motive of a donor in the light of his bodily and mental condition.
When John B. Tonkin transferred the Standard Oil stock and insurance policies to the Trustee, which transfer is now claimed by the Government to have been made in contemplation of death, he was aged sixty-one years. While that age was beyond the period of youth, it still was not an extreme old age such as existed in Helvering v. Le Gierse, 312 U.S. 531, 61 S. Ct. 646, 85 L. Ed. 996. In that case the woman whose transaction was questioned was aged 80 years and died within a few months after the transfer. In such case the age in itself would carry with it at least a strong suspicion that any action had been taken in contemplation of death. But John B. Tonkin was not of such extreme age. The uncontradicted testimony of those coming in contact with him at that time was that he was in good health and interested in the affairs of life.All his actions immediately before and at the time of the creation of the trust were such as were natural to one who expected a long life and who intended to relieve himself of all future anxieties. True, counsel for the Government calls attention to the fact that Tonkin executed a will very shortly after the trust agreement, and urges that action as tending to establish his contemplation of death. It does, in fact, establish a contemplation of death, but not the contemplation considered by the tax statute, viz., the ultimate death which all must contemplate. The will, considering the testimony as to his physical and mental condition at the time, was but another step to enable him to enjoy his leisure without thought of the future. In United States v. Wells, supra, the court considered a will of a much older man than Tonkin and made when the testator was quite ill, and when the interval between its execution and death was shorter, and held that the will, in view of the other facts of the case, did not establish the statutory contemplation.
The main argument of counsel for the Government upon which he bases his claim that the trust agreement was a mere testamentary device is found in this provision of the agreement: "Particularly, the Trustee shall purchase single premium insurance upon the Insured's life if directed to do so by the Insured's wife." John B. Tonkin, about the time of the trust agreement, purchased annuities, and later the Trustee purchased single premium life insurance policies upon his life at the request of Mrs. Tonkin, pursuant to the provision in the trust agreement, supra. The purchase of the annuities by Tonkin permitted the issuance of the single premium life policies without a physical examination of annuitant. Counsel for the defendant contends that the trust agreement, the purchase of the annuities and the acquisition of the life policies constituted one transaction, in effect. He asserts that Mrs. Tonkin was under the control of her husband, and that the effect and purpose of the procedure adopted was to have the transfers of 1936 take effect in possession or enjoyment at or after death. This contention overlooks the power of the trustee under the agreement, the fact that no proof whatsoever establishes control of Mrs. Tonkin by her husband, and ignores the fact that the agreement enabled Tonkin to reduce his excessive holdings in one stock, and also to legitimately save ultimate capital gains tax and to save in income tax by the division of his estate. By the annuity he also provided himself with a certain amount of fixed income.
Counsel for the plaintiffs has cited a case recently decided by the United States Board of Tax Appeals, Fidelity-Philadelphia Trust Company and Ora E. Dundore, Executors, v. Commissioner of Internal Revenue, not reported, but found in C.C.H. It is practically the same in substance as the instant matter. Instead of the irrevocable delivery of the stock and insurance policies under the trust agreement, as in this case, the husband of the deceased, 71 years of age, gave his wife $85,000 in cash. Prior thereto the husband, Charles R. Dundore, had obtained an annuity under which he was entitled to $233.01 per month. About one year later the wife made application to the insurance company for a single premium life insurance policy, which the husband also signed as the insured. The policy, as those in the instant case, was issued without any physical examination, by reason of the existence of the annuity. As in the instant case, the Government asserted that the transaction disclosed a gift to take effect at death, because the insurance company would not have issued the single premium policy without the annuity contract. The decedent had died about eleven months after the policy issued. The Board of Tax Appeals held that the gift to the wife had been completed and that her action was independent of that of her husband.
The gift in the instant case was unquestionably complete and irrevocable, and no testimony appears to disclose that Mrs. Tonkin was not acting independently in requesting the trustee to purchase the single premium policies. Nor does it appear that the Trustee had agreed to any surrender of its powers under the trust agreement. With this absence of testimony joined to the testimony as to the physical and mental condition of John B. Tonkin when the trust was created, the court feels that the addition to the estate tax by the Commissioner was unjustified, and that judgment must be in favor of plaintiffs.
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