Before BIGGS, JONES, and GOODRICH, Circuit Judges.
In our previous decision in this case we decided that the remainder interests, created by the trust agreements there involved, constituted taxable gifts. We granted a rehearing when the taxpayers pointed out that no allowance was made for the grantors' reversionary interests in calculating the value of the remainders. Other points were also pressed, but we do not discuss them again here because we believe they were correctly determined in the original opinion, to which we adhere.
The grantors were mother and daughter. Each of the trust indentures created a life estate for the grantor, succeeding life estates, and then provided for the distribution of the corpus to the daughter's issue at majority. In default of such issue, general powers of testamentary appointment were given to the last surviving life tenant. The taxpayers contend that at the least they are entitled to have the cases remanded to the Board to compute the value of the reversionary interest remaining in the grantor of each trust. This they contend must be deducted in order to furnish the proper determination of the value of the remainders. The Commissioner, on the other hand, contends that whatever either taxpayer has left by way of reversion is too contingent and remote to be valued. It is to be borne in mind that the question here is the valuation of the remainders created in each of these two deeds of trust. According to the Regulations*fn1 it is made on the basis of the "present value of $1 due at the end of the year of death of a person of specified age". Such an evaluation is a matter of calculation from the facts and figures already in the record in these cases. The sum thus arrived at is not affected by the fact that the daughter-grantor may never have children who attain the age of majority and thus become eligible to receive these gifts. The terms of the indentures were direct and unqualified and the gifts thus made are not under the control of either grantor in any way. Only if no child of the daughter-grantor attains the age of majority does the survivor among the life tenants have any opportunity for the exercise of the power of appointment. Failing such appointment there would be, presumably, a distribution of the corpus to the next of kin of the grantor of each trust. In any event, however, if these remainders vest in the children of the daughter-grantor their value is not lessened in any way by what might happen if there were no children to take it. If they get the gifts at all they get the whole of them. The reversionary interests cannot in any way defer the time when the gifts will vest; nor can they defeat the latter. We think, therefore, that each of the respective settlors made such a gift as makes the whole taxable, subject, of course, to the reserved life estate. The cases do not need to be sent back for an evaluation of the reversionary interests.
Differing terms found in instruments creating trusts of course make for differing results on this point. Thus, in Commissioner of Internal Revenue v. Marshall, 2 Cir., 1942, 125 F.2d 943, there was a provision for distribution to the settlor if living upon the death of the life beneficiary and, if not, then to other beneficiaries. However, in neither the Marshall case nor Hughes v. Commissioner of Internal Revenue, 9 Cir., 1939, 104 F.2d 144, where similar reversionary interests were involved, is there a determination of this exact point. Cf. Herzong v. Commissioner of Internal Revenue, 2 Cir., 1941, 116 F.2d 591. Commissioner of Internal Revenue v. McLean, 5 Cir., 1942, 127 F.2d 942, which comes close to the facts of this case was sent back to the Board of Tax Appeals to determine the value of that which the court felt was not included in the gift. We think that in our case each settlor gave away the whole estate and only in the event that the gift failed by reason of subsequent events would either have any further concern with its disposition.We conclude, therefore, that the tax was properly based upon the method adopted by the Commissioner.
The order of the Court upon rendering the first opinion in this case was that "The decisions of the Board of Tax Appeals are ...