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Wisotzkey v. Commissioner of Internal Revenue.

August 10, 1944

WISOTZKEY
v.
COMMISSIONER OF INTERNAL REVENUE.



On Petition for Review of the Decision of Tax Court of the United States.

Author: Dobie

Before DOBIE and McLAUGHLIN, Circuit Judges, and KALODNER, District Judge.

DOBIE, Circuit Judge.

This is an appeal from a decision of the Tax Court of the United States, affirming the imposition of certain gift taxes by the Commissioner of Internal Revenue.

Petitioner, H. A. Wisotzkey, (hereinafter called Wisotzkey) made direct gifts, in the year 1938, of stock of the Maple Press Company (hereinafter called Maple) to each of his five children; each child receiving Maple stock of the value of $3,000. In his gift tax return for 1938, Wisotzkey excluded all of these gifts on the ground that each gift was less than $5,000 in value. He had made no other direct gifts to these persons in that year.

On December 30, 1938, Wisotzkey executed three groups of trust indentures, (herein designated as Group I, Group II, and Group III), by which he conveyed the entire title in certain property to himself and two sons as trustees, for the benefit of certain named beneficiaries.

The corpora of the Group I trusts consisted of Maple stock. The names of Wisotzkey's children, the beneficiaries, and the value of the corpus of each trust are:

Beneficiaries Value of Corpus Exclusion Claimed

Edna Margaret Gartman $21,000 $5,000

Edith Campbell Hummel 9,000 5,000

John Utz Wisotzkey 9,000 5,000

Bradley Wisotzkey 21,000 5,000

Harry Albert Wisotzkey, Jr. 3,000 3,000

The Group I indentures are substantially alike. We set out, ipsissimis verbis, certain pertinent excerpts found in all the indentures:

"ONE: The Trustees are to collect the income, revenues, profits and dividends arising from and accruing to the aforesaid stock, as well as the income from any and all other property that might hereafter be received or acquired under the terms of this indenture, and to pay over and disburse the same annually to the beneficiary, or his heirs or assigns.

"TWO: The trustees are to hold the aforesaid shares of stock as Corpus, and are to treat any and all stock dividends as Corpus and not as income, and, subject to the provisions of paragraph FOUR (4), to hold as Corpus any and all other property that might hereafter be received or acquired as Corpus under the terms of this indenture until the 31st day of December 1962, and then to pay over the same to the said beneficiary, or his heirs or assigns; provided however that this trust shall terminate upon the tenth anniversary of the day on which the Trustee H. A. Wisotzkey ceases to be a Trustee, should that anniversary be earlier than December 31, 1962, in which event the trust estate shall forthwith be paid over to the beneficiary or his heirs or assigns."

The corpora of the Group II trusts were made up of Maple stock. Group II consisted of twelve separate indentures. Each instrument named one of Wisotzkey's grandchildren as beneficiary, and the value of each gift was $3,000.

The pertinent provisions found in all the Group II indentures are:

"ONE: The Trustees are to collect the income, revenues, profits and dividends arising from and accruing to the aforesaid stock, as well as the income from any and all other property that might hereafter be received or acquired under the terms of this indenture, and to pay over and disburse the same to or for, the beneficiary, for the purpose of the education and training and maintenance of said beneficiary until said beneficiary reaches the age of twenty-one (21) years, and then to pay over such income, revenue, profits, and dividends to said beneficiary annually; but stock dividends of stock of The Maple Press Company shall be treated as Corpus and not as income.

"Two: The Trustees are to hold the aforesaid shares of stock as Corpus, and to hold any stock dividends paid on it as Corpus, and, subject to the provisions of paragraph FOUR (4), to hold as Corpus any and all other property that might hereafter be received and acquired as Corpus under the terms of this indenture, until the said beneficiary becomes forty-five (45) years of age, and shall then pay over the same to the said beneficiary or his heirs or assigns. Should the beneficiary die before reaching the age of forth-five (45) years, this trust ...


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