Opinion
No. 28.
December 3, 1945.
Petition for Review of a Decision of the Tax Court of the United States.
Petition by Alice S. Mergenthaler and others, executors of the estate of George W. Sweeney, deceased, of whom named petitioner was the surviving executrix, to review an order of the Tax Court, 4 T.C. 265, redetermining a deficiency in the estate tax imposed by the Commissioner of Internal Revenue.
Affirmed.
Petitioner, Alice S. Mergenthaler, is the surviving executrix of the estate of her father, George W. Sweeney. The facts as found by the Tax Court, are as follows: On December 17, 1927, the decedent transferred to the Harriman National Bank of New York in trust, certain securities with directions to pay the income to the grantor for life with the remainder to his daughter, Alice S. Mergenthaler; if she predeceased the grantor without surviving issue, the grantor had the power to name a beneficiary in her place; she and the grantor together had the power to terminate the trust and to designate the person to whom the accumulated income and corpus should be delivered.
On March 13, 1933, the Comptroller of the Currency ordered the closing of the Harriman National Bank. Prompted by this fact, the grantor and his daughter on July 3, 1933, terminated the trust and directed the trust property to be delivered to the daughter. Three days earlier, on June 30, there had been drafted a new trust agreement which, although dated June 30, was executed by the daughter on July 3. This new instrument transferred the property formerly in the old trust to a new trustee, with income to the father for life; the provisions as to the remainder and other provisions were substantially the same as those in the revoked trust instrument. No gift tax was paid by the father on the transfer to the daughter of the property in the first trust. The estate tax return of the estate of the decedent contained a statement that the trust under the agreement of June 30, 1933, had been treated as a continuation of the trust created by the agreement of December 17, 1927, with no change of interest, parties or assets. The information return of gifts, filed by the trustee for 1933, contained a statement, prepared by the father's attorney, that the second trust was a continuation of the first. After 1933, both father and daughter transferred additional property to the trustee and made gift tax returns with respect to such transfers.
In computing the estate tax, petitioner did not include in the gross estate of the decedent the value of the corpus of the 1933 trust. The Commissioner, on the basis that this item should have been included in the gross estate, determined a deficiency of $51,817.64. The Tax Court sustained this determination, 4 T.C. 265.
H. Kennedy McCook, of Washington, D.C., for petitioner.
Samuel O. Clark, Jr., Sewall Key, Helen R. Carloss, and Maryhelen Wigle, all of Washington, D.C., for respondent.
Before L. HAND, SWAN, and FRANK, Circuit Judges.
1. Taxpayer agrees that, had there been no new trust, the Commissioner's determination would have been correct. As there is ample evidence to support the Tax Court's inference that the change was merely formal, the new trust being a continuation of the old, we cannot disturb that Court's decision.
2. The Tax Court did not discuss the transfers made by the daughter to the trustee after 1933. Although she filed gift tax returns with respect to these transfers, it is unlikely that these were gifts of her property since, had they been, she would have been increasing the life income of her wealthy father. As he, having his gift tax exemptions in mind, may have made these gifts to the trust in his daughter's name, taxpayer, to overcome the presumption in favor of the Commissioner's determination, should have offered proof — easily available to her — that she had been the real owner of the property added to the trust.
Affirmed.