Smith v. Shaughnessy, 318 U.S. 176 (1943)

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Smith v. Shaughnessy

No. 429

Argued January 14, 1943
Decided February 15, 1943
318 U.S. 176

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

1. Under an irrevocable transfer of properly in trust, the income was to be paid to the grantor’s wife for life; upon her death, the corpus was to go to the grantor, if living, or, if not, to the wife’s heirs. Concededly, the wife’s life interest was subject to the federal gift tax. Held that the remainder interest, less the value of the grantor’s reversionary interest, was subject to the gift tax imposed by §§ 501, 506 of the Revenue Act of 1932. P. 180.

2. The gift tax under the Revenue Act of 1932 amounts in some instances to a security for the payment eventually of the federal estate tax; it is in no sense double taxation. P. 179.

3. The language of the provision of the Revenue Act of 1932 imposing a tax upon every transfer of property by gift, whether the property is "real or personal, tangible or intangible," is broad enough to include a contingent remainder, and the provisions of the Treasury regulations for application of the tax to, and determination of the value of, "a remainder . . . subject to an outstanding life estate" are consistent with the purpose of the Act. P. 180.

4. In a case such as this, where the grantor has neither the form nor substance of control over the trust property, and never will have unless he outlives his wife, it must be concluded that the grantor has relinquished economic control over the trust property, and that the gift was complete except for the value of his reversionary interest. P. 181.

128 F.2d 742, affirmed.

Certiorari, 317 U.S. 617, to review the reversal of a judgment, 40 F.Supp. 19, ordering a refund of a federal gift tax.