Estate of Spiegel v. Commissioner, 335 U.S. 701 (1949)
Estate of Spiegel v. Commissioner of Internal Revenue
No. 3
Argued October 24, 1947
Reargued October 11-12, 1948
Decided January 17, 1949
335 U.S. 701
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Syllabus
In 1920, decedent, a resident of Illinois, made a transfer in trust of certain stocks to himself and another. He died in 1940. During his life, the trust income was to be divided among his three children; if they did not survive him, to any of their surviving children. On his death, the corpus was to be distributed in the same manner. But no provision was made for distribution of the corpus and its accumulated income should the decedent survive all of his children and grandchildren. The Tax Court determined that the value of the corpus of the trust was not includible in the gross estate of the decedent under § 811(c) of the Internal Revenue Code. The Court of Appeals for the Seventh Circuit reversed, holding that, under Illinois law, there was a possibility of reverter to the decedent, and that this made the corpus of the trust includible in his gross estate under § 811(c).
Held:
1. This Court accepts the determination of the Court of Appeals that, under Illinois law, the settlor had a right of reverter; this renders the trust one "intended to take effect in possession or enjoyment at or after his death," within the meaning of § 811(c) of the Internal Revenue Code, and the value of the corpus of the trust at the settlor’s death was includible in his gross estate for purposes of the federal estate tax. Pp. 705-707.
(a) The taxability of a trust corpus under the "possession or enjoyment" provision of § 811(c) does not hinge on a settlor’s motives, but depends on the nature and operative effect of the trust transfer. P. 705.
(b) A trust transaction cannot be held to alienate all of a settlor’s "possession or enjoyment" under § 811(c) unless it effects a bona fide transfer in which the settlor, absolutely, unequivocally, irrevocably, and without possible reservations parts with all of his title and all of his possession and all of his enjoyment of the transferred property. After such a transfer has been made, the settlor must be left with no present legal title in the property, no possible reversionary interest in that title, and no right to possess or to enjoy the property then or thereafter. Commissioner v. Estate of Church, ante, p. 632. P. 705.
(c) It is immaterial whether a present or future interest, absolute or contingent, remains in the settlor because he deliberately reserves it or because, without considering the consequences, he conveys away less than all of his property ownership and attributes, present or prospective. P. 705.
(d) The Tax Court having found that the trust contained no provision for disposition of the corpus should the settlor outlive the beneficiaries, and petitioner not having contended that it was denied an opportunity to present any relevant evidence concerning ownership, possession, or enjoyment, remand of the case to the Tax Court for further findings of fact is unnecessary. Pp. 706-707.
2. The fact that the monetary value of the settlor’s contingent reversionary interest is small in comparison with the total value of the corpus does not render the "possession or enjoyment" provision of § 811(c) inapplicable. P. 707.
3. The ruling of the Court of Appeals for the Seventh Circuit, which circuit embraces Illinois, that, under Illinois law, when all trust beneficiaries die, the trust corpus reverts to the donor, is not plainly wrong, and this Court does not disturb it. Pp. 707-708.
159 F.2d 257, affirmed.
The Commissioner determined that the corpus and certain accumulated income of the trust in question was includible in the gross estate of the decedent for purposes of the federal estate tax. The Tax Court reversed. The Court of Appeals reversed. 159 F.2d 257. This Court granted certiorari. 331 U.S. 798. Affirmed, p. 708.