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May 31, 1933


The opinion of the court was delivered by: DICKINSON

DICKINSON, District Judge.

The clerk's office will please see that a waiver of jury trial has been made in writing and is filed of record.

 The Issue.

 A tax, levied against the estate of plaintiff's decedent, was paid under protest, and its return demanded and refused, and this action brought. The sole issue is whether certain shares of stock at one time in the name of plaintiff's decedent were assigned by the then owner in contemplation of her death.

 Fact Statement and Discussion.

 James H. Clarke was the owner and operator of a textile mill. As has come to be usual, he had the business incorporated under the name of the Orinoka Mills. The certificates of stock (except a few shares held for organization purposes) were issued to him. Later on he assigned some of the shares to his wife, the decedent in the present case. Subsequently she received more shares through a stock dividend. The stock was appraised, for tax purposes, at its supposed value, in 1928. What its value was a short time afterwards does not affect the question before us, although it has doubtless emphasized the demand for the return of the tax paid. Mrs. Clarke, in 1927 or later (within two years of her death), transferred this stock to her son, A. Vinton Clarke. It was, however, included in her estate because of the fact finding by the collector that this transfer was made in contemplation of death. The sole question is this question of fact. The relations of the father to the son were what they usually are in such cases. The son was always a boy to the father. There was the very common vague hope on the part of the father that some time the son might become old enough to assume the responsible management of the mills. As long as the father, however, was in the active management, that time had not arrived. In September, 1927, the father suffered a so-called "stroke," and was thereafter incapacitated. From that time the son took full charge. The stock which had been assigned to the mother, we find as a fact, was in her mind held by her in trust for the son to go to him whenever he succeeded to the management of the business. She accordingly so assigned it. There was no thought of estate distribution and no thought of death which supplied the motive for any of these transfers. We are not ready to say that the real motive of the father in transferring this stock to his wife was not to reduce his income taxes by reducing his income by making part of it taxable to the wife. We are confident, however, that "contemplation of death" had no part in his motive and it makes no difference here whether it did or not. We are equally sure that such thought did not prompt the transfer by the mother to the son. One reason for thinking so is that she had a daughter. The stock had at that time a very substantial value, and if she had been distributing her estate in anticipation of her death she would not have ignored the daughter. This would in itself make clear that she had some other motive than that of dividing up what she had in anticipation or contemplation even of her death. What prompted the transfer was that she felt that she held the stock to be transferred to the son whenever he became the responsible manager of the mills. That the transfer was made when he assumed this responsibility puts the stamp of verity upon this motive. The purpose of the act of Congress is clear. The payment of an estate tax may be evaded by a distribution made before death. The tax is not imposed upon transfers made, but only upon transfers made as a substitute for the distribution of a decedent's estate.

 This disposes of the only question submitted to us, and a formal judgment may be entered in accordance herewith.

 The formal requests for findings of fact and conclusions of law submitted to us by the plaintiff are all found as requested.

 As in trials on waiver of a jury, there is a question of whether exceptions should be allowed, we now allow an exception to defendant.

 Findings of Fact.

 1. Plaintiff, A. Vinton Clarke, is the only son of Mary Jane Clarke and James H. Clarke; both parents being now deceased.

 2. Plaintiff and Bessie Clarke (now Bessie C. Arthur) were and are the only children born to said parents.

 3. Plaintiff is executor under the will of his mother, Mary Jane Clarke, a resident of Philadelphia, who died testate in Philadelphia county, ...

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