceeding. Nothing suggests trustee practiced fraud, evasion, violated obligations trustee. became irrevocable inception. thus contrasts sharply testamentary might executed. There nothing suggest even sole trustee, free strict accountability obligation use discretion own. possobility countless uncertainties retroactive nearly gr flow 28 Furthermore, sharp contrast between 22(a)3 starting 22(a), expansion traditionally taxpayer, invites permits broad given hand, contains sweeping inclusions. Whatever breadth 811(a), whereas special exception vivos. seeks identifiable classifications experience indicated spite form, believes subjected tax. historical development bears interpretation. extended addition specifically described classifications. true revocable 811(d), joint community 811(e), powers appointment 811(f), proceeds insurance 811(g), prior 811(h) insufficient 811(i). sweep into contrary limitations upheld foregoing specific extensions necessary. very specificity subsections emphatically negative language. No comparable used 22(a) appears anywhere Section. 29 vested conflicts position taken supra. example, directly 4477 equal but, ways, broader trust. reservations were personal capacity, him removes traditional equity places exercise holds benefit cestui que Appendix II, infra, quoted number especially material clauses italicized. While verbatim summarized several them4 said: 'Nor management trusts save economic benefits others incomplete. shifting nterest subject soon made. His power recall own ceased do distinguish vivos tax.' 346, 30 coupled 'others' significant squarely Government's brief: 31 '1. Do 402(c) measuring shall 'take death,' embrace: 32 '(b) Trusts effective date similar earlier Act, sell reinvest property; vote stock; leases; reappoint trustees; jointly beneficiaries, alter, amend, modify (This applies Nos. 4477, 4478, 4479, 4480, 4481, respectively, appearing 3, 25, 32, 40.)'5 33 settlor-trustee would, amount 1921 case.6 34 failure tests settle does, show willing rest basis record. 35 COMMON BASIS THIRD, FOURTH AND FIFTH PROPOSALS. 36 Material Facts. 37 important arose, corporate securities directions trustees pay during named children, predeceased payments go deceased child per stirpes. ettlor, descendants Similarly, fund thereon provided, obvious care, died, leaving surviving, receive share parent entitled. remaining event, none survived intimation thought manner beneficial to, 38 prescribing person whose relationship, appear Both residents Their commonly handle consisting originally here. mentioned revoke age widower. were, 22, years old. 1940, 43, 33. grandchildren, aged, ten, four two. Throughout them. 39 POSSIBILITY REVERTER TO SETTLOR. 40 proposals, narrow claim. claim if, arises exists gossamer thread 'string tie' then, due. petitioners' simply fund. III. THIRD PROPOSAL. Law Precludes Possibility Reverter. branch inquiry adversely conclusive them, relieved favorable factual proposal. principle dispose favor. conclusiveness e weighty laws nationwide fairly attributed clearer expression inherent administration resulting inequality instruments governed states argue policy. settled practice, reliance announcements Courts respective Circuits.7 weight entitled vary announcement remainders pointing create Our trouble remainders, clear reversions, interests, 'possibilities reverter' remainder. due essential difference situation, escape clear-cut State. condition results naturally enough reversion undisposed-of subsequent attached divestiture contemplated condition. relieves holder legatees next kin subjected. 45 just stated. whatever treated contingent.8 elemental statement conditions conforms generally accepted trusts9 Illinois.10 46 near decisive written vested. suggested little substantial subsequent, purposes where, hypothesis, attach inescapably not, situation conveyance beg question. spelled denied. Its depend art conveyance. analysis return dispositions wished detail done so. customary conveyancing gives helpful light Lachenmyer Gehlbach, 266 Ill. 107 N.E. 202, carrying subsequent. Stombaugh Morey, 388 392, 58 N.E.2d 157 254; Murphy Westhoff, 836 931; Danz Danz, 373 482, 872; Shepard, 370 491, 368; Hoblit Howser, 338 328, 170 257, 1046; Boye Boye, 300 133 382; McBride Clemons, 294 251, 128 383; Hickox Klaholt, 291 544, 126 166; Welch Crowe, 244, 115 859. Freudenstein Braden, 397 72 832. distinction drawn deeds documents. Dugger, 310 624, 625, 142 243, construing deed. Harder Matthews, 548, 141 442.11 48 reasons, existed relies establish 'hoist petard.' IV. ASSUMES EXISTS FACTUAL INTENT SETTLOR MAY DISREGARDED. 50 reached conclusions disregarded. assumed arisen further, called presents view However, going far, extreme remoteness Commissioner. execution chances realization highest point, conceivable Disregarding shows actuarial computation likelihood 1/2 100. realization, gave $4,000 $1,000,000. $450,000, proposed, worth readily imagine meant impose. proportion maximum lex. applying test exemption obvious. element provides thoroughly combined presence final V. Statutory Intent Settlor Required Make applicableis Absent Contrary Present. 52 undisputed conscious it, ever estate. strong affirmatively exclude him. recited outright deed natural feature immature age, deliver descendants, date. completeness instead fixing fixed arbitrarily December 19, later proved similarly, termination coincide STATUTE REQUIRES FINDING SETTLOR'S INTENT. 54 expressly, impliedly, recognized itself fav r reverter, expiration 55 accordingly, consequences acts begs So construed, word 'intended' omitted. 'Intended' normal, meaning. intend 'have mind design purpose.'12 difficult determine, determinable, nevertheless. involves determining took tie,' actually 57 covers 'in death.' (Italics supplied.) settlordecedent's motive determined States Wells, 102, 446, 867. 'contemplation found 'intended death'. Chief Hughes, speaking 117, 451, 867: 'The quality context manifest purpose. Transfers category, taxation, transferor. dominant substitutes prevent As indicia valid differentiating factor transferor's motive.' involving death' impelling 'is each case.' Allen Georgia, 326 630, 636, 389, 90 367. 'the otherwise, *' 59 making considerations persuasive: 1. Language instrument.—There expressed implied praesenti. declaration intent, issue. description of, reference sence consistent reverter. desired intends desires put. effectively silence amounted permitted extrinsic tended opposite desire. 62 overwhelming improbability supplied omitting provisions 47-year-old prospective grandchildren obviously small. turned reaching quite time, beneficiary expectancy shorter Standing alone, evidences praesenti, instrument, itself, 1920, included, setlor's anything, read discussion regarded advice counsel, expressive 2. Remoteness reverter.—The (whether law) establishing probable make, thereby, having comparatively short expectancy, assuming occurrence substantial. great mention substantially demonstrated Even themselves, high probability reversion, base additional youthful postpone weakened. evidence, reduced mathematical computations bas d mortality table rate prescribed Treasury Regulations taxes. ages persons primary living 0.01612, person, $1 $0.00390. most relating $1,000,000 born qualify reduce qualify—thus reducing fund, $70. $70 ordinarily induce permit assessment $450,000 existence. 67 demonstration persuasive probably completed gift, such, tax-free. today emphasizes impropriety, propriety, character 1940 paid Direct settlor.—Substantial confirmed direct indicating or, manner, cause 70 attorney drew testified drafting wanted retain added endeavored carry instructions client believed member firm representing settlordecedent attorneys decedent, understood advised otherwise. receipt executing supports translate distribution. uncontroverted convincing bring judgment settlor-decedent's executors, judgment. reasons Appendixes BURTON'S dissent. 74 ante, 701, 301, follows: 76 'Know Men By Presents, I, City County Cook State Dollar (1.00) valuable considerations, sold, assigned, set delivered, sell, assign, Modie J. survivor Trustees, six hundred twenty-five (625) shares capital stock Spiegel's House Furnishing Company seven fifty (750) May Stern Company, Trust, nevertheless, uses purposes, conditions:— 77 '1: successor full, hold, manage every thereof; exchange, same, thereof, invest derived sale sales, shares, continuance stock, therefor, Trustee, corporation Trustees action taken, stockholder individual names owners thereof. 78 '2: collect therefrom, substitutes, myself, divide net (3) parts, maintenance, education my Katherine Jr. Julia K. Spiegel,—such convenient intervals year. mine, survivors stirpes capita. 79 '3: Upon hands mine entitled, her '4: increase principal dividends increases emoluments remain herein forth. 81 '5: refusal, inability, act both Chicago Title & become successor, rights, powers, duties hereinbefore named. 82 '6: None anticipate hereunder order, assignment 83 Witness Whereof hereunto hand seal, 2nd day January, 1920. 'Sidney Spiegel. (Seal) 'We hereby above-named agree above-mentioned, 86 'Modie (Seal)' follows (italics supplied): 'This indenture, March, year Lord thousand nine nineteen (A.D. 1919), Adolphus C. Bartlett, city county Cook, party part, (hereinafter termed 'trustee'), organized doing business witnesseth: 91 'Article 92 'That being desirous creating hereinafter mentioned, forth, premises influenced love affection named, unto securities, wit: 1,000 Company. 94 784 Commonwealth Edison 95 Central Railroad 96 common Northwestern 97 200 preferred 98 Pullman 99 bonds Armour $1,000 each. Morris s1,000 101 'Also following-described notes secured mortgage real Phoenix, Arizona: Maker: Amount Rollin S. Howard......... $5,000.00 W. Dorman.............. 5,000.00 Edgar O. Faucett......... 22,500.00 Elisha T. Waters.......... Roy Goodrich.......... 40,000.00 Wilson Dobson.......... 7,000.00 Redwell Music Company.... 20,000.00 Pauline O'Neil........ 25,000.00 O'Neil......... 102 disposed unde pursuance indenture. 103 104 authority time— 105 '(1) agreement, moneys, bonds, hereunder, rents accrue payable hereunder. 106 '(2) convey stocks, obligations, Or thereof dividend-paying corporations; writing management, investment liability responsibility direction instruction. purchaser dealing ascertain sale, conveyance, rely delivery assignment, respects fully authorized, affected notice contrary, purchase money. '(3) voting power, election, discretion, notice, demand, thing respect owner request execute, executed, requests proxy, entitling (with substitution) proxy defined meeting meetings stockholders corporations specified proxy. 108 '(4) declared, corporation, constitute liquidation company issuing voluntary involuntary) assets, account bond, security; join reorganization readjustment substituted allotted 109 '(5) execute leases rental, terms, length (not exceeding (200) years) deem best; erect buildings, change, additions buildings estate; needful desirable proper advantageous protect productive; observe thereto writing, signed party. 110 Third—Distribution income. 111 wife, Abby H. Bartlett sum dollars ($2,000.00) month, residue kept invested authorized 112 lieu monthly agreement(s), thereto. 113 From payment month continue she party's will, bearing herewith; (4) viz., Maie Heard, Frederic Clay Florence Dibell Eleanor Perdue, shares; stand place received living; intention cease end becoming portion herewith, directed (and child) created. 114 Fourth—Distribution trut (5) shal terminate. 116 'Upon created, 117 '(a) One-fourth (1/4) viz, Perdue; 118 living, one-fourth stirpes; default issue, Fifth—Concerning 119 accepts agrees accordance provisions. consult rotected nonaction suffered faith selected it; proceedings defend advisable protection institute proceedings. 120 reimbursed indemnified liability, loss, expense constituting name nominee, lien therefrom incurred defending proceeding instituted nominee holding. 121 'Out taxes, assessments, governmental charges therein, State, county, municipality, taxing lawfully charged deficiency 122 'All indenture current accumulated, 123 resign giving resignation live, 124 acting disability incapacity majority wife appoint duly convey, hands, thereupon thereafter duties, original Sixth—miscellaneous Said maintenance anticipate, encumber process 127 altered, changed, modified f through signing though do. 129 witness whereof hereto executed written. 130 'Adolphus Bartlett. (seal.) 131 'By Solomon Smith, President. 'Attest: 134 'H. Rockwell, 135 'Assistant Secretary.' conflict Third Church's Estate, 161 11. cases, heard together, reversed 322. clause inapplicable belief Reinecke, raised Nor indicate bare always corpus. Harrison Schaffner, 579, 759, 1055, Stone. Stuart, 317 154, 162—165, 140, 144—146, 154; cf. Steele General Mills, 329 433, 439, 402. 'reverter' frequently discussions They refer suggested, previously technical sense peculiar Paul, Federal Gift Taxation 7.21, n. (1942). refer, sense, referred term 'reversion' usual forth infra. 'Sec. 22. Gross definition. 'Gross income' includes gains, profits, salaries, wages, compensation service, paid, professions, vocations, trades, businesses, commerce, dealings personal, growing rent, dividends, carried gain profit, gains profits source whatever. ed.) 22(a). '* supervise reinvestment funds, proxies, trustees. With 'to change trust,' exercised single jointly, trusts, jointly.' 344, 124, requested discuss particularly insofar 711, 305. these, numbers 2, 6, bore solution: '2. '3. Did 1939, had, March 1931, amendment section? '4. Were congressional resolution 1931 (46 1516—1517), statutes, repudiation Heiner (281 238, 286, 826, 1244) statutes? '5. (309 1368)? '6. after' cotrustee administrative vested, cor withheld death? '7. Hassett (303 303, 858) relevance life? '8. 'refined technicalities property' deemed 'akin dispositions' (See 448, 1368.) '9. rulings 788) trusts?' 297—298. somewhat contracts insured minority sought doctrines rationale inheres recognizing as, substance, insured, Richardson Cir., 1, 314 684, 188, 584, revocation benefit, liable Bunting 164 443, 333 856, 735; Mich.L.Rev. 137 (1948). 163, 164; 145, 146, MacGregor Mutual Life Assur. 315 280, 607, 864. 'Applying vest happening precedent, namely, 'event larger the' beneficiaries.' 259. 'Where remainder, latter dies intestate kin, seem passes state, erest, preceding beneficiary, fail rise ultimus haeres. contingency occur, estate.' Scott Trusts, 411.5 (1939). divestment literal compliance divesting Henderson Harness, 176 302, 68. Land Loan Bonner, 315; McFarland McFarland, 177 208, 217, 281, 284, Continental Nat. Bank Kane, 308 Ill.App. 110, 351. Ill.L.Rev. 561, 564. room necessarily employed. classic definition Gray, Rule Against Perpetuities, 18, 205: 'A reg rded question, adopted, 'If conditional incorporated remainderman, words, Thus, devise life, lifetime A., survive, divested contingent.' closely comparable. gift. children's (subject subsequent) testator's turn subsequent). divestiture—comparable example 'but italics supplied, capita.' 'Third. alike, die, child, deceased; children.' 13, 203. Contrasting provisions, examples 232, 233, 399, 996. cited Haward Peavey, 430, 503, Am.St.Rep. Baley Strahan, 213, 145 359, wills Webster's International Dictionary, 2d Ed. (1938).

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