Source: http://www.chanrobles.com/usa/us_supremecourt/296/39/case.php
Timestamp: 2017-10-23 11:49:49
Document Index: 97480521

Matched Legal Cases: ['§ 301', '§ 302', '§ 301', '§ 302', '§ 301', '§ 302']

The decedent, several years prior to his death, transferred to a trustee certain securities in trust, to be held, managed, and disposed of as an active trust, the net income thereof to be paid to the decedent's daughter during her life, with remainder over to the persons named. The trustee was given discretionary power to determine the trust whenever the trustee might deem it wise to do so, whereupon the estate was to revert to the grantor. The indenture contained a further provision that, if the daughter predecease the grantor, the trust shall terminate and the trust estate be transferred, paid over, and delivered to the grantor, to be his absolutely. It is this latter provision which gives rise to the question we are called upon to consider. By the terms of the indenture, the grantor recited that it was his intention to make for the chanroblesvirtualawlibrary
The substantive provision of the act which imposes the tax is § 301(a), and, by that provision, the tax is laid "upon the transfer of the net estate of every decedent dying after the enactment of this Act." The event which gives rise to the tax is the death of the decedent, with the resulting transfer of his estate either by will or the law relating to intestacy. When, therefore, § 302(c) includes within the purview of § 301(a) a transfer inter vivos "intended to take effect in possession or enjoyment at or after his death," it does so upon the theory that such a transfer in effect is testamentary; that is to chanroblesvirtualawlibrary
reached by the phrase in [§ 302(c)] 'to take effect in possession or enjoyment at or after his death,' include any others than those passing from the possession, enjoyment or control of the donor at his death, and so taxable as transfers at death under [§ 301(a)]. That doubt must be resolved in favor of the taxpayer."
"Mrs. Barstow could do nothing to change the effect of the deed. The corpus was beyond her control except for the happening of the contingency that she might survive the two life tenants, and then she would have been revested with the corpus. The rights of the beneficiaries did not depend upon the death of the donor. The term of the trust was not measured by the life of the donor, but by the lives of her two daughters. They had an interest in principal and income, provided one or both survived the donor. They took a vested estate subject to being divested if the donor survived both daughters. If we 'are to view the sequence of events in the order of the actual, rather than the possible' (In re Schmidlapp's Estate, 236 N.Y. 278, 286, 140 N.E. 697, 699), then we have not only a right, but are bound, to conclude that, because Mrs. Barstow died before
We think it unnecessary further to review the decisions which support our conclusion. In addition to those already cited, the following are in point: May v. Heiner, 281 U. S. 238, 281 U. S. 243; Coolidge v. Long, 282 U. S. 582; McCormick v. Burnet, 283 U. S. 784, reversing the Circuit Court of Appeals for the Seventh Circuit, Commissioner v. McCormick, 43 F.2d 277, and in effect affirming the Board of Tax Appeals, 13 B.T.A. 423, 437; Duke v. Helvering, 23 B.T.A. 1104, 1113, aff'd, Commissioner v. Duke, 62 F.2d 1057, and affirmed by an equally divided court in 290 U.S. 591; Wallace v. Helvering, 27 B.T.A. 902, 910, 913, aff'd, Commissioner v. Wallace, 71 F.2d 1002, cert. denied, 293 U.S. 600; St. Louis Union Trust Co. v. Becker, 76 F.2d 851.
The case of Klein v. United States, 283 U. S. 231, which is strongly relied upon by the government, does not support its position. There, the grantor, 15 months prior to his wife's death, conveyed to his wife by deed a life estate in certain lands. But, in the event that she survived the grantor, "and in that case only," she was to take the lands in fee simple. The effect of this deed, we held, was that only a life estate was vested, the remainder being retained by the grantor, and whether that should ever become vested in the grantee depended upon the condition precedent that the grantor die during the life of the grantee. The grantor having died first, his death clearly effected a transmission of the larger estate to the grantee. But here, the grantor parted with the title and all beneficial interest in the property, retaining no right with respect to it which would pass to anyone as a result of his death. Unlike the Klein case, where the death was the generating source of the title, here, as the court below chanroblesvirtualawlibrary
The section, in its scope and purpose, is thus similar to § 302(d), which includes in the decedent's taxable estate the value of his interest held as joint tenant or tenant by the entirety, although created by deed inter vivos. Tyler v. United States, 281 U. S. 497; Phillips v. Dime Trust & S.D. Co., 284 U. S. 160. Both provisions prevent tax evasion by subjecting to the death tax forms of gifts inter vivos which may be resorted to, as a substitute for a will, in making dispositions of property operative at death. See Tyler v. United States, supra, 281 U. S. 505. chanroblesvirtualawlibrary
Compare Helvering v. City Bank Farmers Trust Co., ante, p. 296 U. S. 85.