1945 U.S. Tax Ct. LEXIS 55">*55
Estate Tax -- Irrevocable Transfer to Take Effect After Death Made Before First Estate Tax Act. -- Value of trust property included in gross estate following
5 T.C. 971">*971 OPINION.
The Commissioner determined a deficiency of $ 7,077.63 in estate tax. The petitioners contend that the Commissioner erred by including in the gross estate $ 36,815.14 representing the value of property transferred by the decedent in trust on August 26, 1911. The Commissioner held that the transfer1945 U.S. Tax Ct. LEXIS 55">*56 took effect in possession or enjoyment at the death of the decedent. The facts have been stipulated.
Jane B. Barnard, the decedent, died testate on July 29, 1942, leaving no husband or issue surviving. The estate tax return for her estate was filed with the collector of internal revenue of the first district of New York.
The decedent was a daughter of Anna Eliza Barnard, who died in 1911. Her husband, John G. Barnard, had predeceased her, as had her prior husband, James McHenry Boyd. Eliza was survived by her three children, John, Anna, and Jane, the decedent in the present case. Boyd left his property in trust to pay the net income to his widow for life and at her death to pay the principal to her heirs or to such persons as she might by will designate. Eliza, by her will, purported to exercise the power of appointment given her by Boyd. She provided how this property should be handled. Most of it she placed in trust with a bank in Baltimore and the income of the trust, after certain uses not here material, was to be paid to her three children during their lives. The share of a deceased child was to go to the surviving spouse and issue of the deceased child, but, if none, 1945 U.S. Tax Ct. LEXIS 55">*57 it was to be divided among the surviving children and their issue. The principal was to go, upon the death of the last surviving child or last surviving spouse of any child, to the descendants of Eliza's three children then living, but if there were no such descendants, then the property was to go to such persons as the last surviving child should appoint by will.
5 T.C. 971">*972 A question arose after the death of Eliza as to whether her exercise of the power of appointment given her by Boyd was valid. Her three children, and the spouses of the two who were married, created an irrevocable trust on August 26, 1911, without power to change. The deed recited that the validity of the exercise of the power by Eliza had been questioned, her three children as her only heirs at law would be entitled to the property if the appointment was invalid, and they desired to dispose of the property as their mother had attempted to do in her will. They named the same Baltimore bank as trustee and directed the bank to use the trust funds for the same purposes as named in their mother's will, to pay the income to the children, and to distribute the trust property on the same terms as were set forth in1945 U.S. Tax Ct. LEXIS 55">*58 their mother's will.
The decedent survived her brother and her sister and their spouses. She was survived by four children of her sister and by eleven children of those children. The decedent in her will stated that any property as to which she might have any power of appointment she gave to her sister, Anna, absolutely, or if her sister did not survive her, to her issue surviving.
The petitioners contend that the transfer which the decedent made on August 26, 1911, was not intended to take effect in possession or enjoyment at or after her death within the meaning of
5 T.C. 971">*973 The petitioners also argue that the transfer by the decedent was for an adequate and full consideration in money or money's worth. Their point is that Jane, by signing the deed of August 26, 1911, acquired the right to receive1945 U.S. Tax Ct. LEXIS 55">*60 the income from all of the property in case she survived her brother and her sister, and this constituted adequate consideration for what she transferred. However, they also say that the exercise by Eliza of the power of appointment under the Boyd will was valid to the extent of the creation of the life estates in Eliza's three children. The stipulation does not show what state law is controlling in this situation, but, if Eliza's appointment was valid to the extent of the life estates, then the decedent acquired under that appointment the right to receive the income from the entire estate in case she survived her brother and sister, and she did not acquire it from those two persons by executing the deed of August 26, 1911.
The petitioners' remaining contention is that
Arundell,