Court Opinion

ID: 9653722
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:52:33.596998+00
Date Added: 2024-06-11T18:13:00.927293
License: Public Domain

WALLER, Circuit Judge
(specially concurring).
I take no issue with either the reasoning or the result in the main opinion in this case, but I also like the solution thereof set out in the opinion in Bethea v. Sheppard, Comptroller, 143 S.W.2d 997, by the Court of Civil Appeals of Texas, which construes the will of Henry and Catherine Henke— *938the same will that is involved in the case before us — , and answers the questions in our case fully, quickly, and, I think, correctly.
The decision in that case holds: (1) that Mrs. Henke reserved the right under the will to enjoy an annual income from the estate of not less than $40,000, of which one-half was payable out of her trust estate, and only $12,500 was payable therefrom to her daughter; (2) that the trust withheld from the beneficiaries of the trust the right to the full or complete possession and enjoyment of Mrs. Henke’s one-half of the community until after the death of the settlor, or not sooner than eight years after her death; (3) that the transfer or right of possession of that part of the trust estate that remained after the expiration of the eight years was contingent upon the daughter surviving the settlor; and (4) that these facts made the property so transferred subject to the inheritance taxes of Texas.
In speaking of the will of Catherine Henke, the Court of Civil Appeals said:
“We are in accord with the construction placed upon the joint will and trust instrument by the trial court and its conclusion that the net value of the corpus of the trust estate in suit was taxable upon the death of the grantor. That is, we construe the instrument as conclusively showing the intention of grantor or settlor to withhold the full or complete possession or enjoyment of the trust estate, except the annuity payable to appellant primarily out of the revenues, from appellant until after the death of grantor, or until eight years after her death. The trust instrument expressly provides that the ‘remainder’ of the estate ‘shall not be distributed’ during the lifetime of grantor, and not ‘until the expiration of eight years after her death.’ The transfer or right of possession or enjoyment of the remainder of the trust estate was made contingent upon appellant’s surviving the grantor, which necessarily fixed appellant’s rights at or after the death of grantor.”
The proceeding in Bethea v. Sheppard, Comptroller, supra, is not one of those semi-collusive family law suits but is an adversary one wherein the State of Texas, through its Comptroller, sought and collected inheritance taxes in an amount in excess of $60,000. Implicit in the holdings of the District Court and the Court of Civil Appeals of Texas in that case is a negation that Catherine’s interest in the community was divested out of her upon the probate of the will of Henry Henke, for how else could those courts hold that the transfer of possession and enjoyment did not occur until after the death of Catherine?
Sec. 811 (c), Title 26 U.S.C.A., provides that transfers, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after death, shall be subject to the federal estate tax, by the use of the following language:
“(c) Transfers in contemplation of, or taking effect at death. To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from, the property, * *
Moreover, the location of the legal title does not necessarily determine the estate tax consequences because a gift to a donee that does not take effect in use and enjoyment until after death is universally held by the federal courts, in applying the statutes relating to federal estate taxes, to have been one made in contemplation of death.
In Allen v. Trust Company of Georgia, 5 Cir., 149 F.2d 120, at page 124, affirmed, 326 U.S. 630, 66 S.Ct. 389, 90 L.Ed. 367, we said:
“It is settled that df anything essential to the full enjoyment of a gift or trust could not accrue to the donee until after the death of the donor, such a gift is testamentary in character. If it is testamentary in character, it is subject to the tax. In United States v. Wells, 283 U.S. 102, 116, 51 S.Ct. 446, 451, 75 L.Ed. 867, the Court said:
*939“ ‘The quality which brings the transfer within the statute is indicated by the context and manifest purpose. Transfers in contemplation of death are included within the same category, for the purpose of taxation, with transfers intended to take effect at or after the death of the transferor. The dominant purpose is to reach substitutes for testamentary dispositions and thus to prevent the evasion of the estate tax. Nichols v. Coolidge, 274 U.S. 531, 542, 47 S.Ct. 710, 71 L.Ed. 1184, 52 A.L.R. 1081; Milliken v. United States (ante), 283 U.S. 15, 51 S.Ct. 324, 75 L.Ed. 809 * * * ’ ”