Appeal from the District Court of the United States for the Eastern District of Pennsylvania; William H. Kirkpatrick, Judge.
Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.
BUFFINGTON, Circuit Judge.
The decisions of this court*fn1 have uniformly held the creation of deeds of trust tax free where sound health and purposes associated with creator's life, rather than with death, led to their creation. Such cases depend on their individual facts. In United States v. Wells, 283 U.S. 102, at page 119, 51 S. Ct. 446, 452, 75 L. Ed. 867, the Supreme Court said:
"It is apparent that there can be no precise delimitation of the transactions embraced within the conception of transfers in "contemplation of death," as there can be none in relation to fraud, undue influence, due process of law, or other familiar legal concepts which are applicable to many varying circumstances. There is no escape from the necessity of carefully scrutinizing the circumstances of each case to detect the dominant motive of the donor in the light of his bodily and mental condition, and thus to give effect to the manifest purpose of the statute."
In affirming the court below [39 F.2d 998, 69 Ct. Cl. 485] in that case -- which was a much weaker case for the taxpayer than the present one -- the Supreme Court, as we view it, stated the decisive question in such cases, namely, "the question, necessarily, is as to the state of mind of the donor," and then cited certain constraining things which might properly influence and evidence the mind of the donor, saying:
"The purposes which may be served by gifts are of great variety. It is common knowledge that a frequent inducement is not only the desire to be relieved of responsibilities, but to have children, or others who may be the appropriate objects of the donor's bounty, independently established with competencies of their own, without being compelled to await the death of the donor and without particular consideration of that event. * * * The gratification of such desires may be a more compelling motive than any thought of death."
Referring to the finding of the court below that the transfer to the donor's children there involved was "a continuation and final consummation of such policy," the Supreme Court said "that this was the motive which actuated the decedent in making these transfers seems unquestioned," and, we may now add, affirmed the contention of the taxpayer.
Turning then to the case before us, we note that no question of the donor executing the trust in contemplation of death is here involved. The trial judge found:
"* * * This evidence * * * establishes that the transfer was not made under any consciousness or belief or apprehension that death was imminent. In order that the plaintiffs may have the full benefit of this testimony, I specifically find that such was the fact."
Such being the case, the instrument being made by the donor in contemplation of life, not in contemplation of death, "the question" before us, as quoted above from the Wells Case, "is as to the state of mind of the donor."
The proof is that Dr. Malcolm MacFarlan was a firm-minded Scot, and that with the persistent pertinacity of an opinionated Scotchman, he had methodically husbanded the large gains arising from his profession -- he was a leading physician of Philadelphia -- until they amounted to nearly three quarters of a million. His life was devoted to acquisition, and coupled with his earning a fortune, was a firm determination on his part to place that fortune in trust for his children. His life was dominated by these two adhered-to lines of conduct. His acquisitions from the fifty-seven years of the practice of medicine and the interest and accretions therefrom amounted to between six and seven hundred thousand dollars. As to the disposition of his fortune, his plan and its fulfillment were in one undeviating path, namely, the creation of irrevocable trusts in favor of his children. His belief in trusts was basic, or, as testified to by his son, "To boil the whole matter down, his motive was to conserve his estate. * * * We did it in 1913. He wanted to do it with my maternal grandfather's estate, he wanted to do it with that." His experience with that estate is strikingly illustrative of the earnestness and sincerity of his dominating motive of trust.*fn2 He urged his father-in-law to create such a trust for his children; his advice was followed and a trust was created in favor of his children. For some reason, the trust was broken and all of the father-in-law's estate, except that which was inherited by Dr. MacFarlan's wife, was dissipated. Moved by this forcible vindication of his views and evidently feeling that his own children inherited spendthrift blood, he had his children convey to him their interest in their mother's estate, whereupon he created a trust, which is still effective, giving the whole estate to his children. A son testified as to these incidents:
"Q. Did he" (Dr. MacFarlan's father-in-law) "leave a large estate?A. He had left a half a million dollars, one hundred thousand dollars of which accrued to my mother.
"Q. You say that estate had been dissipated? A. The rest of the members of the family, my uncles and aunts, had largely dissipated their ...