Court Opinion

ID: 9642966
Source: CourtListenerOpinion
Date Created: 2023-08-22 18:13:51.985347+00
Date Added: 2024-06-11T18:10:55.384217
License: Public Domain

SWAN, Circuit Judge
(dissenting).
This court has three times held that a retroactive application of section 302(d) of Revenue Act 1926, 44 Stat. 70, does not offend the due process clause, if the settlor had a reasonable opportunity to avoid the tax by relinquishing his reserved power to alter, amend, or revoke the trust without thereby incurring liability to a gift tax. Porter v. Commissioner, 2 Cir., 60 F.2d 673, 675, affirmed on other grounds, 288 U.S. 436, 53 S.Ct. 451, 77 L.Ed. 880; Witherbee v. Commissioner, 2 Cir., 70 F.2d 696, 697, certiorari denied, 293 U.S. 582, 55 S.Ct. 96, 79 L.Ed. 678; Commissioner v. Chase Nat. Bank, 2 Cir., 82 F.2d 157, 158, cert. denied, 299 U.S. 552, 57 S.Ct. 15, 81 L.Ed. 407. See, also, Gwinn v. Commissioner, 287 U.S. 224, 228, 53 S.Ct. 157, 158, 77 L.Ed. 270. Until the Supreme Court expresses disap*563proval of this doctrine, I think consistency requires us to adhere to it. In the case at bar the settlor, during more than two years prior to her death, could have relinquished her power to change the trust without subjecting herself to a gift tax by reason of such relinquishment. It is true that relinquishment of the power would have required the consent of the trustees,' one of whom was the remainderman, but none of the trustees could have had any interest adverse to such an alteration of the trust; hence the situation is like that in the Witherbee Case. So long as the power was outstanding, the settlor retained substantial control over the life estates; for example, she might have appointed to herself or to another the income of each trust during the life of the person originally named as life beneficiary. This would in no respect have been detrimental to the remainderman, and, in the absence of an adverse interest, it must be assumed that his consent and that of his fellow trustees would have been forthcoming. The termination of such power by the settlor’s death passed an economic benefit to the named life beneficiaries. In my opinion, the value of these life estates was properly included in the decedent’s gross estate, and the order of the Board should be affirmed.