Docket No. 48317. | B.T.A. | Apr 27, 1934
Lead Opinion
1. At the time of his death decedent had 5,012 shares of the Stephen F. Whitman & Son, Inc., class A stock. Under a stockholder’s pooling agreement outstanding, certain parties to the agreement had the right to purchase the stock at its book value, which was ascertained to be $123.11 per share. At this value it was sold by petitioners and included by them in the estate tax return. This value, however, did not include an 8 percent dividend declared on the stock on March 1, 1926, payable March 15, 1926. The right to the dividend was a property right and belonged to decedent’s estate and was taxable as such. Sec. 302 (a), Revenue Act of 1926. John F. Degener, Jr., et al., Executors, 26 B.T.A. 185" court="B.T.A." date_filed="1932-05-26" href="https://app.midpage.ai/document/degener-v-commissioner-4492606?utm_source=webapp" opinion_id="4492606">26 B.T.A. 185, and cases therein cited. We sustain the respondent’s ruling on this point.
2. Petitioners contest the inclusion in the gross estate of the proceeds of two of the insurance policies only, as shown in our findings of fact. The beneficiary named in these two policies is the widow of the deceased. There was no reservation of a right to substitute beneficiaries. The insurance was payable to “ Edith Huggard Sharp, wife of the insured ” if living at the time of the death of the insured, “otherwise to the executors,” etc., of the insured. Each
While the decedent lived there was always the possibility that the named beneficiary might predecease him, or that the policy by reason of nonpayment of premiums might lapse and become void, or it might be surrendered for its cash surrender value by the insured. In any such case the beneficiary would receive nothing. The insured might borrow money and pledge the policy, in which event the beneficiary’s interest would be lessened to the extent of the loan. The death of the insured put an end to these possibilities and made complete the “ shifting of the economical benefits of the property ”, and is the “ identifiable event ” which points to the transfer which is taxable. Chase Nat. Bank v. United States, 278 U.S. 327" court="SCOTUS" date_filed="1929-01-02" href="https://app.midpage.ai/document/chase-national-bank-v-united-states-101366?utm_source=webapp" opinion_id="101366">278 U.S. 327; Sampson v. United States, 1 Fed. Supp. 95. Cf. Sally S. Levy et al., Executors, 25 B.T.A. 1174" court="B.T.A." date_filed="1932-04-19" href="https://app.midpage.ai/document/levy-v-commissioner-4492325?utm_source=webapp" opinion_id="4492325">25 B.T.A. 1174 (reversed in part, 65 Fed. (2d) 412).
We conclude, under the conditions attached to the two contested policies, that they also should be included with those uncontested policies in the gross estate; and we accordingly sustain respondent’s determination on this point. This ruling in no way conflicts with the court’s decision in Anthracite Trust Co. v. Phillips, 49 Fed. (2d) 910, or other authorities cited and relied on by petitioners.
3. Petitioners having abandoned, rightfully under the law, all allegations of error as to the third issue, the respondent is sustained as to that issue. . ■
4. The determination of respondent that decedent transferred to five certain trusts property which, after the -deduction of the value of $5,000 allowed in respect to each trust, aggregated the sum of $178,220.50, is prima facie correct. The witness Norris testified that
The trusts were made only one day before the death of the grantor. At the time the trusts were made decedent also made his last will and testament. These facts point to, but do not necessarily answer the issue. While the will necessarily falls within the provisions of the statute, since it takes effect at death, nowhere in the evidence was any other connection between the execution of the trusts and the will shown except in the point of time and the further fact that the same lawyer prepared them all. This incident of time and the circumstance of the execution of the will and trusts on the same day are not sufficient, we think, to overcome the other evidence in the case. The evidence was at considerable length, and it all pointed to the fact that motives and purposes other than the .contemplation of death actuated the execution of the instruments, as shown succinctly in our findings of fact. Decedent was not then sick; he had not been seriously sick in years; he was busily engaged about his business and in making plans for business activity for the years ahead; for the immediate future he was to attend'that evening a supper party. In the midst of life he was in the midst of death and knew it not. Even after the fatal malady seized him he signed the payroll checks of his business and expired before he could return to his bed, a victim of a first attack of angina pectoris. When decedent signed the trust deeds we are of the opinion he had reason to believe and did believe that he would not die until some fairly remote time thereafter. We are further of the opinion that decedent’s motive in executing the trust instruments and making the transfers in question was not in contemplation of death and was not testamentary in nature. United States v. Wells, 283 U.S. 102" court="SCOTUS" date_filed="1931-04-13" href="https://app.midpage.ai/document/united-states-v-wells-101707?utm_source=webapp" opinion_id="101707">283 U. S. 102. Upon this issue we overrule respondent and sustain petitioners.
5. With reference to the items under this head in the amounts of $19,926.80 Pennsylvania Power & Light 1st 5 percent bonds and
As to the other items under this head, they were never included in any trust and never delivered by way of gift to any person, but they remained the property of decedent at the time of his death and should be included in the gross estate, and the respondent is sustained as to them. Marshall v. Commissioner, 57 Fed. (2d) 633; certiorari denied, 287 U.S. 621" court="SCOTUS" date_filed="1932-10-10" href="https://app.midpage.ai/document/atchison-topeka--santa-fe-ry-co-v-moran-8149310?utm_source=webapp" opinion_id="8149310">287 U.S. 621. The action of the Court of Equity of Pennsylvania in adjudging certain bonds (assumed to be those here involved) to belong to Edith Huggard Sharp as surviving trustee of a trust of Walter P. Sharp, grantor, to Walter P. Sharp and Edith Huggard Sharp, trustees, is in no sense binding on the Board of Tax Appeals in the controversy here present. As said in Joseph Walker Wear et al., Executors, 26 B.T.A. 682" court="B.T.A." date_filed="1932-07-20" href="https://app.midpage.ai/document/wear-v-commissioner-4492703?utm_source=webapp" opinion_id="4492703">26 B.T.A. 682, 685; aff'd., 65 Fed. (2d) 665, “ in determining whether or not there has been a transfer under the Federal statute we must look to the interpretations adopted by the Federal courts and tribunals.” See Edward J. Haney, Executor, 17 B.T.A. 464" court="B.T.A." date_filed="1929-09-25" href="https://app.midpage.ai/document/hancy-v-commissioner-4489778?utm_source=webapp" opinion_id="4489778">17 B.T.A. 464; Chase Nat. Bank v. United States, supra.
Reviewed by the Board.
Judgment %tiül be entered under Bule 50.
Dissenting Opinion
dissenting: I concur in the above dissent, that the gift was made in contemplation of death.
I agree with the result reached as to the insurance policies, but not for the reasons stated. Both policies at the time of decedent’s death had been assigned to the insurance company for loans. Decedent’s wife was named beneficiary in each policy and there was no right to change the beneficiary. She had a vested interest in the policy, of which she could not be divested without her consent. Entwistle v. Traveler's Ins. Co., 202 Pa. 141" court="Pa." date_filed="1902-03-24" href="https://app.midpage.ai/document/entwistle-v-travelers-insurance-6246645?utm_source=webapp" opinion_id="6246645">202 Pa. 141; 51 A. 759" court="Pa." date_filed="1902-03-24" href="https://app.midpage.ai/document/commonwealth-v-washington-6246647?utm_source=webapp" opinion_id="6246647">51 Atl. 759; Bank v. Hume, 128 U.S. 195" court="SCOTUS" date_filed="1888-11-12" href="https://app.midpage.ai/document/central-bank-of-washington-v-hume-92324?utm_source=webapp" opinion_id="92324">128 U.S. 195.
The fact that the policy also provided that in case of beneficiary’s death prior to that of insured, the insurance was to be, paid to the executors of the insured, did not prevent the vesting in the beneficiary from being complete. In James B. Duke Estate, 23 B.T.A. 1104" court="B.T.A." date_filed="1931-07-13" href="https://app.midpage.ai/document/duke-v-commissioner-4491840?utm_source=webapp" opinion_id="4491840">23 B.T.A. 1104, in which the settlor of a trust provided in the trust deed that, if the beneficiary should predecease him, the trust res should revert to him, we said “ such possibility of reversion did not prevent the gift from being complete,” citing McCormick v. Commissioner, 283 U.S. 184. Our decision in the Duke case was affirmed by the Circuit Court of Appeals, 62 Fed. (2d) 1057, and affirmed per curiam by the Supreme Court (divided), 290 U.S. 591" court="SCOTUS" date_filed="1933-10-23" href="https://app.midpage.ai/document/helvering-v-duke-8149690?utm_source=webapp" opinion_id="8149690">290 U.S. 591. .The Duke case was cited and followed in Emily King Parker et al., Trustees, 30 B.T.A. 342" court="B.T.A." date_filed="1934-04-10" href="https://app.midpage.ai/document/parker-v-commissioner-4495155?utm_source=webapp" opinion_id="4495155">30 B.T.A. 342, with respect to an insurance policy having a similar provision in the case of an irrevocable beneficiary.
Under the terms of each policy, which are set forth in the statement of facts, loans would be made only upon legal assignment of the policy. The terms do not provide, that the insured could secure a loan upon assignment of the policy by him. It must be assumed, therefore, that the beneficiary, who had a vested interest in the policies of which she could not be divested without her consent, joined in the assignment, and for aught the record shows her consent may well have been sufficiently broad to permit the insured to surrender the policies for their cash surrender value. Until his death, therefore, the insured had control over the policies and their proceeds, and for this reason I think the proceeds are includable in gross estate.
The majority opinion interprets the provision of the policy to provide that it might be surrendered for its cash surrender value by the insured, and that the insured might borrow money and pledge, the policy. Under the terms of the policy no such powers are left in the insured alone. If such could be done at the date of his death, it was by virtue of the consent of the beneficiary to the assignment of the policies to the company for a loan, which consent, as stated above, might, for all the record shows, be broad enough to permit the
Dissenting Opinion
dissenting: I can not agree with the majority ruling that the transfer of property to the trusts was not made in contemplation of death as defined in United States v. Wells, 283 U.S. 102" court="SCOTUS" date_filed="1931-04-13" href="https://app.midpage.ai/document/united-states-v-wells-101707?utm_source=webapp" opinion_id="101707">283 U.S. 102. On the same day the trust deeds were executed petitioner executed his will. The trusts were for the benefit of the wife and children, the natural objects of the decedent’s bounty in a testamentary disposition. The only conclusion I can draw from such a situation is that decedent was putting his house in order in contemplation of his ultimate death. The fact that he did not contemplate early death is immaterial. He was doing those things normally done in a testamentary disposition by one desiring to control the disposition of his property at his death. Edgar A. Igleheart et al., Executors, 28 B.T.A. 888" court="B.T.A." date_filed="1933-08-08" href="https://app.midpage.ai/document/igleheart-v-commissioner-4493231?utm_source=webapp" opinion_id="4493231">28 B.T.A. 888.
The burden of proof was on the taxpayers. The failure to produce the deeds of trust in evidence gives rise to a proper inference that the language of the deeds would not have supported their contention.