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Commissioner v. Estate of Church, 335 U.S. 632 (1949)

Commissioner v. Estate of Church

No. 5

Argued October 24, 1947

Reargued October 12, 1948

Decided January 17, 1949

335 U.S. 632


1. In 1924, decedent, then 21 years old, unmarried and childless, made a transfer in trust in New York in accordance with state law, naming himself and two of his brothers as co-trustees. Certain corporate stocks were transferred to the trustees, who were empowered to hold and sell them and to reinvest the proceeds. Decedent reserved no power to alter, amend, or revoke, but required the trustees to pay to him the income for life. The trust was to terminate at decedent's death, which occurred in 1939. Some provision was made for distribution of the trust assets at decedent's death, but no provision was made for distribution if decedent died without issue, and none of his brothers or sisters, or their children, survived him.

Held: the decedent having reserved the income from the trust property for life, the transfer was one "intended to take effect in possession or enjoyment at or after his death" within the meaning of § 811(c) of the Internal Revenue Code, and the value of the corpus of the trust was properly included in the gross estate of decedent for purposes of the federal estate tax. Pp. 335 U. S. 633-651.

2. A trust transaction cannot be held to alienate all of a settlor's "possession or enjoyment" under § 811(c) unless it effects a bona fide transfer in which the settlor, absolutely, unequivocally, irrevocably, and without possible reservations, parts with all of his title and all of his possession and all of his enjoyment of the transferred property. After such a transfer has been made, the settlor must be left with no present legal title in the property, no possible reversionary interest in that title, and no right to possess or to enjoy the property then or thereafter. P. 335 U. S. 645.

3. Helvering v. Hallock, 309 U. S. 106, reaffirmed; May v. Heiner, 281 U. S. 238, held no longer controlling on the interpretation of the "possession or enjoyment" provision of § 811(c). Pp. 335 U. S. 636-646.

4. Reaffirmance of May v. Heiner is not required by the doctrine of stare decisis nor by the Joint Resolution of March 3, 1931, nor by the decisions of this Court in Hassett v. Welch and Helvering v. Marshall, 303 U. S. 303. Pp. 335 U. S. 646-651.

161 F.2d 11 reversed.

Page 335 U. S. 633

The Commissioner determined that the corpus of the trust in question was includible in the decedent's gross estate as a transfer intended to take effect in possession or enjoyment at or after decedent's death. The Tax Court overruled that determination. The Court of Appeals affirmed. 161 F.2d 11. This Court granted certiorari. 331 U.S. 803. Reversed, p. 651.

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