Augustus v. Commissioner

Black,

dissenting: It is petitioner’s contention in this proceeding that the interest which she received in the property conveyed by her father’s will to a testamentary trust was a contingent remainder and *1209that this interest in such property did not become vested until the date of the death of her mother, November 9,1928.

The law of New York controls the question. Forbes v. Commissioner, 82 Fed. (2d) 204. Under the laws of the State of New York, I think petitioner had only a contingent remainder under the terms of the testamentary trust. Under the will of petitioner’s father, petitioner’s mother, the life tenant, had not only the right to the income from the property, but also the right to take for her own use so much of the principal as she might wish or desire, she being the sole judge as to whether she should consume the principal. By the terms of the will it was only the residue of the principal of the fund so remaining in the testamentary trust at her death which was to be disposed of by the trustee to the remaindermen. The remainder thus created was contingent and not vested. See In Matter of Dinkel, 133 Misc. 868; 234 N. Y. S. 97; Matter of Nugent, 142 Misc. 594; 255 N. Y. S. 236; Matter of Dormer, 157 Misc. 810; 285 N. Y. S. 283; Louis Kalb, 15 B. T. A. 886.

If, under the testamentary trust involved in this proceeding, the remainder interest of petitioner was contingent, petitioner did not “acquire” the property within the meaning of section 113 (a) (5) of the Bevenue Acts of 1934 and 1936 until the death of the life tenant. Dane v. Corwin, 63 Fed. (2d) 767; Pringle v. Commissioner, 64 Fed. (2d) 863; Forbes v. Commissioner, supra; Louis Kalb, supra.

The language of section 113 (a) (5) of the Bevenue Acts of 1934 and 1936 is precisely the same as the language of a similar section in the 1926 Act and prior acts. Although this is true, the majority opinion construes the language of section 113 (a) (5) of the Bevenue Acts of 1934 and 1936 to fix the date of “acquisition” as the same whether the remainder interest is vested or contingent.

This construction given by the majority opinion seems to rest largely upon reports of the House Ways and Means Committee and the Senate Finance Committee, which accompanied the bill which became the Bevenue Act of 1934. It seems to me that the reports to which the majority opinion refer went no further than to make plain that the purpose of the language was to adopt the construction which the Supreme Court of the United States had put upon similar language in Brewster v. Gage. I think that the court in Pringle v. Commissioner, supra, makes clear that Brewster v. Gage did not decide the question we have in the instant case. There the court (Ninth Circuit) said, among other things:

The eases of Brewster v. Gage, 280 U. S. 327 and Chandler v. Field, 63 Fed. (2d) 13, are not controlling here. In each of those cases the interest of the taxpayer became vested immediately upon the death of the testator.

*1210To th.e same effect, I think, is Lane v. Corwin, supra, although it involved a different statute.

Under the authorities I have cited, I think the date of petitioner’s acquisition of the property in question was the date of the death of her mother, November 9, 1928, which terminated the testamentary trust and vested the property in petitioner, and not the date of the death of her father, July 13, 1922.

For the reasons I have stated, I respectfully dissent from the majority opinion.

ARundell, Van Fossan, Murdock, and Disney agree with this dissent.