Court Opinion

ID: 8595927
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:03:07.323547+00
Date Added: 2024-06-11T16:54:56.215085
License: Public Domain

Kunzig, Judge,
concurring:
I join in the opinion and judgment of the court, although with some difficulty. At the outset, I would not have decided the case in accordance with the majority, because I thought this court’s decision in Estate of Tully v. United States, 208 Ct.Cl. 596, 528 F.2d 1401 (1976) demanded an opposite result. It is because I now think that Tully, applied to the facts of the instant case, requires a decision in favor of the Government that I state my views separately.
Tully involved the question whether death benefits paid directly to the deceased’s widow by his employer should be included in the deceased’s gross estate for estate tax purposes. 208 Ct.Cl. at 598, 528 F.2d at 1402. We decided *632that the death benefits should not be included because they did not fall within either section 2038(a)(1) or section 2033 of the Internal Revenue Code. 208 Ct.Cl. at 606, 528 F.2d at 1407. I am concerned here as I believe that section 2038(a)(1), at issue in Tully, is closely analogous to section 2036, at issue in the instant case.
The court in Tully reached its conclusion as to section 2038(a)(1) only after deciding that Tully, the deceased, did not keep a section 2038(a)(1) "power” to "alter, amend, revoke or terminate” the enjoyment of the benefits after the transfer until his death. Id. In reaching this decision, the court applied the standard established by the court in Harris v. United States, 29 Am.Fed. Tax R. 2d 1558 (C.D. Cal. 1972), that is, that a section 2038(a)(1) power must be demonstrable, real, apparent and evident, not speculative. 208 Ct.Cl. at 602, 528 F.2d at 1404.
The deceased’s power in Tully fell into the speculative range. Tully could have altered the terms of the death benefits agreement only with the cooperation of the other 50% owner of the corporation which was to pay the benefits. Tully’s power, then, was the power of persuasion, not a "real” power within the Harris standard. Each owner in Tully had an equal stake in the corporation. Each, realizing that he might be the survivor, had an interest in keeping a reasonable ceiling on the size of the payments and in preventing frequent changes in the agreement. Each, therefore, acted as a brake on the other. 208 Ct.Cl. at 602-03, 528 F.2d at 1404-05.
But in the instant case, Farrel’s power was not merely speculative. Certainly, if she had appointed herself as one of the two trustees (as explained in the majority opinion, supra), she would have been in the same "50%” situation as existed in Tully. There, however, the similarity stops.
Farrel, as settlor, had a greater stake in the distribution of trust income and corpus than did the other trustee, a stranger to the trust. I think that Farrel’s dominant interest gave her a power "to designate the persons who shall possess or enjoy the property or the income” of the trust. IRC § 2036. I think that this "power” is within the parameters given that word by the court in Tully and as defined in Harris. The power is demonstrable, real, *633apparent and evident. It is for this reason, as well as for those stated by the majority, that I join in the judgment of the court.