Court Opinion

ID: 6889167
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:37:02.791632+00
Date Added: 2024-06-11T16:05:47.895764
License: Public Domain

BIGGS, Circuit Judge.
I dissent. It is clear that the gifts to the minor beneficiaries are, in part, at least, gifts of future interests within the meaning of Section 504(b) of the Revenue Act of 1932. The indentures provide that the income unexpended for the immediate benefit of the minors shall, be accumulated for their future1 enjoyment when they reach their respective majorities. If one of the cestuis should die before reaching the age of twenty-one years, the accumulation for his benefit could not pass to his administrator for the indentures create spendthrift trusts.2 If the accumulation passed to an administrator it would become liable to the deceased minor’s debts and the purpose of the grantor in creating the spendthrift trusts would be destroyed. See Huber’s *120Appeal, 80 Pa. 348, 359.3 Gifts of future interests were never clearer.
The Tax Court assimilates the facts of the case at bar to those of cases of discretionary trusts such as that discussed in Lillian Seeligson Winterbotham v. Com’r, 46 B.T.A. 972. The majority of this court take the view that the trustees are compelled to expend the income of the trusts for education, comfort and support of the minors and that therefore the gifts are of present interests. Taking the position of the majority to its extreme logical limit and conceding that income to be used for the immediate benefit of the minor cestuis constitutes a gift of a present interest, we find a future interest and a present interest embraced in the trusts. As the Tax Court points out, the trustees are the judges (in the first instance) of how much of the income from the gift is to be expended for the immediate benefit of the minors. That amount might be much or little as justified by the circumstances of the particular minor involved and it is impossible to determine the value of the present right or even to allocate it to the first $5000 in value of the gift. See Helvering v. Blair, 2 Cir., 121 F.2d 945, 947. It may be argued that since the right of a minor cestui to the use of the income for his education, comfort and support comes before accumulation and since the income from the first $5000 in value of the gift might not exceed the requirements of income for these purposes, the gift may be assumed to be one of present interest. Such an assumption, however, scarcely can stand as a basis for evaluating the gift of the present interest for the purpose of taxation.
It follows that I can perceive no sound reason why this court should overrule its decision in Commissioner v. Taylor, 3 Cir., 122 F.2d 714, certiorari denied 314 U.S. 699, 62 S.Ct. 479, 86 L.Ed. 559.
As to the second point raised by the petitioner I think it is clear that the statute of limitations does .not preclude the reduction of the $40,000 specific exemption on account of gifts made in a previous barred year even though such gifts were not taxed in the earlier year. See Greenleaf Textile Corp. v. Commissioner, 26 B.T.A. 737, affirmed per curiam 2 Cir., 65 F.2d 1017, and Lord Forres v. Commissioner, 25 B.T.A. 154. See also Treasury Regulations 79 (1936 ed.), Article 5.
In my opinion the decision of the Tax Court should be affirmed.

 See the definition of the term “future interests in property” contained in the eommitteo reports recommending the legislation; H. Rept. No. 708, 72d Cong., 1st Sess., p. 20; S. Rept. No. 665, 72d Cong., 1st Sess., p. 41.

 See the “Protective Clause”, paragraph “Third” of both indentures.

 The majority consider the accumulation provisions of the trusts as “ * * * but compliant recognition by the donor of what the law, out of its solicitude for the safeguarding of a -minor’s property, would have interposed in the absence of the donor’s express direction in such regard.” In my opinion this consideration is not pertinent because a present interest by definition (see that contained in the House and Senate Reports cited in note 1 supra) must be limited to present enjoyment. The question before us under the statute is the nature of the gift “* * * made -to any person by the donor during the calendar year * * that is to say, whether the gift embraced a future interest. We are not concerned in the case at bar with what the law of guardianship might do in another case. We are concerned with what the grantor did by the indentures subjudice.