Court Opinion

ID: 9650379
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:34:17.530451+00
Date Added: 2024-06-11T18:12:20.072799
License: Public Domain

MARIS, Circuit Judge
(dissenting).
I am unable to agree that the interests which the nephews and nieces of the respondent received under his deed of trust were future interests within the meaning of Section 504(b) of the Revenue Act. Accordingly I think that the decision of the Board of Tax Appeals holding that the gifts in trust for the four nephews and *717nieces were gifts of present interests and allowing four $5,000 exclusions in respect of them, was right and should be affirmed.
The case, in my view, is clearly distinguishable from United States v. Pelzer, 312 U.S. 399, 61 S.Ct. 659, 85 L.Ed. 913, and Ryerson v. United States, 312 U.S. 405, 61 S.Ct. 656, 85 L.Ed. 917, upon which the petitioner relies. In the Pelzer case income was directed to be accumulated for ten years and then distributed to a class the members of which could not be ascertained until that time. In the' Ryerson case insurance policies on the life of the donor were transferred in trust upon terms under which the beneficiaries were ascertainable only upon the happening of one or more uncertain future events, survivorship of one or more persons at the death of the donor. In neither case was there a definitely ascertained beneficiary of the income at the time of the gift or any provision for present distribution or use of that income.
In the case before us the respondent made a direct and absolute gift of present income to his nephews and nieces. In the case of each of the beneficiaries who was a minor, and all four of them were, he empowered his trustees to apply to the proper education and support of the minor during his minority so much of his income as was needed for that purpose and to accumulate the balance for distribution to him upon reaching his majority. While the accent in the respondent’s deed is on the accumulation rather than the disbursement for the minor’s education and support, the effect of the gift, it seems to me, was substantially the same as in the ordinary case of an ab-.Olute gift of income to a minor. The min- or being under a legal disability to receive it directly, the income in every such case must be expended for his benefit either by a guardian appointed by a court for him or by a trustee designated to do so by the don- or. In either case it becomes the fiduciary’s duty to expend only so much of the current income as'may be needed for the min- or’s proper education and support and to accumulate the balance until he comes of age.
It is suggested that the minors may receive the present benefit of only such income as the trustees in their sole discretion think proper to use for their education and support. But the discretion vested by the respondent in his trustees was not an arbitrary one. It was conferred upon them solely for the benefit of the minors and, if abused, would doubtless be subject to control by the appropriate tribunal. We must, therefore, assume for the purposes of this case that the minor beneficiaries here involved will receive present benefit from the respondent’s gifts to them insofar as they may need it for their education and support. I, therefore, conclude that the gifts to them were present gifts within the meaning of the Revenue Act.
In my view the case is indistinguishable in principle from our case of Commissioner v. Krebs, 3 Cir., 90 F.2d 880. I think that Welch v. Paine, 120 F.2d 141, recently decided in the First Circuit, is distinguishable on its facts. Insofar as its reasoning may be extended to the facts of this case, however, I think it wrong and I should decline to follow it.