Court Opinion

ID: 4634557
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:16:16.542748+00
Date Added: 2024-06-11T08:00:08.681846
License: Public Domain

H. SELDON TAYLOR, JR., AND VIRGINIA TRUST COMPANY, AS EXECUTORS OF THE ESTATE OF H. SELDON TAYLOR, DECEASED, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Taylor v. CommissionerDocket No. 64444.United States Board of Tax Appeals27 B.T.A. 220; 1932 BTA LEXIS 1101; December 6, 1932, Promulgated *1101  Trust made by decedent for the benefit of his wife for life, with reversion to decedent if he survived her, and, if not, with remainder to his children, was not a transfer to take effect in possession or enjoyment at or after his death within section 302(c) of the Revenue Act of 1926.  Eugene G. Smith, Esq., for the respondent.  STERNHAGEN *220  The respondent determined a deficiency of $734.84 in estate tax against the estate of H. Seldon Taylor, deceased.  In making this determination he included in the gross estate the value of two parcels of real property held under trusts for the benefit of decedent's wife and children.  Petitioners contend that these trusts did not take effect in possession or enjoyment at or after death within the meaning of section 302(c) of the Revenue Act of 1926.  The facts are stipulated.  FINDINGS OF FACT.  Petitioners are the duly qualified executors of the estate of H. Seldon Taylor, deceased, who died February 13, 1930, a resident of Richmond, Va.  He left a will and five codicils annexed.  By deed dated March 22, 1895, Minna Keppler, in consideration of $6,250, conveyed to decedent certain real property situate*1102  at 322 E. Broad Street, Richmond, Va., IN TRUST, nevertheless, for the following purposes, to wit: That the said H. Seldon Taylor shall hold the same for the sole, separate and exclusive use and benefit of his wife, Sallie F. Taylor, with power, during the joint lives of the said H. Seldon and Sallie F., to sell, exchange, or encumber by mortgage or deed of trust, upon the written request of the said Sallie F. Taylor.  Should *221  the said property, or any taken in exchange therefor, not be alienated in any of the above modes, during the said joint lives, and the said Sallie F. Taylor should survive her husband, the said property shall be held by her for and during her natural life, for her sole and separate use, free from the debts, contracts and control of any future husband she may take, and at her death shall be equally divided among the children of the said H. Seldon Taylor then living, including those by his first marriage, as well as those by his present marriage.  In the event that the said H. Seldon Taylor shall survive his said wife, Sallie F., then the said property, or any taken in exchange therefor, and not alienated in any of the above modes, shall revert to*1103  the said H. Seldon Taylor in fee simple, absolutely freed and discharged from all trusts whatever.  By deed dated October 30, 1911, decedent and Sallie F. Taylor, his wife, granted to A. W. Patterson, trustee, certain real property situate at 1022 W. Franklin Street, Richmond, Va., subject to the following trusts and limitations: FIRST: - For the sole use, benefit and enjoyment of said Sallie F. Taylor, for and during her natural life, with full power in the trustee, during the joint lives of said H. Seldon Taylor and Sallie F. Taylor, to sell the property hereby conveyed, or to encumber the same by deed of Trust, or by mortgage, or exchange it for other property, real or personal, whenever the said H. Seldon Taylor and Sallie F. Taylor shall unite in a writing, signed by them, requesting the Trustee so to do, or whenever they shall unite in such conveyance with the Trustee, and in such case, whether of sale or encumbrance, no purchaser, if a sale, and no lender of money, if the encumbrance be by Deed of Trust, or mortgage, shall be required to see to the application of the purchase money, or the borrowed money; it being the intent of this provision, that the proceeds of such sale*1104  or loan, or such personal property as may have been taken in exchange for said real estate, shall be turned over to the said Sallie F. Taylor, to be disposed of, as she may see fit; and the Trustee shall in no way be responsible for the disposition of said proceeds.  In the event the property hereby conveyed is exchanged for other real estate, said other real estate shall be held upon the same trust and with the same powers herein declared.  SECOND: - Upon the death of said Sallie F. Taylor, if said H. Seldon Taylor be then living, the property hereby conveyed, if it shall not have been sold, or such other property, real or personal, as may have been taken in exchange therefor, shall immediately vest in said H. Sheldon Taylor, in fee simple, absolute, free and discharged of all trusts whatsoever.  THIRD: - Upon the death of said Sallie F. Taylor, if said H. Seldon Taylor be not then living, the Trustee shall hold the property hereby conveyed, or such real estate as may have been taken in exchange therefor, if it shall not have been sold, for the sole and separate use, benefit and enjoyment of Floyd Brown Taylor, if then living, for and during her natural life, free from the debts*1105  and control of any husband she may take.  FOURTH: - Upon the death of said Sallie F. Taylor and said Floyd Brown Taylor, if said H. Seldon Taylor be not then living, the Trustee shall hold the property hereby conveyed, or such real estate as may have been taken in exchange therefor, if it shall not have been sold, for the sole and separate use, benefit and enjoyment of Mary Belle Pettit, (wife of Charles L. Pettit), if then living, for and during her natural life, free from the debts and control of any husband she may have.  FIFTH: - Upon the death of said Sallie F. Taylor, Floyd Brown Taylor, and Mary Belle Pettit, if said H. Seldon Taylor be not then living, the Trustee shall *222  hold the property hereby conveyed, or such real estate as may have been taken in exchange therefor, if it shall not have been sold, for the sole use, benefit and enjoyment of H. Seldon Taylor, Junior, if then living, for and during his natural life.  SIXTH: - Upon the death of Sallie F. Taylor, Floyd Brown Taylor, Mary Belle Pettit and H. Seldon Taylor, Junior, if said H. Seldon Taylor, Senior, be not then living, the property hereby conveyed, or such real estate as may have been taken in exchange*1106  therefor, if it shall not have been sold, shall pass in fee simple, to such person or persons, who, according to the present statute of descents of the State of Virginia, shall be the heirs at law of said H. Sheldon Taylor, Senior, as of the time of his death, as if he should have died intestate, seized of said property, in fee simple.  Sallie F. Taylor, decedent's wife, survived him, is still living, and has enjoyed, "ever since the taking effect of" (sic) the above trust deeds, and still continues to enjoy, the net income from the properties covered by them.  Petitioners have, at no time, taken any charge or control, as executors, of the properties.  The inventory of decedent's estate filed in the Chancery Court of the city of Richmond, Va., does not include them.  In determining petitioner's estate tax liability, respondent added to the gross estate $41,875 and $15,000, representing the respective values of these properties.  OPINION.  STERNHAGEN: The petitioners omitted any value for the Broad Street or Franklin Street properties from the decedent's gross estate shown on the estate tax return.  The respondent determined that the value of such properties at the time*1107  of death was part of the statutory gross estate, and he argues that the inclusion is required by section 302(c) of the Revenue Act of 1926.  This provides that the value of the gross estate shall include all property, "To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, * * * intended to take effect in possession or enjoyment at or after his death * * *." The petitioner contends that no part of the properties was transferred by decedent to take effect in possession or enjoyment at or after decedent's death, and furthermore that, since both transfers were made before the first estate tax was imposed (Revenue Act of 1916), an application to them of the Revenue Act of 1926 would be unconstitutionally retroactive.  We are of opinion that the petitioner's contention that section 302(c) is inapplicable is correct.  The Broad Street property was, according to this record, transferred in 1895 not by decedent, but by Minna Keppler.  It does not appear by whom the consideration was paid, but even if it were assumed that decedent had paid it, and further that for this reason the trust might be attributed to *223  decedent, *1108  and further that this justified regarding the real propery as the subject of a transfer by decedent, yet it could not be said that such transfer was one taking effect in possession or enjoyment at or after his death.  It was complete in 1895, with the entire beneficial interest in Sallie during her life and in the children after her death.  Nothing was, by the original transfer, to take effect at or after decedent's death.  Such death during Sallie's life merely ended the possibility of his expectancy without enlarging or enhancing Sallie's estate.  This was unlike the first trusts considered in , relied upon by respondent, whereby the decedent by his original transfer reserved as much as he transferred, namely the right to retake if he survived.  Here he kept nothing, but created the right to take upon his wife's death.  While her death before his was made an occasion for an effective transfer, his death had no such effect, but merely destroyed his own possibility of acquisition.  . The Franklin Street property was transferred by decedent and his wife in 1911.  It must also be*1109  held to be beyond the reach of section 302(c), for its effectiveness was unrelated to decedent's death.  While upon Sallie's death before his, he would take, his own death left the possession and enjoyment unaffected.  It was already in Sallie and there it continued, all by virtue of the original transfer.  If it could be said that section 302(c) were applicable, the question would then confront us whether the Constitution forbids such application, since the original transfers were made in 1895 and 1911 before the 1926 Act or any of its forerunners were enacted.  This, however, we must refrain from considering, since the statute as we have construed it avoids constitutional difficulty.  The petitioner concedes that one-half the value of partnership office furniture is properly within decedent's gross estate.  Judgment will be entered under Rule 50.