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TONKIN v. UNITED STATES

September 11, 1944

TONKIN et al.
v.
UNITED STATES



The opinion of the court was delivered by: GIBSON

The Court, after hearing and consideration, makes the following Findings of Fact and Conclusions of Law:

Findings of Fact

 1. The stipulation of facts, filed with the Court on June 14, 1944, is here adopted, now referred to and made a part hereof.

 2. On December 3, 1936, when John B. Tonkin transferred 2,204 shares of the common stock of the Standard Oil Company of New Jersey to the Peoples-Pittsburgh Trust Company as trustee, he was in good health and looking forward to the enjoyment of life after his retirement as President of the Peoples Natural Gas Company. He played golf regularly, he liked travelling, and often expressed confidence that he would outlive his father, who died at ninety-two.

 3. One of Tonkin's intimate friends was his family doctor, Dr. MacMurray, who examined him frequently. While Tonkin had had a valvular heart leak from childhood, Dr. MacMurray did not consider it serious and indeed never told Tonkin about it. During MacMurray's association with him Tonkin was never seriously ill except for an attack of appendicitis about twenty-five years ago.

 4. John B. Tonkin for more than forty years was connected with the Standard Oil Company of New Jersey and with its subsidiary, the Peoples Natural Gas Company, of which he was President. In 1935 he was eligible for retirement under the pension plan of Peoples Natural Gas Company. But because of the launching of a new enterprise in which he was interested, he postponed retirement until February 1, 1936. He looked forward to a period of leisure following his retirement.

 5. After his retirement he maintained an office in the Peoples Gas Building for which he bought new furniture and equipment.

 6. He was a Director of the Peoples-Pittsburgh Trust Company and attended the meetings of its Board and Executive Committee faithfully. He was also a Director of the Passavant Hospital and was a member of several business and social organizations.

 7. In 1935 to 1936 he built and furnished a large house at Madison, Ohio, at a cost of about $32,000. During the winters he went to Florida and during the summers he stayed at his house in Madison, where he played golf frequently and led an active outdoor life. On his customary trip to Florida in the winter of 1940 he contracted pneumonia and died.

 8. Tonkin had acquired during the many years he was connected with the Standard Oil Company of New Jersey and its subsidiary more than 10,000 shares of Standard Oil Company of New Jersey stock. He knew his holdings were too large and felt the need of diversifying his investments. In addition the situation with respect to the expropriation by the Mexican Government of foreign oil properties was another reason why he felt it was necessary to divest himself os some of his Standard Oil Company stock. Standard Oil Company stock was very high in the latter part of 1936.

 9. He discussed this need for disposing of some of his holdings in Standard Oil Company stock with Gwilym Price (then Vice President in charge of trusts of the Peoples-Pittsburgh Trust Company) with whom Tonkin had been associated as a Director in the management of the affairs of the Trust Company. He also discussed the desirability of selling a considerable portion of Standard Oil Company stock with Joseph S. Mason, who was an insurance broker, and told his brother, Loring Tonkin, that he, Tonkin, ought to sell some of his Standard and buy something else.

 10. As a result of his discussions and in view of his circumstances and experience Tonkin decided to invest in annuities, thus giving him a substantial investment unrelated to his Standard Oil Company stock. The investment in the annuities had the added advantage of reducing his Federal income tax and his state personal property tax in that the payments received on the annuities were partially a return of principal and to that extent not taxable.

 11. On December 3, 1936, when Tonkin made the deed of trust and transferred 2,204 shares of Standard Oil Company stock to the trustee, the stock was higher than it had been for many years. If Tonkin had sold the stock himself, he would have had a large capital gains tax to pay, whereas by transferring the stock to a trustee, the taxable gain to the trustee would be very much less, and the trustee in paying income taxes would be in a much lower bracket than Tonkin himself.

 13. The annuities purchased by Tonkin were complete transactions in themselves and did not depend upon any action taken either by his wife or by the trustee. They did afford an opportunity for the purchase of single premium life insurance policies, but whether or not such single premium life insurance policies were purchased did not in any way affect the annuities.

 14. The purchase by Tonkin of annuities was not contingent or dependent upon the exercise by his wife of the right given her under the trust agreement to require the trustee to purchase single premium life insurance policies.

 15. The purpose of John B. Tonkin in creating the trust of December 3, 1936, was to effect a savings in income tax on capital gains, and to reduce his income and personal property taxes. The total savings for the years 1936 to 1939 were $9,126.04.

 16. Contemplation of death was not an impelling motive for the gifts made by Tonkin in 1936.

 17. The gifts made by Tonkin in 1936 were not transfers intended to take effect at or after his death.

 18. The impelling motive of Tonkin in purchasing annuities was not to enable the trustee named in the deed of trust of December 3, 1936, to purchase single premium life insurance policies on his life, if the trustee was requested to do so by Mrs. Tonkin.

 19. The following Certificate of Death was filed in Florida after the death of John B. Tonkin:

 This is a true Local Registrar's Copy

 (Signed) Lurana A. Pohzehl (Seal)

 Deputy Clerk & Deputy Local Registrar V.S. Dist.

 11-09

 Certificate of Death

 Florida

 State Board of Health

 Bureau of Vital Statistics

 State File No. xxx

 Registrar's No. 46

 1. Place of Death:

 (a) County Dade

 District No. ...


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