Mississippi Valley Trust Co. v. Commissioner

MISSISSIPPI VALLEY TRUST COMPANY AND MARTHA SHARPE WARMACK, TRUSTEES OF THE ESTATE OF ROBERT N. WARMACK, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Mississippi Valley Trust Co. v. Commissioner Docket No. 20172. United States Board of Tax Appeals 22 B.T.A. 136; 1931 BTA LEXIS 2162; February 16, 1931, Promulgated *2162 ESTATE TAX - GIFT - CONTEMPLATION OF DEATH. - On the facts, held, that gifts inter vivos by decedent to his wife and daughter of certain securities were not made in contemplation of death and the values thereof are not to be included in his gross estate under section 302(c) of the Revenue Act of 1924. Stanley S. Waite, Esq., for the petitioners. O. J. Tall, Esq., for the respondent. TRUSSELL *136 By this proceeding petitioners seek redetermination of a deficiency in estate tax determined by respondent in an amount of $3,111.23. Petitioners assign as error (1) the allowance of insufficient credit on account of inheritance tax paid to the State of Missouri, and (2) the inclusion in the gross estate of decedent of $157,000 as representing the value of certain stock transferred by decedent to his wife and daughter shortly prior to his death. At the hearing, counsel for respondent confessed error in respect to issue (1) and agreed that on redetermination, due credit would be given for inheritance tax paid. FINDINGS OF FACT. Petitioners were the executors appointed under the will of Robert N. Warmack, deceased, and now hold the estate*2163 of that decedent as trustees in performance of the trust created thereby. The decedent, Robert N. Warmack, was, at the time of his death, and had been for some years prior thereto, vice president, member of the executive committee, and a director of the International Shoe Company of St. Louis. In the latter part of 1920 the decedent consulted a medical specialist, who, after an examination, determined that decedent had enlargement of the heart, hardening of the arteries, high blood pressure, and a minor involvement of the kidneys. *137 He advised decedent to diet, refraining especially from eating much red meat, to take things easier in a general way, and to go south in winter, and perhaps north in the heated term. The decedent made a will in December, 1920, whereby all of his property was directed to be held in trust for the benefit of his wife during her lifetime, and his daughter thereafter during her lifetime. Decedent consulted his medical specialist at various times during the period 1921 to 1924, inclusive, and adhered more or less to the recommended diet. He suffered occasional attacks of difficult breathing at night. In November, 1923, this specialist found*2164 the decedent's health improved and made a recommendation in writing to a medical director of a life insurance company of the decedent as an acceptable risk, conditioned, however, upon the exaction of a premium somewhat higher than ordinary. The decedent was about 6 feet tall, blonde, full faced, had a ruddy complexion, and weighed about 185 pounds. He was of cheerful disposition, genial manner and an optimist. His mental powers were unimpaired and he never spoke of his death. He was at no time warned of an extremely dangerous condition or advised of a probability of dying in the near future. Decedent's wife and daughter had been accustomed for many years to spend the summer at White Sulphur Springs and decedent to join them there for as long periods as the demands of his business permitted. During these vacations he played golf and took part in the usual recreations of the other resort guests. Together with his wife and daughter he spent the winter of 1923 and 1924 in Florida where he played golf and took a regular part in the activities of the other winter visitors. In March, 1924, he returned with his family to St. Louis and found there a very sick brother-in-law who*2165 had been advised to go to Battle Creek for treatment, but was reluctant to go alone. Decedent and his wife offered to accompany this brother-in-law and the latter then consented to go. The party arrived at Battle Creek on May 7, 1924, and remained at the sanitarium until the following June 4, during which time mrs. Warmack took the baths and decedent took the recommended treatments for his ailments under supervision of the resident physician. On the day of his departure decedent was permitted by this physician to play nine holes of golf and apparently suffered little fatigue therefrom. On his return to St. Louis he immediately began making plans for the summer, purchasing three suits of clothing and various supplies including engraved stationery sufficient to last three or four years. Arrangements were made to visit White Sulphur Springs again and plans were tentatively made to take a trip to the Mediterranean during the following winter, and in anticipation of this, literature was secured from various *138 steamship companies for study during the summer in order to plan an itinerary. The decedent had been advised by an official of his company with experience in income*2166 tax matters that a transfer to his wife and daughter of some of his stock would effect a reduction in the surtax paid by diffusion of the income. Decedent had previously made gifts of stock to both his wife and his daughter. At this time he held 8,164 shares of common and 1,566 shares of preferred stock of the International Shoe Company. Decedent caused transfers of 1,000 shares each to his wife and daughter of his common stock to be entered upon the books of the corporation and delivered the new certificates to the donees on June 25, 1924, advising them, in the presence of a nephew, that the gifts were birthday presents, but were made slightly in advance of the dates in order that the certificates might be safely stored away before leaving for the summer. The birthday of decedent's wife was on July 4 and that of his daughter on August 17. Decedent's wife and daughter accepted the stock and deposited the certificates in their safedeposit boxes. Subsequently the decedent met the official of his company who had advised him and stated to the latter that he had transferred some of his stock as advised. Before leaving for the summer decedent and his family gave an entertainment*2167 which lasted until midnight and in which decedent took a full part. Decedent, with his wife and daughter, arrived at White Sulphur Springs on July 1, 1924, and on the evening of July 4 gave an entertainment at the hotel in celebration of his wife's birthday. Later in the evening decedent with his family and guests went to a clubhouse, where the entertainment was continued until 1.30 a.m., decedent participating fully with the others in their activities. On July 11, 1924, decedent followed the usual morning routine, his wife remaining with him until 11 o'clock. He had luncheon with his daughter and in the evening, while seated with some friends on the casino porch awaiting the return of his daughter from a round of golf, he suddenly expired, neither his wife nor his daughter being with him at the time. At the time of his death decedent was about 62 years of age. The gift of 2,000 shares of stock by decedent to his wife and daughter on June 25, 1924, was not because of an apprehension by him of death within the reasonably near future. The Missouri State inheritance tax was paid in the sum of $8,215.97 by petitioners on April 25, 1924. They reported for Federal estate tax*2168 purposes a net estate of $501,897.74. The respondent has determined a net estate of $671,367.20, including in the estate at a value of $157,000 the 2,000 shares of stock transferred on June 25, 1924, to decedent's wife and daughter. *139 OPINION. TRUSSELL: In respect to the first issue counsel for respondent admitted at the hearing that the credit proposed in the deficiency letter for the Missouri State inheritance tax was merely tentative and agreed to make the credit properly allowable under the statute upon redetermination of the deficiency. The remaining issue requires us to determine whether transfers of stock by the decedent to his wife and daughter a short time prior to his death were made in contemplation of death, their value having been included in the gross estate as so made by the respondent under section 302(c) of the Revenue Act of 1924, which provides: SEC. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated - * * * (c) To the extent of any interest therein of which the decedent has at any time made a*2169 transfer, or with respect to which he has at any time created a trust, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for a fair consideration in money or money's worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of Part I of this title. This provision is the same as in the Revenue Acts of 1918 and 1921 and has been before the Board and the courts in many cases in which it has been held that by the term "contemplation of death" is meant an apprehension of death within the reasonably near future from some existing bodily or mental condition and not the general expectation of ultimate death entertained by everyone, and that such contemplation of death must be the motive which prompted the transfer and without which the transfer would not have been made, in order to include the transferred property in the gross estate of decedent. *2170 ; ; ; ; ; ; ; ; ; ; ; . On considering the record in the light of the rule laid down we must conclude that petitioners have made a sufficient affirmative showing to rebut the presumption created by the section of the statute quoted. There are many circumstances proven which indicate most strongly *140 that decedent at the time the gifts in question were made did not consider his death as imminent and there is no indication to us in the circumstance of the making of this gift that he contemplated death in the near future. *2171 He was a man of large means and his wife and daughter were his only heirs. He had made other gifts to them of stock and we can see nothing unusual ro extraordinary in the gifts here in question. In view of the situation of the parties and decedent's large means, these gifts would not have been unusal had decedent been a man in perfect physical health. We conclude that the gifts of stock were not made by decedent in contemplation of death. Their value should not be included in his gross estate subject to Federal estate tax. Decision will be entered pursuant to Rule 50.