Court Opinion

ID: 9651760
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:35:03.982727+00
Date Added: 2024-06-11T18:12:39.210690
License: Public Domain

On Petition for Rehearing.
PER CURIAM.
We have given careful consideration to the petition for rehearing filed in this cause and find no occasion either to grant a rehearing or to modify our decision as expressed in the opinion.
Complaint is made of the computation made in the opinion by way of illustration for the guidance of the Tax Court. We see no reason to modify that computation. The first problem is to find what part of the corpora of the estates, available only at the death of taxpayer’s mother for the payment of his debts, should be deducted on account of the indebtedness presently due for the security of which taxpayer’s interest in the trusts had been assigned. Assuming the formulae used to be correct, the computation shows correctly what this deduction should be. The remainder is the amount upon which taxpayer has reserved the income for the term of his life after the death of his mother, and the principal of which he has given at this death to his children. It is not necessary to consider that the mother is to receive the income of the entire property during her life; for deduction is made with respect to the property available at her death, the deduction being of a sufficient amount thereof to provide a present value sufficient to extinguish the debts. The second problem is to find the present value of the gift to the children. This is manifestly the present value of the corpora of the estates left after deducting what is necessary to extinguish the debts, this present value to be computed with respect to the death of the taxpayer. The taxpayer’s expectancy includes his mother’s expectancy; and it is accordingly necessary to use only the factor which determines the present worth of property at his death. To state the matter differently: After the amount necessary to extinguish the debts is deducted from the corpora of the estates, the remainder represents an amount which will be available at the mother’s death to pay income to taxpayer during the remainder of his life and which will go to his children under the terms of his gift at his death. As stated in the opinion, it is for the Tax Court, not for us, to find the correct formulae and apply them to the facts. The computations of the opinion are given merely by way of illustration of the rule to be applied.
Complaint is made that we have stated that the interest of taxpayer in the property given was a vested remainder subject to be divested, whereas it is contended that in the case of the inter vivos trust it was a contingent remainder. In the indenture of trust making the gift to his children, taxpayer describes his interest under the inter vivos trust as well as the other as “a vested future estate subject to be divested”. It is not necessary to decide which description of the estate is correct under the applicable law, since, as pointed out in the original opinion, whichever is correct, the gift is clearly taxable under the decisions of the Supreme Court in Smith v. Shaughnessy, 318 U.S. 176, 63 S.Ct. 545, 87 L.Ed. 690, and Robinette v. Helvering, 318 U.S. 184, 63 S.Ct. 540, 87 L.Ed. 700. See also Treasury Regulations 79, art. 11. In valuing the interests which are the subject of gift for the purposes of taxation, the Tax Court will, of course, apply the proper actuarial formulae to take care of any of the contingencies affecting the interests given.
Petition denied.