Clark v. Commissioner

TuRNER,

dissenting: In my opinion, the Board has confused the question here involved and decided another. The reasoning applied is that applicable to cases where the power or right involved is a general power of appointment. Here the interest in and right to the prop *867 erty were much broader. Under a power of appointment the holder of the power not only has no interest of his own in the remainder estate nor any right whereby he may bring the corpus unto himself for his own unfettered use, consumption, or enjoyment, but merely has the power to designate for the donor a different donee. In the instant case petitioner not only had the power to amend the trust instrument so as to shift the remainder interest to parties other than those named by the grantor but had the further power to revoke the trust at any time she saw fit, to designate herself as the distributee and thereby bring the corpus of the trust to herself for her own unfettered use, enjoyment, and consumption and deprive anyone other than herself of any and all rights whatsoever in the property.

In Richardson v. Commissioner, 121 Fed. (2d) 1, under substantially similar facts, the question was whether the income of the trust was taxable to the holder of powers substantially similar to those held by the petitioner here, the said holder of the power not being the grantor. While recognizing that under the laws of Connecticut the power of revocation, which was never exercised, was not an asset of the holder’s estate and gave him no interest in the corpus of the trust, the court stated the question there as being “whether an unfettered control over the corpus of a trust either in the grantor or in the donee of a power of revocation, who may appropriate it to his personal use, is not the equivalent of ownership of property for tax purposes.” The court answered that question in the affirmative and affirmed the decision of the Board. It is true that the tax there dealt with was income tax and the section of the statute applicable was section 22 (a) of the Bevenue Act of 1932, which is very broad in its scope, while the tax here dealt with is the gift tax, which was imposed by section 501 of that act. Section 501 is also very broad in scope, however, and applies to gifts, direct or indirect, and to property, tangible or intangible. It.very ob-_ viously_ applies also to gifts of value even though of a character not subject to classification as property. Sec. 506, Revenue Act of 1932.

"while it maybe, and probably is, true that under real property law the petitioner’s act of relinquishing her power to revoke and to take the corpus did not effect the vesting of remainders in the successor beneficiaries but the elimination or removal of the power or danger of defeasance, the powers, rights, and interests of the petitioner were in my opinion such as to make their relinquishment a taxable gift within the meaning of the above cited statute. Cf. Richardson v. Commissioner, sup ra. By the original grant the grantor parted with any and all rights in and to the property, whether legal or beneficial in character. After the grant those rights reposed somewhere and with someone. Legal title was in the trustee and the successor beneficiaries had what probably should be referred to as a remainder subject to divestment, but what has more practically been described by the majority *868 as a “contingent expectancy.” All other rights — those of real substance — were for all practical purposes in the petitioner. Her rights, which included the right to take the corpus as her own and to consume it for her own purposes, were far greater than anything received and held by the so-called successor beneficiaries, and, regardless of any theories that may be evolved from real property law, her relinquishment of those powers and rights effected a passage or transfer of her rights and interests in the property from her to the successor beneficiaries. Such transfers are taxable gifts within the meaning of the statute. Cf. Burnet v. Guggenheim, 288 U. S. 280 , and Lehman v. Commissioner, 109 Fed. (2d) 99.

We do not have here a case comparable to that of A. P. Giannini, 42 B. T. A. 546, for there the petitioner at all times refused to accept or take the compensation voted to him by the bank of which he was president. The same may not be said of Edith Evelyn Clark with respect to the interests in and rights to the property here involved. She accepted the grant of all such interests and rights and held them for more than a year before passing them by her own act to the holders of the “contingent expectancy.” The rights considered in Helvering v. Grinnell, 294 U. S. 153 , and Merrill v. Lynch, 13 N. Y. Supp. (2d) 514, were of an entirely different character.

Smith, Disney and Ofper agree with this dissent.