Appeal from the Board of Tax Appeals.
Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge.
The question involved upon this appeal is whether a trust fund created by the will of John O. Stone, who died in 1876, a resident of New York, over which his daughter Annie Stone, who died September 24, 1927, had a power of appointment by will, should be included in her gross estate for the purpose of determining the federal estate tax.
The devolution of the property in question is governed by article fifth of the will of John O. Stone. Under that article the testator bequeathed his residuary estate to his executors in trust to divide the same into as many shares as he should leave children him surviving and to apply the income of each share to the life use of the child for whom it was set apart. In disposing of the remainder interests, he provided that:
"Upon the death of my children respectively their respective share of my estate shall go and be applied to such persons, and such uses as they respectively may appoint by Last Will and Testament, and in default of such appointment their respective shares of my estate shall go and belong to their children or issue respectively, * * * and in default of such issue to their next of kin. * * *"
John O. Stone left him surviving his wife, Catherine C. Stone, who died many years before the death of Annie Stone, and his three daughters Annie Stone, Ellen J. Stone, and Sarah J. Grinnell, who were his only children, heirs at law, and next of kin. Annie Stone, the decedent, died unmarried, without issue, and left as her sole next of kin, her sisters, Ellen J. Stone and Sarah J. Grinnell. The value of the property left in trust for the life of Annie Stone under article fifth of her father's will, and over which she had the power of appointment at the time of her death, was $75,764.26. She died on September 24, 1927, a resident of the state of Connecticut, leaving a will which was admitted to probate January 4, 1928, in which she provided as follows:
"Fifth: All the rest, residue and remainder of my estate both real and personal, of every kind and description and wheresoever situated including what property or money I am allowed to dispose of by will under the will of my dear father, the late Dr. John O. Stone, of the City of New York, I give, devise and bequeath in equal shares to my dear sisters Ellen J. Stone and Sarah J. Grinnell, the latter the wife of E. Morgan Grinnell, to have and to hold the same to them, their heirs, executors, administrators and assigns forever."
The property over which Annie Stone had a power of appointment was physically located in the state of New York, and at the time of her death, and prior thereto, the trustee thereof was a resident of that state.
In February, 1928, Ellen J. Stone and Sarah J. Grinnell executed an instrument of election whereby they renounced their right to receive their shares of the trust fund, theretofore held for the life of Annie Stone, under the fifth article of the will of their father, John O. Stone.
The Commissioner included in the gross estate of the decedent, Annie Stone, the value of the trust property at the time of her death over which she had assumed to exercise the power of appointment given her by her father's will, and accordingly found a tax deficiency against her estate of $9,628.78. Her executor petitioned the Board of Tax Appeals for a redetermination of the deficiency in the estate tax upon the estate of Annie Stone by excluding the value of the trust property from her gross estate. The Board affirmed the action of the Commissioner and fixed the deficiency at $9,628.78.
The effect of the bequest under the will of John O. Stone, who died a resident of New York, and of the attempted exercise of the power of appointment over the trust estate created thereby for the life use of his daughter Annie Stone, is determined by the law of New York. Restatement of the Law of Conflict of Laws, §§ 283, 307, and 328, American Law Institute.
Under the New York law, Ellen J. Stone and Sarah J. Grinnell, who were the next of kin of Annie Stone, had the right of election and might accept title either as appointees under the power which she attempted to exercise, or as remaindermen under the will of John O. Stone. As Judge Vann said in Matter of Lansing, 182 N.Y. 238, 245, 74 N.E. 882, 884, about a testamentary power exercised in favor of the same person who would take title if it had not been exercised:
"An appointee under a power has the right of election, the same as a grantee under a deed. 'It is essential to the legal operation of a deed that the grantee assents to receive it. It cannot be imposed upon him, and there can be no delivery without an acceptance.' Jackson v. Dunlap, 1 Johns. Cas. 114, 116, 1 Am. Dec. 100; Jackson v. Phipps, 12 Johns. 418. He can accept the title tendered or reject it, in his discretion. It cannot be forced upon him against his will. He cannot be compelled to receive additional evidence of title when he does not want it, and does not need it because his title is perfect without it. ...