and his wife had taken title to the properties as tenants by the entirety, he had only conveyed a half interest to his children so that Section 2036 only applied to this half interest (the Court noted that the full value of such properties would be included if the decedent had been the full owner of the property at the time of the transfer to the children).
A similar conclusion was reached in United States v. Heasty, supra. In that case, the decedent-husband supplied the entire consideration for several tracts of land and later conveyed them through a "strawman" to himself and his wife as joint tenants with right of survivorship. Two years later, they conveyed the properties to their daughters and grandchildren, reserving to themselves joint estates with rights of survivorship. Upon decedent's death, the Government sought to tax the full value of the properties in his gross estate. The Government contended that if decedent had died before the transfer to his children and grandchildren, the full value of the property would have been includable in his estate by Section 2040. Therefore, the Government contended that Section 2036 could only be applied in conjuncture with Section 2040. The Court, citing Glaser v. United States, supra, agreed "with the conclusion of the Seventh Circuit Court that section 2040 has no application to a case like this because after the husband and wife took the property as joint tenants there was another transfer of the property."
As already noted, following these decisions, the Government reversed its above quoted position by Revenue Ruling 69-577, supra, and by its position in the present case.
As stated previously, reference solely to Section 2036 causes me to conclude that one-half of the value of the property transferred by the Millers to the trust dated March 15, 1935, was properly included in Decedent's gross estate. This conclusion is unaltered by the existence of Section 2040, which is inapplicable despite plaintiff's vigorous assertions to the contrary.
The plaintiffs' first argument in favor of reading Section 2036 in conjuncture with Section 2040 concerns the dangers of a total tax of 150% of the value of the property transferred to the trust. This argument is clearly without merit, for I am presently unconcerned with how Miller's gross estate will be calculated upon his death; I am only concerned with the gross estate of this Decedent -- Miller's wife. Plaintiffs introduce their "Argument" with the statement (on page 5 of Plaintiffs' Brief) that "Plaintiffs have brought this action, not so much in the expectation of being able to convince the Court of the correctness of their position, but rather to insure, to the extent possible, that the property which Mr. and Mrs. Miller transferred to the trustees of the trust dated March 15, 1935, will not be taxed to the extent of 150% of the value thereof in the estates of Mr. and Mrs. Miller." Insofar as plaintiff's request concerns the future calculation of Miller's gross estate, I agree with the Government (Government's brief, page 10) "* * * that this request for an advisory opinion by the Court need not be honored to decide this matter, nor would it be proper for the Court to go beyond the issue before it." And even if I were concerned with the supposed impropriety of taxing certain property at a total of 150% of its value as between two different estates, according to Revenue Ruling 69-577, Supra, there is apparently no longer any such danger. Plaintiff's fears will only prove to have been well founded if the Government again changes its position, and the effect of such an unlikely circumstance is clearly beyond the scope of my inquiry. Finally, I must note that there is nothing inherently wrong in taxing 150% of the value of a certain property as between two estates. Such is the norm where one spouse dies leaving a certain property to the other spouse, and the other spouse later dies unmarried leaving the same property in his estate.
Plaintiff's second argument in favor of reading Section 2036 in conjuncture with Section 2040 is that the transfer of the entireties property to a trust with a retained life estate, bringing into play Section 2036, should not alter the pre-existing effect of Section 2040 on the relative gross estates of the Millers. Plaintiffs contend that Section 2036 was never intended to negate the effect of Section 2040. But Plaintiffs overlook the importance of the following introductory language used in Section 2040 relating to its applicability: "The value of the gross estate shall include the value of all property * * * to the extent of the interest therein held as * * * tenants by the entirety by the decedent and spouse * * *." This language was interpreted in Glaser v. United States, supra, to mean that it is only the value of property held jointly at the time of decedent's death that is includable. Here, as in both Glaser and Heasty, the transfer of the entirety property to a trust destroyed the tenancy by the entirety for purposes of Section 2040, so that at the time of Decedent's death there existed no joint interest to which Section 2040 could apply. The substantial similarity of the circumstances is unaltered by the fact that the wife died before the husband in our case.
Thus, I read Section 2036 alone in this case, and as previously noted, it is sufficient to justify the Government's inclusion of one-half of the value of the property transferred to the trust of March 15, 1935, in Decedent's gross estate.
III. SECTION 2038 OF THE INTERNAL REVENUE CODE.
The Government also attempts to justify the inclusion in Decedent's estate of one-half of the value of the property transferred by the Millers to the trust created March 15, 1935, by reference to Section 2038 of the Internal Revenue Code of 1954, which provides, in relevant part, as follows:
"The value of the gross estate shall include the value of all property * * * to the extent of any interest therein of which the decedent has at any time made a transfer * * * by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power * * * to alter, amend, revoke, or terminate * * *."
The trust created by the Millers on March 15, 1935, provided, in relevant part, as follows: (Complaint, Exhibit A) (page 2) "I. DUTIES AND POWERS OF TRUSTEES.
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