Lehman v. Commissioner

Black,

dissenting: I agree with the majority opinion wherein it holds that the corpus of the two irrevocable trusts executed by decedent, Harold M. Lehman, December 6, 1930, may not be included in decedent’s gross estate under the provisions of section 302 (c) of the Revenue Act of 1926. It seems clear that both trusts were irrevocable and were not made in contemplation of death and were not intended to take effect in possession or enjoyment at or after death.

I do not agree to that part of the majority opinion which holds that $150,000 should be included as a part of decedent’s gross estate under section 302 (d) of the Revenue Act of 1926 because at the time of decedent’s death he had the right to withdraw $150,000 from two trusts which were simultaneously executed by his brother Allan S. Lehman. Manifestly if the right to withdraw this $150,000 had survived decedent’s death and was available as an asset to decedent’s estate, then it is includable as a part of decedent’s estate. This inclusion would be by reason of the provisions of section 302 (a) of the Revenue Act of 1926, and not by reason of section 302 (d) of the same act.

Section 302 (d) reads:

(d) To tbe extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, or revoke, or where the decedent relinquished any such power in contemplation of his death, except in case of a bona fide sale for an adequate and full consideration in money or money’s worth. * * *

In the two trusts which decedent executed he retained no power to make any change in the trust corpus, either alone or in conjunction with any other person. He did confer upon his brother Allan the right to withdraw $75,000 from the corpus of each trust at any time or from time to time prior to December 31, 1935. This right, so far as the record shows, Allan possessed at the time of decedent’s death and it continued until December 31, 1935. But this was no reservation of a power to decedent, and the fact that his brother Allan conferred upon decedent similar rights in two trusts which Allan executed at the same time, it seems to me, does not affect the situation under section 302 (d).

*29Congress can of course tax such transactions by means of the gift tax and has done so in revenue acts enacted subsequent to the dates of the execution of the trusts herein involved. I do not believe however that section 302 (d) of the Revenue Act of 1926 can properly be construed so as to make includable in decedent’s gross estate the $150,000 which the majority opinion holds should be included. When decedent died his right to withdraw that $150,000 from trusts which his brother Allan had created ceased and nothing passed from the dead to the living. Hasbrouck v. Bookstaver, 114 N. Y. S. 949.

Article 13 of Treasury Regulations 80 (1937 Ed.), Estate Tax, would seem to cover the situation which we have here, where it says: “Nor should anything be included on account of an interest or an estate limited for the life of the decedent.”

In my judgment the $150,000 in question was so limited and is therefore not includable as a part of decedent’s gross estate.

ArundeUj, Van Fossan, Leech, and Aenold agree with this dissent.