The opinion of the court was delivered by: SCHOONMAKER
A jury trial was waived in this case, and it was heard before the court on the pleadings and proofs.
The question at issue in the case is whether or not plaintiffs, as executors of the last will and testament of David B. Oliver, deceased, are entitled to recover from defendant, as collector of internal revenue of the United States, the sum of $444,492.10 paid by plaintiffs to defendant on a deficiency assessment of estate taxes against the estate of David B. Oliver.
This assessment resulted from the inclusion in the gross estate of decedent the value of certain property that was determined by the Commissioner of Internal Revenue to have been transferred by the decedent in contemplation of death.
This deficiency assessment was made pursuant to the provisions of section 302 of the Revenue Act of 1926, c. 27, 44 Stat. 9, 70, U.S.C.A. title 26, § 411.The pertinent provisions of this statute are as follows:
"The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated --
"(a) To the extent of the interest therein of the decedent at the time of his death; * * *
"(c) To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, except in case of a bona fide sale for an adequate and full consideration in money or money's worth."
The property involved in the special assessment by the Commissioner of Internal Revenue was given by David B. Oliver in his lifetime, on April 4, 1932, to his children and grandchildren. The gifts were seven in number and consisted of a gift to each of his two sons and to each of his four daughters, and separate gifts to the two sons of a deceased son. The gifts to the daughters were in trust for the life of the daughters, with remainders over. Each of these gifts was covered by a trust instrument, in which the Fidelity Trust Company of Pittsburgh, Pa., was named trustee. The gift to the two grandchildren was also covered by a trust agreement, in which the Fidelity Trust Company was also named trustee. The gifts to the two sons were outright gifts.
There gifts were for substantially the same amount of property to each son and daughter, and to the sons of the deceased son.
On the final audit by the Commissioner of Internal Revenue he held that the gifts of April 4, 1932, were substitutes for testamentary dispositions, and were made in contemplation of death, and that the value of the property transferred was taxable. He, thereupon, included in the gross value of the estate the amount of $1,526,732.67 as the taxable value of these gifts, with the result there was a deficiency assessment in the estate tax of $428,288.89. This assessment the plaintiffs paid with interest, the total amount of the payment being $444,492.10. A claim for refundment was duly made, which was rejected by the Commissioner, he stating in the notice of rejection:
Then this suit followed for the recovery of the amount paid on this special assessment.
The sole issue involved in this case is one of fact, i.e., Were the gifts of April 4, 1932, made in ...