Court Opinion

ID: 9445064
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:19:02.94399+00
Date Added: 2024-06-11T17:30:06.884594
License: Public Domain

SCHNACKENBERG, Circuit Judge
(dissenting).
Defendant relies on Lehman v. Commissioner of Internal Revenue, 2 Cir., 109 F.2d 99, while plaintiff relies on Newberry’s Estate v. Commissioner of Internal Revenue, 3 Cir., 201 F.2d 874.
In the Lehman case the existence of consideration was uncontroverted. There, two brothers owned equal shares in stocks and bonds. Harold agreed to transfer his share in trust for Allen and his issue, in consideration of Allen transferring his share in trust for Harold and his issue. The trust instruments were duly executed and each brother thereby granted to the other, in the trust created, the income for the other’s life, with remainder to the latter’s issue, together with a right in the other to withdraw $150,000 from the principal.
In the Newberry case, where the court, based upon oral testimony, held there was no consideration, Mr. and Mrs. New-berry each executed a trust conveying his or her own property for the benefit of their children. However, neither settlor created any beneficial interest therein for his or her spouse.
In the case at bar there is no parole evidence in the record. We have merely the instruments creating the trusts and amending them. At the time and place when and where Albert executed a trust creating inter alia a life estate for the benefit of his wife Minnie, she executed precisely the same form of trust covering precisely the same amount and kind of property, thereby creating inter alia a similar life estate for the benefit of Albert. The two trusts together also provided for their children and their families. Here is a beneficial interest contemporaneously bestowed upon the *214maker of each trust, by the maker of the other trust. The significance of this circumstance has been overlooked by the majority opinion. It is an undue taxing of our credulity to ask us to believe that this transaction lacked consideration. The only logical inference to be drawn from the stipulated facts is that, when Albert gave to Minnie a life estate in a trust which he then created, and she contemporaneously did the same for him, the act of one was the consideration for the act of the other. In an exchange the property received is consideration for the property given. Cole’s Estate v. Commissioner of Internal Revenue, 8 Cir., 140 F.2d 636, at page 637. Both reason and the law place upon him who would rebut this reasonable inference the burden of introducing evidence to that end. The competent attorneys who devised the plan now reviewed before us and their assistants or office associates were certainly in a position to introduce evidence on this subject, the nature of which is exemplified in the Newberry case. However, it is well to point out that even such testimony, to be effective, must counterbalance the fact of the execution of the trust agreements and their contents. In the case at bar, such evidence would have to explain why each of the trusts set up a life estate in the spouse of the maker of the trust. Orvis v. Higgins, 2 Cir., 180 F.2d 537, at page 540.
In the instant case Albert, in consideration of granting to Minnie, in the Dorothy trust which he set up, the possession and enjoyment of and right to the income from his trust estate, during her lifetime, procured from her a similar life estate in the Harold trust, which she set up. Under § 811(c) (1) (B) the Harold trust created by Minnie must be treated as though created by decedent, and thereby § 811(c) (1) (B) operates to bring the corpus of that trust into Albert’s gross estate.1 .
We also find that in this case the Harold trust, as modified by an instrument, executed by Albert, Harold, and Dorothy under date of December 18, 1935, was-subject to termination by Albert and'. Dorothy, so long as Harold or any of his-lawful issue were living. It was held in. Commissioner of Internal Revenue v. Estate of Holmes, 326 U.S. 480, at page 487, 66 S.Ct. 257, 260, 90 L.Ed. 228, that a trust settlor’s power to terminate will bring a trust corpus within the scope of § 811(d) (2). That case makes clear that where, as here, enjoyment may be substantially affected by exercise of the-power, a trust settlor, who may terminate a trust by joint action with another member of the family, has kept “so-strong a hold over the actual and immediate enjoyment” of the corpus as to-bring it into his gross estate.
Accordingly, I would reverse the district court.

. To the same effect is Hanauer’s Estate v. Commissioner of Internal Revenue, 2 Cir., 149 F.2d 857, at page 859, which cites § 302(d) of the Internal Revenue, act of 1926, as amended in 1934.