Petition for Review of Decision of United States Board of Tax Appeals.
Before BIGGS, CLARK, and JONES, Circuit Judges.
The Board of Tax Appeals has entered is decision against the petitioners, finding a deficiency in the sum of $121,936 in estate tax. The petitioners have appealed to this court for a review of the Board's decision.
The pertinent facts are as follows. Sidney F. Tyler died upon June 3, 1935. Upon April 22, 1885, he transferred certain personal property in trust, the income of which was to be paid in equal shares to his two children and to the issue per stirpes of either child predeceasing the other.The settlor also provided by the indenture that the trust was to come to an end upon the death of the surviving child, and that the corpus of the trust should then be distributed among the children's issue then living in equal shares per stripes. The indenture also provided for gifts over in the event of failure of issue.
The indenture contained the following clause: "Provided nevertheless and it is hereby further agreed and declared that the said Sidney F. Tyler may at any time or times before said period of distribution of said trust property shall arrive, by any deed or deeds or other instrument in writing either alter or absolutely revoke and annul all or any of the uses, trusts and estates hereinbefore limited and declared, and by the same or any other deed or instrument limit and declare such other uses, trusts and estates, of or concerning all or any part of the said trust property hereinbefore transferred and conveyed, and the investments representing the same as the shall think fit, anything hereinbefore to the contrary notwithstanding."
Upon February 25, 1888, Tyler executed another instrument which provided in part as follows, that in consideration of the premises and other consideration " * * * Tyler hereby releases and annuls the right of revocation so in the said Indenture of the twenty-second day of April A.D. 1885 was reserved and provided. * * * Provided, nevertheless, that nothing herein contained shall be deemed to affect or limit any other of the terms and conditions of said Indenture, or divest, affect or disturb any estate, right or interest of * * * Tyler in the said estate, other than the said right of revocation."
The language just quoted from the 1888 instrument follows a verbatim recital of the clause of the 1885 instrument which we have quoted above and which reserved to the grantor the right either to alter or absolutely revoke and annul the uses, trusts and estates set up.
Section 302 of the Revenue Act of 1926, Ch. 27, 44 Stat. 71, as amended by Section 401 of the Revenue Act of 1934, 48 Stat. 752, 26 U.S.C.A.§ 411, and Treasury regulations 80 (1934 Edition), Article 20, govern the case at bar. Section 302 as amended by Section 401, provides in part that
"The value of the gross estate of the decedent shall be determined by including the alue at the time of his death of all property, real or personal, tangible or intangible, wherever situated * * * ."
Section 401 provides in part: "(d)(1) To the 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 of an adequate and full consideration in money or money's worth."
Article 20 of the pertinent Treasury Regulations provides: "Power to change enjoyment. - The value of the property transferred, other than by a bona fide sale for an adequate and full consideration in money or money's worth, constitutes a part of the gross estate, whether the transfer was made before or after the enactment of the Revenue Act of 1916, if at the time of the decedent's death the enjoyment thereof was subject to any change through a power, exercisable either by the decedent alone or in conjunction with any person, to alter, amend, or revoke."
The petitioners concede that if after the execution of the 1888 instrument there remained in Tyler any right to alter or amend the indenture of 1885 so as to enable him to direct a change in the proportionate division of income or of principal between the beneficiaries, the trust estate falls within the purview of the section of the Revenue act and the regulation quoted.
We are concerned therefore with only one question, which may be stated as follows: After the execution of the instrument of 1888 did the decedent retain the power to reapportion shares of the principal or income among the named beneficiaries of the trust? If so, the corpus of the state is taxable under the Act; there is a deficiency and the decision of the Board must be affirmed. Porter v. Commissioner, 288 U.S. 436, 53 S. Ct. 451, 77 L. Ed. 880; Sanford's Estate v. Commissioner, 308 U.S. 39, 60 S. Ct. 51, 84 L. ...