Court Opinion

ID: 4496974
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:11.093659+00
Date Added: 2024-06-11T14:54:14.688372
License: Public Domain

DisNEY,
dissenting: I can not concur in the finding that Edwin Loehridge Cox was only one of the beneficiaries under the trust set up on November 15, 1935. The trust instrument provided, in short, that he should have the income throughout his life and by the age of 45 one-half of the corpus, and that at his death and that of his *869mother, the trust should cease and the remainder of the corpus should be paid to his lineal descendants, if any, per stirpes; that if no lineal descendants survive him, or if any survive him and die before his mother, the trust should continue through her lifetime to pay her the income and that then the trust should cease, the corpus to be vested in Russell Eugene Cox or his distributees. Under this state of facts, the mother, in any event, would take only the income for her life, perhaps only a portion thereof, and only in the contingency of surviving Edwin Lochridge Cox and any lineal descendants surviving him. Such remote contingency does not, in my opinion, make her a beneficiary under the trust within the intent of the statute, and I conclude that he was beneficiary in two successive trusts.
Moreover, in so far as the majority opinion assumes two successive trusts to the same beneficiary and holds, nevertheless, that there should be allowed two deductions of $5,000 each, I can not concur. The object intended by the statute is too plain, I think, to allow it to be stultified by a plurality of trustees under which arrangement, with trusts of $5,000 each, the gift for tax purposes could be diminished to zero. I do not think that Commissioner v. Krebs, 90 Fed. (2d) 880, or Noyes v. Hassett, 20 Fed. Supp. 31, furnish authority herein, for in both cases the question as to who was donee was not met. In Commissioner v. Wells, 88 Fed. (2d) 339, quoting section 1111 of the Revenue Act of 1932, defining “person” as including “trust,” the statement is made that the donees were trusts. The question was as to future interest, and taken as a whole the case is to the effect that there was transfer, taxable under the statute, because the tax is on transfer and not receipt. Definitions based upon inductive reasoning are often pitfalls for unwary thought when applied to particular situations. I think this is a situation where “A word * * * may vary greatly in color and content according to the circumstances and the time in which it is used.” Towne v. Eisner, 245 U. S. 418, 419. It is well recognized that definitions “are to be understood by looking at the subject-matter * * * and the object of the Legislature * * Edinburgh St. Tramways Co. v. Torbain, 3 App. Cas. 58, 68. In spite of the definition of the word “person” as including “trust” in section 1111, the statute as a whole shows that the definition can not be consistently applied. Thus section 142, requiring specially a return by a fiduciary for a trust, and section 161, providing a particular imposition of a tax upon trusts, seem unnecessary, if the word person is in every instance to include “trust.”
Commonwealth v. Welosky (Mass.), 177 N. E. 656, says:
⅜ * * The word “person” like any other words, has no fixed and rigid signification, but has different meanings dependent upon contemporary condi*870tions, the connection in which it is used, and the result intended to be accomplished. * * *
It has been held, in a consideration of perpetuities, that beneficiary, and not trustee, is donee and first taker. Henry v. Henderson, 58 So. 354, (357). The word trustee itself discloses that another is the person primarily involved. I believe that section 504 (b) requires a construction of the word person in its usual sense. Old Colony Railroad Co. v. Commissioner, 284 U. S. 552. The fact that in Commissioner v. Wells, supra, as well as other cases the tax was based upon the transfer to the trust is justified by the words of the statute, which imposes the tax upon the transfer, with emphasis upon that fact. There was transfer, and not in futuro. As said in Davidson v. Welch, 22 Fed. Supp. 726, the same conclusion could have been reached in Commissioner v. Wells, supra, by finding that the donees were the cestuis que trust. Davidson v. Welch, supra, holds each of several beneficiaries under a single trust to be donees requiring exclusion of $5,000. Considering the light given upon the intent of the Congress by the Senate Committee Report as to section 501 of the Revenue Act of 1932,1 it seems to me plain that within the purview of section 504 (b) the donee is the beneficiary under a trust. Cases like Seymour H. Knox, 36 B. T. A. 630, and Katherine S. Rheinstrom, 37 B. T. A. 308, involving a transfer in trust for several persons do not, I think, answer the question here propounded, as to the application of section 504 (b) to successive trusts in the same year for the same beneficiary; for there was in those cases one transfer, within the object of section 501. Here there are two, to the same person. The fact that section 504 (b) was amended by section 505 (a) of the Revenue Act of 1938 to exclude gifts in trust, along with gifts of future interests in property, is, I believe, indicative of the intent to clarify the earlier statute and that, being subject to erroneous interpretation, it should be clarified. Greensboro Gas Co., 30 B. T. A. 1362 (1374, 1375); Johnston v. Commissioner, 86 Fed. (2d) 732; certiorari denied, 301 U. S. 683. I think petitioner here has erroneously interpreted its meaning. I dissent.
Offer agrees with this dissent.

 The words “transfer * * * by gift” and “whether * * * direct or indirect" are designed to cover and comprehend all transactions (subject to certain express conditions and limitations) whereby and to the extent (sec. 503) that property or a property right is donatively passed to or conferred upon another, regardless of the means or the device employed in its accomplishment. For example, * * * (8) a transfer of property to B where there is imposed upon B the obligation of paying a commensurate annuity to C would be a gift to C; * * * (7) where A creates a revocable trust naming B as beneficiary, a gift to B of the corpus is effected when A relinquishes the power to revoke or the power is otherwise terminated in B’s favor (the income payments to B in the interim being gifts from A in tbe calendar years when received.)