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Home > Journals > Michigan Law Review > MLR > Volume 37 > Issue 2 (1938)

 

Abstract

Decedent, when eighty years old and while still in good health, set up an irrevocable trust of one-third of his property, with a life estate to his daughter and remainder over on the daughter's death to her children and descendants. Under the trust deed the income was to be accumulated and added to the principal until the donor's death. The Supreme Court found that decedent, who was thinking about speculating on the stock exchange, was anxious to insure adequate provision for his daughter and her descendants upon his death, and that he therefore determined to make an irrevocable disposition of a substantial portion of his property in their favor and thereby avoid the hazards and uncertainties to which testamentary gifts would be subject because of possible shrinkage and depletion of his estate due to losses on the stock market. Decedent died about five and one-half years after the gift was made. The commissioner assessed additional taxes against the estate on the theory that the gift by trust was in contemplation of death within the meaning of § 302 (c) of the Revenue Act of 1926. The Board of Tax Appeals reversed the commissioner's determination in a memorandum decision. The Circuit Court of Appeals, by a two to one decision, reversed the board and upheld the commissioner. Held, with one justice dissenting, that the board's decision should be affirmed and the Circuit Court of Appeals reversed, since the "mere purpose to make provision for children after a donor's death is not enough conclusively to establish that action to that end was 'in contemplation of death.' " Colorado National Bank v. Commissioner, (U. S. 1938) 59 S. Ct. 48.

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