Document: 383 U.S. 627 86 S.Ct. 1123 16 L.Ed.2d 145 UNITED STATES, Petitioner,v.Charles E. O'MALLEY et al. No. 127. Argued Jan. 24 and 25, 1966. Decided March 23, Sol. Gen. Thurgood Marshall, for petitioner. Leon Fieldman, Chicago, Ill., respondents. Mr. Justice WHITE delivered the opinion of Court. 1 The Internal Revenue Code 1939 imposes an estate tax 'upon transfer net every decedent.' § 810. gross is to include not only all property '(t)o extent interest therein decedent at time his death,' 811(a), but also, under 811(c)(1), 2 'To any which has made a (except in case bona fide sale adequate full consideration money or money's worth), by trust otherwise— 3 '(A) contemplation death; 4 '(B) he retained life period ascertainable without reference death does fact end before (i) possession enjoyment of, right income from, property, (ii) right, either alone conjunction with person, designate persons who shall possess enjoy therefrom; or1 5 '(C) intended take effect after and, 811(d), been subject revocable described that section.2 6 Edward H. Fabrice, died 1949, created five irrevocable trusts 1936 1937, two each daughters one wife. He was three trustees trusts, provided trustees, their sole discretion, could pay beneficiary accumulate income, event it became part principal trust.3 Basing action on 811(c)(1)(B)(ii) 811(d)(1), Commissioner included Fabrice's both original accumulated added thereto. accordingly assessed deficiency, payment prompted this refund respondents, executors estate. District Court found corpus includable estate, holding challenged Appeals here. It felt obliged, however, v. McDermott's Estate, 7 Cir., 222 F.2d 665, 55 A.L.R.2d 410, exclude from taxable portion representing order appropriate refund. D.C., 220 F.Supp. 30. affirmed, 340 930, adhering its own decision Estate noting disagreement Round Revenue, 332 590, First Circuit declined follow Estate. Because these conflicting decisions we granted certiorari. 382 810, 35, 15 58. We now reverse below. applicability 811(c)(1)(B)(ii), upon United States stands, depends answer inquiries relevant facts case: first, whether Fabrice power 'to therefrom'; second, sought be included, namely, portions previous Fabrice. 8 Section originated 1931, important congressional response May Heiner, 281 238, 50 286, 74 L.Ed. 826, offspring4 legislative policy subjecting incomplete inter vivos transfer. Cf. Church, 335 632, 644—645, 69 322, 328—329, 93 288; Helvering Hallock, 309 106, 114, 60 444, 449, 84 604. section requires when grantor himself also those may it. Here empowered, other distribute beneficiaries add principal, thereby denying privilege immediate conditioning eventual surviving termination trust. This significant power, see Holmes, 326 480, 487, 66 257, 260, 90 228, sufficient substance deemed 'designate' within meaning 811(c)(1)(B)(ii). Tax almost 20 years ago. Industrial Trust Co. 165 142, 144, affirming respect Budlong Commissioner, T.C. 756. here followed affirmed includability trusts. That ruling disputed. By same token, first condition taxing satisfied, increments identical until very moment death. 9 dispute relates second 811(c)(1)(B)(ii)—whether had ever 'transferred' additions principal. Contrary judgment Appeals, are sure had. At established owned rights transferred, major aspect present future produced property. 644, 328, 288. With creation relinquished except hold remaindermen no longer had, example, benefit have distributed than beneficiaries. Moreover, issue, exercised choosing do latter adding All therefore traceable himself, virtue exercise accumulate. Before income. divested control over deal such additions. addition clearly 'transfer' as required Under section, require inclusion likewise includable. 590; Yawkey 12 1164.5 10 Respondents rely cases circuit courts appeals concluded where trust, respect, subjected gift 811(c), prior grantor's Gidwitz' 196 813, 14 1263; Burns 177 739, 979. considered completed transfer, death, value whatever valuation date, apparently reflection since might justify subsequently Maass Higgins, 312 443, 61 631, 85 940. 11 reasoning, solve arising provisions 811. Burns, 979, 988—989 Gidwitz, 817—818, expressly distinguished situations retains either, step effecting began becomes final complete demise. failed note distinction represents erroneous extension Gidwitz.6 In McDermott us now, reserved accumulating held circumstances, including Reversed. 13 STEWART, whom HARLAN joins, dissenting. 1930's certain wife daughters. Twelve later died. 1939,1 irrevocably transferred nonetheless purposes. respondents question correctness determination. But holds generated during elapsed I think misreads statute. terms statutory provision applies 'of transfer.' 'made transfer' corpus. never thereafter produced, not.2 can put matter more did Seventh 668: 'Irrespective considerations, includible must transferred. Obviously, accumulations involved were trustee. true, course, represented fruit derived but, even so, Congress make fruit, If desired accumulations, would simple so stated.' 17 See Michigan Kavanagh, 284 502, 506 507 (C.A.6th Cir). 18 Nothing history persuades me statute should applied written, affirm judgment. 2036 Int.Rev.Code 1954, amended, 26 U.S.C. (1964 ed.), materially 811(c)(1)(B) 1939. 811(d)(1) provides: bona-fide otherwise, thereof date change through (in capacity exercisable) person (without regard what source acquired power), alter, amend, revoke, terminate, decedent's death.' following Janet contained trusts: 'The paid, whole part, my daughter, JANET FABRICE, proportions, amounts times Trustees may, time, determine, said credited account beneficiary, calendar year become Estate.' Heiner dealt providing spouse life, then her remainder children. Act 1918, c. 18, 402(c), 40 Stat. 1097, predecessor I.R.C.1939, '* * (t)o *' 244, 287. There 2, per curiam opinions vein: Burnet Northern Co., 283 782, 51 342, 75 1412 (grantor income); Morsman Burnet, 783, 343, (the same); McCormick 784, 1413 (trustees directed request distributions specified purposes; terminate contingent approval named beneficiaries). On 3, 302(c) 1926 amended joint resolution read follows: transferor ending (1) (2) worth.' 1926, 27, 302(c), 44 70, 454, 46 1516. Through various amendments years, evolved into result reached, discussion, Spiegel 701, 301, 330, 'take enjoyment' 811(c) 811(d). Other reaching conclusion 811(d) predecessors Hager's 173 613, petition cert. dismissed, 337 937, 1515, 1742; Showers 902; Guggenheim B.T.A. 181, aff'd, 117 469, denied, 314 621, 62 66, 499. wrong saying there Gidwitz. Gidwitz specific direction discretionary powers McDermott, case, text set out page 628 Court's opinion. doubt reflected income-producing capacity.

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