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Matched Legal Cases: ['§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', 'art, 317', '§ 811', '§ 22', '§ 811', '§ 402', '§ 811', '§ 811', 'art, 317']

Estate of Spiegel Vs Commissioner - Citation 98417 - Court Judgment | LegalCrystal
Estate of Spiegel Vs. Commissioner - Court Judgment
LegalCrystal Citation legalcrystal.com/98417
Case Number 335 U.S. 701
Appellant Estate of Spiegel
estate of spiegel v. commissioner - 335 u.s. 701 (1949) u.s. supreme court estate of spiegel v. commissioner, 335 u.s. 701 (1949) estate of spiegel v. commissioner of internal revenue no. 3 argued october 24, 1947 reargued october 11-12, 1948 decided january 17, 1949 335 u.s. 701 certiorari to the united states court of appeals for the seventh circuit syllabus in 1920, decedent, a resident of illinois, made a transfer in trust of certain stocks to himself and another. he died in 1940. during his life, the trust income was to be divided among his three children; if they did not survive him, to any of their surviving children. on his death, the corpus was to be distributed in the same manner. but no provision.....
Estate of Spiegel v. Commissioner - 335 U.S. 701 (1949)
U.S. Supreme Court Estate of Spiegel v. Commissioner, 335 U.S. 701 (1949)
1. This Court accepts the determination of the Court of Appeals that, under Illinois law, the settlor had a right of reverter; this renders the trust one "intended to take effect in possession or enjoyment at or after his death," within the meaning of § 811(c) of the Internal Revenue Code, and the value of the corpus of the trust at the settlor's death was includible in his gross estate for purposes of the federal estate tax. Pp. 335 U. S. 705 -707.
(a) The taxability of a trust corpus under the "possession or enjoyment" provision of § 811(c) does not hinge on a settlor's motives, but depends on the nature and operative effect of the trust transfer. P. 335 U. S. 705 .
or to enjoy the property then or thereafter. Commissioner v. Estate of Church, ante, p. 335 U. S. 632 . P. 335 U. S. 705 .
(c) It is immaterial whether a present or future interest, absolute or contingent, remains in the settlor because he deliberately reserves it or because, without considering the consequences, he conveys away less than all of his property ownership and attributes, present or prospective. P. 335 U. S. 705 .
(d) The Tax Court having found that the trust contained no provision for disposition of the corpus should the settlor outlive the beneficiaries, and petitioner not having contended that it was denied an opportunity to present any relevant evidence concerning ownership, possession, or enjoyment, remand of the case to the Tax Court for further findings of fact is unnecessary. Pp. 335 U. S. 706 -707.
2. The fact that the monetary value of the settlor's contingent reversionary interest is small in comparison with the total value of the corpus does not render the "possession or enjoyment" provision of § 811(c) inapplicable. P. 335 U. S. 707 .
3. The ruling of the Court of Appeals for the Seventh Circuit, which circuit embraces Illinois, that, under Illinois law, when all trust beneficiaries die, the trust corpus reverts to the donor, is not plainly wrong, and this Court does not disturb it. Pp. 335 U. S. 707 -708.
The Commissioner determined that the corpus and certain accumulated income of the trust in question was includible in the gross estate of the decedent for purposes of the federal estate tax. The Tax Court reversed. The Court of Appeals reversed. 159 F.2d 257. This Court granted certiorari. 331 U.S. 798. Affirmed, p. 335 U. S. 708 .
This is a federal estate tax controversy. Here, as in Commissioner v. Church, ante, p. 335 U. S. 632 , we granted certiorari to consider questions dependent upon the meaning and application of a provision of § 811(c) of the Internal Revenue Code. 47 Stat. 169, 279, 26 U.S.C. § 811(c). The particular provision requires including in a decedent's gross estate the value at his death of all property
The value of the corpus of this trust was not included in the Spiegel estate tax return. The Commissioner concluded that its value with accumulated income, about $1,140,000 should have been included in the gross estate under § 811(c). The Tax Court held otherwise in an unreported opinion. The Court of Appeals for the Seventh Circuit reversed. 159 F.2d 257. It held that the possession or enjoyment provision of § 811(c) required inclusion of the value of the trust property and accumulated income under the rule declared in Helvering v. Hallock, 309 U. S. 106 , because, under state law, the trust
agreement left the way open for the property to revert to Mr. Spiegel in case he outlived all the beneficiaries. This holding rested on the agreement of parties that whether there was a right of reverter depended on Illinois law, and the court's conclusion that, under Illinois law, a right of reverter did exist. [ Footnote 1 ]
First. In Commissioner v. Church, ante, p. 335 U. S. 632 , we have discussed the Hallock holding in relation to the scope of the "possession or enjoyment" provision of § 811(c) and need not elaborate what we said there. What we said demonstrates that the taxability of a trust corpus under this provision of § 811(c) does not hinge on a settlor's motives, but depends on the nature and operative effect of the trust transfer. In the Church case we stated that a trust transaction cannot be held to alienate all of a settlor's "possession or enjoyment" under § 811(c) unless it effects
In this case, the Tax Court made findings of fact, and then decided against the Government. It did so, however, by holding as a matter of law that those facts did not require inclusion of the value of this corpus in the settlor's estate. [ Footnote 2 ] But the Tax Court's findings of fact showed that the trust contained no provision for disposition of the corpus should the settlor outlive the beneficiaries. This finding of fact, which we accept, plus the Court of Appeals determination of controlling Illinois law,
without more, brings this trust transaction within the scope of the possession or enjoyment provision of § 811(c) as we have interpreted that section in the Hallock and Church cases. And petitioner has not contended that it was denied an opportunity to present any relevant evidence concerning ownership, possession, or enjoyment. It is therefore not necessary to remand the case to the Tax Court for any further findings of facts. See Hormel v. Helvering, 312 U. S. 552 , 312 U. S. 559 -560.
Second. It is contended that, since the monetary value of the settlor's contingent reversionary interest is small in comparison with the total value of the corpus, the possession or enjoyment provision of § 811(c) should not be applied. But inclusion of a trust corpus under that provision is not dependent upon the value of the reversionary interest. Fidelity-Philadelphia Trust Co. v. Rothensies, 324 U. S. 108 , 324 U. S. 112 ; Commissioner v. Estate of Field, 324 U. S. 113 , 324 U. S. 116 ; see Goldstone v. United States, 325 U. S. 687 , 325 U. S. 691 . The question is not how much is the value of a reservation, but whether after a trust transfer, considered by Congress to be a potentially dangerous tax evasion transaction, some present or contingent right or interest in the property still remains in the settlor so that full and complete title, possession, or enjoyment does not absolutely pass to the beneficiaries until at or after the settlor's death. See Smith v. Shaughnessy, 318 U. S. 176 , 318 U. S. 181 .
Third. It is contended that, under Illinois law the corpus of this trust would not have reverted to the settlor had he outlived the beneficiaries. The record reveals that the state law problem here is not an easy one, but, under this Court's decision in Meredith v. Winter Haven, 320 U. S. 228 , the difficulty involved did not relieve the Court of Appeals of its duty to make a decision. The questioned ruling was made by three judges who are constantly required to pass upon Illinois law questions. One
of the three judges has long been a resident and lawyer of Illinois. Examination of the Illinois state court opinions pressed upon us leaves us unable to say with any degree of certainty that the Court of Appeals holding was wrong. It is certainly neither novel nor unreasonable for state law to provide that, when all trust beneficiaries die the trust corpus should revert to the donor. It would be wholly unprofitable for us to analyze Illinois cases on the point here urged. It is sufficient for us to say that we think reasonable arguments can be made based on Illinois cases to support a determination of this question either for or against the petitioner's contention. Under these circumstances, we will follow our general policy and leave undisturbed this Court of Appeals holding on a question of state law. [ Footnote 3 ]
[For concurring opinion of MR. JUSTICE REED, concurring in this decision but dissenting from that in Commissioner v. Estate of Church, ante, p. 335 U. S. 632 , see ante, p. 335 U. S. 651 .].
[For dissenting opinion of MR. JUSTICE FRANKFURTER, dissenting from this decision and also that in Commissioner v. Estate of Church, ante, p. 335 U. S. 632 , see ante, p. 335 U. S. 667 .]
This Court of Appeals interpretation and application of § 811(c) was in conflict with the holding of the Third Circuit in Commissioner v. Church's Estate, 161 F.2d 11. We granted certiorari in both cases, arguments have been heard together, and we have today reversed the Church case, ante, p. 335 U. S. 632 .
The Tax Court's conclusion of law that the "possession or enjoyment" clause of § 811(c) was inapplicable to the facts of this trust rested in part on its belief that Reinecke v. Northern Trust Co., 278 U. S. 339 , had decided the issue. But the Hallock case was decided after Reinecke, and the question here involved was not specifically raised in the Reinecke case. Nor did the Court's opinion in that case, written by the late Chief Justice Stone, indicate that a transfer of bare legal title in a transfer must always be accepted as a conclusive showing that the possession and enjoyment provision of § 811(c) cannot be applied to the trust corpus. Cf. Court's opinion in Harrison v. Schaffner, 312 U. S. 579 , written by Chief Justice Stone.
Helvering v. Stuart, 317 U. S. 154 , 317 U. S. 162 -165; cf. Steele v. General Mills, 329 U. S. 433 .
At least five alternative proposals have been presented to us for the solution of this case. The first calls for the reversal of Reinecke v. Northern Trust Co., 278 U. S. 339 , and a decision against the taxpayers. The second calls for the extension to this case of the doctrine of Helvering v. Clifford, 309 U. S. 331 , and a remand to determine further facts. The third, fourth, and fifth follow existing precedents more closely. Each recognizes that, if no possibility of a reverter [ Footnote 2/1 ] arose in favor of the settlor by operation of law, under the trust instrument before us, the property thereby placed in trust is not required by § 811(c) of the Internal Revenue Code to be included in the gross estate of the settlor for federal estate tax purposes. The third proposal finds that the law to be applied for the above purpose is that of Illinois. It calls for a decision in favor of the taxpayers because, under a correct application of that law, the required
I . THE FIRST PROPOSAL IS THAT THE REINECKE CASE
The lack of judicial support for overruling Reinecke v. Northern Trust Co., supra, at this late day makes it unnecessary to consider this proposal at length. It has been, however, strongly urged upon us. The Spiegel trust instrument is so simple and complete in its terms [ Footnote 2/2 ] that to apply the federal estate tax to its corpus merely on the strength of those terms would require a reversal
"In its plan and scope, the tax is one imposed on transfers at death or made in contemplation of death, and is measured by the value at death of the interest which is transferred. Cf. YMCA v. Davis, 264 U. S. 47 , 264 U. S. 50 ; Edwards v. Slocum, 264 U. S. 61 , 264 U. S. 62 ; New York Trust Co. v. Eisner, 256 U. S. 345 , 256 U. S. 349 . It is not a gift tax, and the tax on gifts once imposed by the Revenue Act of 1924, c. 234, 43 Stat. 313, has been repealed, 44 Stat. 126. One may freely give his property to another by absolute gift without subjecting himself or his estate to a tax, but we are asked to say that this statute means that he may not make a gift inter vivos, equally absolute and complete, without subjecting it to a tax if the gift takes the form of a life estate in one with remainder over to another at or after the donor's death. It would require plain and compelling language to justify so incongruous a result, and we think it is wanting in the present statute."
Id. at pp. 278 U. S. 347 -348.
See also Helvering v. Hallock, 309 U. S. 106 ; dissenting opinion in Becker v. St. Louis Union Trust Co., 296 U. S. 48 , 296 U. S. 53 , and Helvering v. St. Louis Union Trust Co., 296 U. S. 39 , 296 U. S. 46 ; Klein v. United States, 283 U. S. 231 , and Shukert v. Allen, 273 U. S. 545 .
II . THE SECOND PROPOSAL IS FOR THE APPLICATION
Furthermore, there is a sharp contrast between § 22(a) [ Footnote 2/3 ] and § 811(c) of the Internal Revenue Code as a starting point for the application of the doctrine of the Clifford case. Section 22(a), upon which the Clifford
in the settlor as a trustee conflicts with the position taken by this Court as to the "five trusts" in the Reinecke case, supra. For example, the powers reserved directly to the settlor under Trust No. 4477 in the Reinecke case not only are equal to, but, in some ways, are broader than, those vested in the settlor, as a trustee, in the Spiegel trust. The very fact that, in Trust No. 4477, the reservations were made directly to the settlor in his personal capacity, rather than to him as a trustee, removes from them the traditional limitations which equity places upon a trustee in the exercise of powers which he holds for the benefit of his cestui que trust. In Appendix II, infra, Trust No. 4477 is quoted in full from the record in the Reinecke case and a number of the especially material clauses have been italicized. While the terms of that trust were not quoted verbatim in the opinion of this Court in the Reinecke case, this Court there summarized several of them, [ Footnote 2/4 ] and said:
"(b) Trusts created after the effective date of a similar and earlier Act where the settlor reserved the power to sell and reinvest the trust property; vote the stock; control leases; reappoint trustees; and, jointly with the beneficiaries, to alter, amend, or modify the trust. (This applies to Trusts Nos. 4477, 4478, 4479, 4480, and 4481, respectively, appearing in the record at pp. 3, 17, 25, 32, 40.) [ Footnote 2/5 ] "
the decision of this Court in the Reinecke case which held that the corresponding language of § 402(c) of the Revenue Act of 1921 did not apply in that case. [ Footnote 2/6 ]
III . THE THIRD PROPOSAL
I LLINOIS LAW PRECLUDES THE POSSIBILITY OF A REVERTER
This Court, as a settled practice, places much reliance upon announcements by Courts of Appeals as to the law of the states within their respective Circuits. [ Footnote 2/7 ] The weight to which such announcements are entitled will vary with the circumstances under which they are made. In this case, we have an announcement by the Court of Appeals for the Seventh Circuit on the law of Illinois as to the effect of contingent remainders contained in
The Court of Appeals in the instant case has made no announcement of Illinois law contrary to that just stated. In fact, it made no announcement whatever on the subject of vested remainders, because it treated the Spiegel remainders as contingent. [ Footnote 2/8 ] The foregoing elemental
statement as to the legal effect of contingent remainders and of vested remainders subject to conditions subsequent conforms to the generally accepted law of trusts [ Footnote 2/9 ] and to the law of Illinois. [ Footnote 2/10 ]
243, 244, where the Illinois Supreme Court relied upon Lachenmyer v. Gehlbach, supra, in construing an inter vivos deed. See also Harder v. Matthews, 309 Ill. 548, 141 N.E. 442. [ Footnote 2/11 ]
IV . THE FOURTH PROPOSAL ASSUMES THAT A POSSIBILITY OF A
V . THE FIFTH PROPOSAL
"Intended" should be given its normal, factual meaning. To intend means to "have in mind as a design or purpose." [ Footnote 2/12 ] The question of intent is one of fact, difficult to determine, but determinable, nevertheless. Section 811(c) involves more than merely determining whether a transfer took effect, as a matter of law at or after death or whether a "string or tie," as a matter of law, was retained until death. There remains for determination the fact whether the settlor did actually intend that the 1920 transfer take effect in possession or enjoyment upon the expiration of the trust at his death.
Section 811(c) expressly covers transfers either " in contemplation of or intended to take effect in possession or enjoyment at or after . . . death." (Italics supplied.) We have held that the settlor-decedent's motive must be determined before it can be held that a transfer was in contemplation of death. United States v. Wells, 283 U. S. 102 . That case included a transfer in trust,
inter vivos, which was held not to have been made in "contemplation of . . . death." Similarly, factual intent should be found in order to determine whether a transfer was "intended to take effect in possession or enjoyment at or after . . . death." In United States v. Wells, Chief Justice Hughes, speaking for the Court, said (pp. 283 U. S. 116 -117):
In cases involving "contemplation of . . . death" under § 811(c) the required motive impelling a transfer " is a question of fact in each case. " (Italics supplied.) See Allen v. Trust Co. of Georgia, 326 U. S. 630 , 326 U. S. 636 . So also, in each case under § 811(c), the question whether
278 U.S. at 278 U. S. 344 .
Upon the reargument of the instant case and the Church case, we requested counsel to discuss particularly nine questions insofar as those questions were relevant to the respective cases. The first question has been quoted supra, at p. 335 U. S. 711 . The rest are quoted below and, of these, numbers 2, 6, 8, and 9 bore upon this alternative solution:
"8. Assuming that, under the 'refined technicalities of the law of property,' the 'possession and enjoyment' of the trust properties here be deemed to have passed to the beneficiaries when the trust was created, are the transfers so much 'akin to testamentary dispositions' as to make them subject to the estate tax statutes? ( See Helvering v. Hallock, p. 309 U. S. 112 .)"
A somewhat comparable but less direct conflict is presented by Goldstone v. United States, 325 U. S. 687 . There, substantially complete control over the disposition of the proceeds of insurance contracts was placed by the insured in the discretion of his wife, who also was the primary beneficiary. A minority of this Court sought to apply the doctrines of the Hallock case and the rationale which inheres in the Clifford case to the extent of recognizing the transaction as, in substance, a completed gift to the wife of the insured, and therefore not subject to the estate tax. This Court, however, did not, in that case, apply the Clifford doctrine to the estate tax. But see Richardson v. Commissioner, 121 F.2d 1, cert. denied, 314 U.S. 684, where it was held that, under the Clifford case, a trustee, with a broad power of revocation which might at any time be exercised for his own benefit, was himself liable for the income tax on the income of the trust. See also Bunting v. Commissioner, 164 F.2d 443, cert. denied, 333 U.S. 856; 47 Mich.L.Rev. 137 (1948).
See Helvering v. Stuart, 317 U. S. 154 , 317 U. S. 163 -164; MacGregor v. State Mutual Life Assur. Co., 315 U. S. 280 .
The language in the Spiegel and the Lachenmyer trusts is closely comparable. In each case, the gift to children of the settlor is a vested gift. In the Spiegel trust, the children's interest was a vested primary interest (subject to conditions subsequent), and in the Lachenmyer trust, the children's interest was a vested remainder following a life interest in favor of the testator's wife (and in turn subject to conditions subsequent). In both cases, the language making the gifts over is in the form of a divestiture -- comparable to that in the classic example quoted above, " but if any child dies in the lifetime of A, his share to go to those who survive. . . ." (Italics supplied.)
" Third. After the death of my said wife, all of said property and estate above mentioned and described to go to my children, share and share alike, and shall any of my children die, then the children of such deceased child, should any children be surviving such deceased child, to take the share of the parent so deceased, and should any of my children die leaving no issue, then the share of such deceased child shall be divided equally among my surviving children."
Contrasting provisions, specifically recognized by the court below as examples of contingent remainder in an inter vivos trust, are found in Klein v. United States, 283 U. S. 231 , 283 U. S. 232 -233. The court below also cited Haward v. Peavey, 128 Ill. 430, 21 N.E. 503, and Baley v. Strahan, 314 Ill. 213, 145 N.E. 359, involving wills and recognizing the contingent character of the remainders in the Klein case.
The trust instrument which is the subject of the decision in Spiegel v. Commissioner, ante, p. 335 U. S. 701 , is as follows:
The Northern Trust Company trust instrument No. 4477, which is one of the "five trusts" considered in Reinecke v. Northern Trust Co., 278 U. S. 339 , is as follows (italics supplied):
"(3) To exercise the voting power upon all shares of stock held by the trustee hereunder, and to exercise every power, election, and discretion, give every notice, make every demand, and do every act and thing in respect of any shares of stock or bonds, or other obligations and securities held by the trustee hereunder, which it might or could do if it were the absolute owner thereof; provided, however, that, upon the written request of said first party, it shall be the duty of the trustee to execute, or cause to be executed, to the person or persons named in such requests a proxy, entitling him or them (with full power of substitution) to vote in respect of any shares of stock in such written request or proxy defined and mentioned, any meeting or meetings of the stockholders of any corporation or corporations specified in such request and proxy. "
"(5) To execute leases of any real estate which shall form a part of the said trust at any time at such rental, and upon such terms, and for such length of time (not exceeding two hundred (200) years) as it may deem best; to erect buildings, or to change, alter, or make additions to any existing buildings upon any real estate which may form a part of said trust estate, and to do all other acts in relation to the said real estate which, in the judgment of said trustee, shall be needful or desirable to the proper and advantageous management thereof, so as to protect the same and make the same productive; provided, however, that in every case the said trustee shall observe and be governed by any instructions or requests in relation thereto made by an instrument in writing, signed by said first party. "
"The said payments to the said Abby H. Bartlett are in lieu of the monthly payments now being made to her under an existing agreements [ sic ], and not in addition thereto."
" In case of the resignation of any trustee acting hereunder, or of its disability or incapacity to further act as trustee, the said party of the first part, if living, and after his death a majority of the five (5) beneficiaries hereinbefore named, viz., the wife and four (4) children of said party of the first part, or a majority of the survivors of them, shall have power to appoint a successor in trust by an instrument in writing duly signed by him or them and delivered to said trustee,
"(1) Said grantor has created the foregoing trusts to provide for the support and maintenance of the beneficiaries entitled to share in the income of said trust estate, and the said beneficiaries shall have no power to anticipate, assign, or otherwise dispose of or encumber their respective interests in said trust estate, and the same shall not be subject to be taken from them by process of law. "
"(2) Any of the provisions of this trust deed may be altered, changed, or modified in any respect and to any extent at any time during the life of said party of the first part by the delivery to said trustee of an instrument in writing signed by said party of the first part and by a majority of the five (5) beneficiaries hereinbefore named, or by a majority of the survivors of said five beneficiaries. "
" Assistant Secretary "