Source: https://supreme.justia.com/cases/federal/us/326/480/
Timestamp: 2018-12-19 07:53:35
Document Index: 761923903

Matched Legal Cases: ['§ 302', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811', '§ 811']

Commissioner v. Estate of Holmes :: 326 U.S. 480 (1946) :: Justia US Supreme Court Center
Justia › US Law › US Case Law › US Supreme Court › Volume 326 › Commissioner v. Estate of Holmes
Held: that, under 811(d)(2) of the Internal Revenue Code, for the purpose of the federal estate tax, the value of the property so transferred by the decedent was includible in his gross estate as an interest whereof the "enjoyment" was subject, at the date of his death, to change through exercise of a power to "alter, amend, or revoke." P. 326 U. S. 483.
In White v. Poor, 296 U. S. 98, the question arose whether the power "to alter, amend, or revoke" included
In 1936, immediately following the White decision, Congress revised § 302(d) by rewriting it into two separate paragraphs relating to "revocable transfers," one applying to transfers after June 22, 1936, the other to transfers on or prior to that date. These are now §§ 811(d)(1) and (2) of the Internal Revenue Code, which are set forth in the margin. [Footnote 1] For present purposes, the difference claimed to be important consisted in changing the phrase
The principal contention is that the sum of the various provisions was to create or reserve to the decedent only a power to accelerate in time the enjoyment of the beneficial interests brought into being by the trusts; that these were vested interests; that no power was reserved to revest them or any of them in the donor or his estate or to change or alter them, or the terms of the gifts, in any manner other than by mere acceleration of enjoyment, and that the powers thus reserved are not sufficient to bring the trust estate, or any part of it, within the coverage of § 811(d)(2). [Footnote 5]
One difficulty with respondent's position is in its conception of "enjoyment." More than once recently, we have emphasized that "enjoyment" or "enjoy," as used in these and similar statutes, are not terms of art, but connote substantial present economic benefit, rather than technical vesting of title or estates. Cf. United States v. Pelzer, 312 U. S. 399, 312 U. S. 403; Fondren v. Commissioner, 324 U. S. 18; Commissioner v. Disston, 325 U. S. 442. [Footnote 6] In this sense, it is clear that none of the sons here had a present right to immediate enjoyment of either income or principal, see Commissioner v. Disston, supra, although each may have been invested with what respondent regards as a "fee simple" in an equitable interest, subject to divestment by the contingency of the beneficiary's death during continuance of the trust. So long as it continued -- and it might continue for the life of the survivor of the three sons and 21 years -- it could not be said with assurance that any of the sons, or his issue, would come into present enjoyment of his share, or any part of it; for, in connection with the possible occurrence of many contingencies, including
This was from concern that retroactive application of § 811(d)(1) should not impose taxes on prior transfers not comprehended by the prior law, as the concluding sentence of § 811(d)(2) shows. [Footnote 7] Notwithstanding this and the doubt created by White v. Poor, supra, the report of the Committee on Ways and Means of the House of Representatives expressly states that the addition of "or terminate" in § 811(d)(1) was "declaratory of existing law." [Footnote 8] Administrative interpretation, including Treasury Regulations, support this view, [Footnote 9] which also is either followed or indicated in decisions of the Circuit Courts of Appeals, except the one now in review. [Footnote 10] As we have pointed out, that view is more consonant with the structure and interpretation given concomitant taxing act provisions. For all these reasons, we think it must prevail.
It seems suggested that the power of termination was reserved to the grantor not in the capacity of donor, but only in that of trustee, from which the conclusion appears to be drawn that no power of termination was reserved within the meaning of § 811(d)(2). As we have noted, [Footnote 12] the eleventh paragraph of the indenture is not wholly clear concerning the premise. But, in terms, the reservation is to "the grantor, during his lifetime," and grammatical construction of the second sentence seems to indicate the qualifying clause "while acting as trustee hereunder" was intended to apply only to the decedent's son or sons acting in that capacity. [Footnote 13] If the question has been